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What’s next for Greece?

From 'cheap development' to violent 'adjustment'

It is clear that Greece is being transformed into an entirely different society than it used to be during the last thirty years. Fears of falling into a prolonged crisis with unprecedented consequences are steadily growing. In this sense, new political solutions and arrangements are needed. 

The current Greek drama is reaching a temporal culmination. The validation by a small parliamentary majority of a tough agreement between government and the Troika as well as the long-expected decisions by the Eurogroup and the EU signal a final blow to the post-junta (1974) Greek economic/political settlement. It is clear that Greece is being transformed into an entirely different society than it used to be during the last thirty years. However, catharsis does not appear on the horizon. Fears of falling into a prolonged crisis with unprecedented consequences are steadily growing. In this sense, new political solutions and arrangements are needed.

´Cheap development´

The post-1974 model of economic consensus has been perfectly described by the term 'cheap development', which was introduced by Mihail Papayannakis, a Left European deputy. It indicates a type of development based primarily on the construction sector, oriented towards short-term profit and neglecting technological innovation, value-adding work and research. In brief, an economically, financially and environmentally unsustainable model which prevailed even during 1994-2009 when the country had been already integrated into the Eurozone and organized the Olympic Games. Throughout this era, political and economic elites, gaining a strong support by wide electoral majorities, pushed to the extreme a range of fatal tendencies which had emerged in the early eighties. Therefore Greece, by increasing its public deficit even in a period of economic growth, had become the most procyclical OECD country already before entering the current phase of acute crisis in 20091.

Two additional factors have contributed to a further deterioration of this trend. On the one hand, widespread tax evasion strengthened by extensive corruption of political personnel and segments of the public service. On the other hand, a disproportional emphasis on the construction sector, which has discouraged investment in innovative projects. In more detail: huge public (as well as banking) funds were dedicated to the construction of public infrastructure (roads or communication networks) by large domestic privately held companies, which are strongly connected to major media groups. Correspondingly, a disproportional amount of private capital was allocated to housing and real estate projects (or was spent on overconsumption), instead of funding innovative and export-oriented entrepreneurial schemes or activities. At the same time, numerous professions remained overregulated for many decades, restricting competition and indirectly contributing to the unemployment of younger people.

Violent adjustment

Should one attribute a collective responsibility to the Greek people, deserving 'paradigmatic punishment'? Of course not! One should take into account the highly unequal distribution of the overall previous economic growth as well as the fact that the 'cheap development' model was highly unsustainable in fiscal, social and environmental terms. Moreover, one should consider that the very structure of the current adjustment program puts overwhelming, uneven and unfair burdens precisely on those social strata that benefitted least in the previous period: low paid employees, both in the private and the public sector.

Does this mean that no fiscal adjustment program and social transformation are required? Of course not! On the contrary, many measures imposed by memoranda by the Troika are absolutely crucial to achieving fiscal stability, eliminating public deficits, and making the welfare state effective and fair. However, the highly undesirable consequences of imposing strict and socially unfair austerity should be alarming: a deep recession, a high and unthinkable rate of unemployment, unequal distribution of the costs both of the crisis and of fiscal adjustment.

Not surprisingly, a general sense of lack of positive perspective fuels populist, anti-democratic and eurosceptic sentiments on the Right and the Left. Furthermore, it has lead to the spectacular rise of the Golden Dawn, an evidently Neonazi party whose members systematically engage in criminal actions and pogroms against immigrants and other ideological enemies. In short, it should be seriously taken into account that implementation of such a tough adjustment program puts the major achievement of Greek post-junta settlement in danger: democracy itself.

Yet the very structure and design of the proposed austerity measures leaves untouched those social strata (clientele networks, corrupted groups) and extensive societal structures that have profited most during previous years and which definitely bear the main responsibility for the current Greek derailment. The Trioka's emphasis on strict austerity has permitted sections of the absolutely unreliable and corrupt political establishment to represent themselves (especially the conservatives of Nea Demokratia and the socialists of Pasok) as –reluctant– executors of the measures and hence as unique guarantors of a 'European road' for the country.

Oddly enough, therefore, it is these segments of the political system that come to represent and encapsulate the genuine support by the vast majority of the Greek population for continuation of its membership of the EU and the Eurozone. In this sense, the support which is provided for the government by the centre-left party Democratic Left is crucial both for the government's viability and for the European orientation of Greece. But Democratic Left seems to lack the necessary political impetus and has not come up with a coherent political solution based on Green Left principles. The same is true for the Eco-Greens: in spite of their interesting political elaborations and the support by the Green European Party, they did not manage to attain the appeal of a wide public.

