• Ελληνικά
  • English
  • The financial crisis

    CriisisThe financial crisis during 2010 to 2015
    The years 2010 to 2015 proved to be a most dramatic period for Greece that reached very close to bankruptcy.
    Bankruptcy has been avoided, for the time being, due to continued fund injections in the form of low interest rate loans provided by the European Union and the International Monetary Fund, in exchange of harsh austerity measures that caused serious resentment in lower and middle level classes of the Greek public.
    This situation, led to a political instability the  extend which was not initially anticipated.
    The developments were so serious that instability jeopardized parliamentary democracy in the country and put at risk fundamental principles of the European Union such as common currency, solidarity or even aspirations for future political unification.
    The treatment of Greece as a “guinea pig” from it’s partners, did not help.
    This, presumably, happened in order to help Europe to deal with a larger upcoming problem that has been developing in Europe, due to existing wide differences in standards of economy among member countries, especially between north and south of the European Union,
    The long standing weaknesses of the Greek economy have been exposed and became more evident during this crisis.
    The Greek political system consistently encouraged the expansion of public sector for populist reasons, generating, as consequences, budget deficits and excessive government overspending.
    Such characteristics, in addition to the protection of most “closed professions”, and extensive unionism, already existed since the 80’s.
    Unfortunately these practices continued to exist contributing to the devastating situation experienced during the years of the financial crisis.
    It is to the detriment of Greek economy that, the impact of the global crisis, severely affected Europe, as well, with the development of disruptive counter-trends such as Euro skepticism among many political groups in Europe.
    Conflicts also appeared between the European Union and the International Monetary Fund that represented different interests.
    As a consequence IMF considered the Greek problem, strictly, as an internal European affair, therefore, the situation become more complicated.
    Greece was dragged in the midst of an international power game, very much related to conflicting interests with complex financial and geopolitical parameters.
    Meanwhile the political situation within Greece became subversive.
    Traditional political parties, alternating in power, belonging to right or social democrats, that governed Greece for decades lost their electorate base, as a consequence of their practices to reconcile with the policy of austerity imposed by IMF and the European Union.
    The same parties were also blamed to be the main culprits for their irresponsible management during previous decades, read article in Greek at the following link:

    Ποιοι διέλυσαν τον Ομιλο Ανδρεάδη και την ελληνική βιομηχανία

    but even more they were blamed to be responsible for implementing the suffocating pressure of austerity policy, as mentioned above.
    All this led to a dramatic change in the scene in the Greek parliamentary democracy.
    The social democratic party, PASOK, totally lost their power.
    The extreme Nazi party rose to a third position after the January 2015 elections.
    SY.RI.ZA the leftist party raised to power for the first time after the Second World War.
    SY.RI.ZA consists of two main components, the component with supporters of a purely Marxist ideology and the other, of moderate socialist ideology that was strengthened by ex Members of the crumbling PASOK the Socialist Democratic party.
    As a result, SY.RI.ZA, a party that rose from 4% to 36%, managed to become a leading force in Greece.
    This dramatic shift to left that took place in a country, part of the European Union tool place dew to serious indignation caused by the austerity policy imposed, yet this shift was not to an extent that the Greek people would want to secede from Europe and the monetary union.
    At the same time, it has become very obvious that the European Union would hesitate to conciliate with a party with is considered to maintain confused ideas and unclear objectives or intentions.
    This type of contrast became the crucial point of political conflict, both internally within Greece and in Europe.
    A section of the ruling party of the left SYRIZA, interprets the vote of the Greek people as a mandate to stop all austerity measures at any cost, including the exit from the monetary union, (GREXIT) considering that every other possible tactic will not be an effective way to negotiate.
    On the other side, the stringent policies of certain circles in the European Union cannot accommodate the fact that a party advocates that a breach of an agreement between countries is a legitimate practice if it is supported by electorate results.
    Reading behind the lines European culture requires that contractual obligations cannot be questioned and need to be honored, if a country intends to maintain its credibility.
    Public mandates can change but honoring commitments cannot be translated as lack of democracy.
    The previous government of New Democracy and PASOK is trying to defend its own negotiating practice, by stressing the fact that they have succeeded to bring the first signs of recovery at the end of 2014, despite sacrifices made (high unemployment, in the public sector).
    The real life examples of Portugal, Spain and Cyprus come to support policies that followed austerity invoked by the European Union.
    In the background of all this is the fact that Greece enjoyed the largest financial support than any other country in Europe, making Europeans very hesitant to trust the promises of the leftist government to manage enforcement of prudent economic policy programs. Thereby delaying the conclusion of a final negotiation, thereby increasing the status of uncertainty hence delay further any investment activity.
    Thus, the problem of Greece was transformed from a problem of productivity, which undoubtedly existed, to a problem of political and economic instability.
    May 2015 and the crisis continues …
    Some comments:
    Greece has been criticized by its partners and especially from Germany, which admittedly has been bearing most of the weight, for all deficiencies and short comings. This criticism has taken , in some cases, extreme dimensions. Some of the comments made include that Greece should be selling some of the islands, comments that Greeks are taking too long holidays ect.
    Such comments, are very unfortunate and lead to oversimplifications in so far as the analysis of the reasons that cause the financial crisis and who is really responsible and what is the system that is causing the problems.
    I wonder what any one from the German critics would reply to a question, what is the basis for the industrial development of their country? To what extend defense industry is affecting their prosperity? Why doesn’t European Union and NATO recognize the fact that Greek frontiers are and need to be defended as European Union frontiers, so that Greece to redirect defense budgets to other development projects, that would definitely help Greece to exit this financial crisis?
    Why Germany, France, UK USA and Russia are selling to both Greece and Turkey?
    But even the above note does not expose the full story and the magnitude of the financial crisis that effects not only Greece, as a weak link among the European Union nations, but extends to the total world economy including United States.
    This crisis, for the first time, indicates that “globalization” has failed as an economic development model and a new concept needs to be worked out to protect the world economy from reaching  instability.
    The European Union is the first attempt to build a “pilot” system that hopefully, will manage to work as a multinational union of states,  operating under a single multinational governance that would take decisions, compromising conflicting financial and national interests.
    If that fails the impact will affect the world economy because much bigger conflicts will be experienced among larger national economies such as China, India, Russia, United States and some other new developing countries i.e Brazil.

    European Union hopes to show the road  for a better way to resolve global financial and national conflicts. The successful resolution of the Greek crises can serve as the best example to prove the viability of the EU vision.
    Because of its size, Greece is only 2% of the European economy, it is an ideal opportunity to demonstrate how this model can function. This is why the Greek crises receives such attention globally.
    All Greece has to do is to demonstrate that it is a credible partner’.

    See more detailed analysis in my Blog “timesforchange.wordpress”



    Some more relevant links :

    An open letter to the German people referring to related historical analysis that led to the Greek financial crises.