The lesson of the Greek crisis
by
Herkül Millas*

Failed to conform to EU philosophy

Another reason for the indecisiveness is fear of social resistance. The Greek nation is fixed on the method of making financial demands, applying pressure for these demands to be met and consequently accomplishing “something.” This has been the method for years. At a time when high-interest foreign loans are being used to pay for public workers’ salaries and pension benefits, agricultural workers are setting up blockades on roads and making certain parts of the country inaccessible (they want subsidies from the new government), and public sector workers (especially tax collectors) are going on strike to protest the austerity plan.

The resistance of these two strong groups is ironic considering that they are supposed to be weak. The reason is that according to EU policies, the government and the agriculture sector are among the two areas that need to be reduced. However, Greek governments have implemented a completely opposite policy within the scope of vote hunting and populism. Even though the necessity of “reducing government” has been constantly mentioned over the decades, the number of government workers has multiplied. The number of public employees was occasionally (and with “good intentions”) increased, sometimes to please voters (clientele relationship) and at other times as part of the rhetoric on solving unemployment.

This practice placed a major burden on the government, and inevitably this burden was shifted to the markets, inciting taxation and borrowing. This in return impaired the productive private sector and caused productivity and the nation’s competitiveness to drop. Privatizations in line with the EU program were also carried out with a “statist” mentality. Those who were dismissed from work either received almost scandalously large sums of compensation or were reinstated as public sector workers. In other words, instead of relieving the government’s (and taxpayers’) burden and supporting the economy, privatization created more debt for the government and put pressure on the market. Ultimately, investments were delayed, and a solution to unemployment was sought in government employment once again. This created a cumbersome and bulky government and a society with a weak ability to undertake new ventures. In other words, a complete vicious cycle. The crisis was like a predictable car accident.

According to EU policy, the agricultural sector would be limited and workers would be transferred to other sectors. Efforts, incentives and educational programs to this end were not implemented, and the EU’s cheap money was distributed to the individuals concerned to be used in consumption. EU resources were inappropriately used, the necessary structural changes were not made, consumption increased without consideration of the future and an opportunity was lost.

The last major problem is with banking. The era of low-interest borrowing from the EU has ended. In brief, Greece failed to comply with the EU philosophy. In fact, economic circles still have doubts about whether some politicians fully understand the causes of the crisis.

Scope of lies unclear

There is a second reason for the EU’s concern and distrust. There has been speculation about the reliability of Greek statistics, but the deviations in recent months have riddled statistics with “lies.” The term “Greek statistics” has become a joke among European circles. The EU is disturbed by these lies, but more importantly the scope of these lies is not exactly clear. Any investor or creditor in a sector where the figures do not reflect the truth is not secure. Actually, an economic crisis and a crisis of confidence are intertwined. (It’s necessary to mention that the lies were not merely directed to the outside world but that society deluded itself, refusing to see the facts and not wanting to understand the mechanisms. They realized that they were “benefiting” from the lies and took part in them.)

Even though it’s not officially or widely mentioned, the people in Greece want to believe that a miracle will happen. A superpower, in other words the EU, will come and solve all their problems with a magic wand. In old Greek tragedies, “deus ex machina” (literally meaning “God from the machine”) would appear at the last moment and solve all problems. But we are living in modern times, and a state of affairs known as “moral hazard” is greater than “deus.” Helping out those who are in trouble because of wrong policies means giving undue credit to wrong policies in the long run. In fact, it means an injustice to those who observe correct policies. It also means those who know they will be saved will constantly take unnecessary risks. If the EU attempts to follow a “savior” policy, it might not signal a type of confidence to the markets, but a lack of confidence. Other countries may want to follow in Greece’s steps. In other words making it seem like a go-ahead for politicians who want to extend the cost of populist policies to EU countries could put pressure on the euro. The benefits are at three levels: personal, national and at the EU level, in other words general. Providing external support to the Greek economic crisis could make matters worse (for the EU). It is for this reason that the EU is constantly sending the message that “Greece needs to solve its own problem” and that it has the “ability to do it.”

The economic crisis in Greece is obviously going to have a negative impact on the people. But this doesn’t mean that their quality of life is going to be at the level of poor countries. It will be a relative and limited problem. One way or another, in the short or middle term the financial crisis will be solved. The main issue is restructuring this society so that it is compatible with the EU. This will depend on whether society changes its mentality. This is the challenging aspect of the task. The course of the crisis in Greece is a lesson for other countries. It will be beneficial to follow this adventure in terms of the consequences of economic instabilities. Lessons are always beneficial. But sometimes the cost of learning late can be very high.

*Herkül Millas is a political scientist.