Furthermore, members of the political establishment are struggling to retain for themselves numerous privileges and to avoid any possible judicial inquiry into their corrupt activities. At the same time, some distinguished members of the same political establishment emerge in the public sphere as 'censors of collective ethics'. This contradictory and chaotic situation leads to attempts by some of the formerly most privileged groups (high-level state officials, professionals such as lawyers, doctors, journalists, and certain parts of the entrepreneurial or rentier class) along with their new political representatives (including populist parties such as SYRIZA on the Left and Independent Greeks on the Right) to retain their own privileges and even to restore the old good days.

Mistakes of the Troika

Certainly, one could argue that many of the above-mentioned reforms should long ago have become core subjects of domestic public debate and social negotiation. For instance, the extensive corruption and tax evasion, the unfair and unreasonable salary range in the public sector and, prominently, the country's general development model, should have gained the focus of all Greek political parties in the previous years. Nevertheless, the current adjustment program implemented by the Troika is based on the false ideological premise that extreme labor deregulation and the resulting very low wages lead to high competitiveness, economic growth and high employment rates. As a result, due to the implementation of severe wage cuts in the private sector, many employees cannot even meet basic needs anymore. The unemployment rate meanwhile runs at a 25% high.

While for the Green Party in the Netherlands, for example, 'the individualisation of the labor market must be adopted wholeheartedly, but needs to be accompanied by a new package of social certainties with a clearer emphasis on fair sharing', as Dick Pels and Pepijn Vloemans recently observed, in Greece the individualization of labor market will certainly lead to entirely different outcomes and to even greater social and economic inequalities. This is the case because the domestic entrepreneurial class has profited by gaining privileged access to state resources as well as by extensive tax evasion, has been neglecting R&D during many decades, and has sought to entirely undermine labor legislation.

Moreover, the Troika's restructuring and adjustment program – having meanwhile acquired full support by certain political actors – leaves unaffected numerous rules, practices and privileges that would be totally unacceptable in other European countries. While for example, as Aghion and Roulet point out, in Germany ownership of mass media by shareholders of companies or corporations undertaking public works is strictly prohibited, this is not the case in Greece. Thus, one of the main causes of political corruption and devaluation of democracy in Greece remains untouchable. Similarly untouchable remain the high tax exemptions that Greek shipowners traditionally enjoy. Furthermore, while big national or multinational corporations continue to demand low tax rates and labor deregulation, they are not enforced to maintain jobs or to create new ones. While within the EU a fierce debate has developed about new ways of financing a resurrection program for Greece, the Troika seems unable or even unwilling to exert pressure upon entrepreneurs who have openly benefitted from European funds and state resources.

Only the crucial task of the recapitalization of the banking sector prompts the Troika to intervene in a decisive way and take control of it, despite the fact that the banks have hugely profited in previous years by primarly supporting private consumption rather than innovative entrepreneurship. Combined with domestic 'pathogeneses', the Troika's choices have led to an unthinkable and depressive 50% rate of youth unemployment; a deep social and individual trauma for the highest educated postwar Greek generation whose members have in most cases no other options left than to emigrate. Thus, a dramatic brain drain, as historian Mark Mazower characterizes it, is currently taking place in Greece, which undermines both the present and the future perspectives of the country.

Searching for a Third Green-Left Way

As in other critical moments in Modern Greek history, overcoming these difficulties requires a combination of favourable domestic and international dynamics. We must keep such an optimistic attitude alive over against those who are culturally prejudiced and argue that Greece is just a backward Balkan country which does (or should) not belong to Europe. However, such bare optimism –even if it is historically grounded– cannot be considered sufficient and satisfying enough to anyone who favours a democratic, Green, progressive and Left answer to the Greek –and European– crisis.

On the domestic scene, a Third Way political solution is required which reaches beyond corruption and diffused populism: one that would be based on democratic universality, the Left emphasis upon equality, and the Green imperative for intergenerational solidarity. Outside Greece, a European policy seeking to harmonize (in Peter Wagner's terms) economic and political modernity –that is capitalism and democracy– needs to include Greece in the overall settlement which attempts to pose certain restrictions upon today´s uncontrolled capitalism.

The contrary should be considered as hubris: the violation of certain limits which directly leads to catastrophe and is always followed by nemesis. In the current Greek case, what is violated is the endurance of certain segments of Greek society. But the consequences of this violation –from massive youth unemployment, recession and racism to neo-Nazism and tendencies towards autarchy– are not restricted to Greece only: they threaten anyone in Europe.

  1. Philippe Aghion and Alexandra Roulet in their Repenser L' État: Pour une social-démocratie de l' innovation (Éditions du Seuil, 2011) describe in detail this process for Italy and Greece. 

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