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Euro as an ancient Greek drama in four acts

29 September 2011 / 22:09:32  GRReporter
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The Greek economic crisis has long gone beyond the country and now threatens to cause another global financial collapse. Therefore, for months now, Greece is the first news in all international media, which rarely have anything positive to say about the cradle of modern democracy. The German magazine Der Spiegel decided to make a retrospect of the problem from the beginning until today and GRReporter offers an outlook on the story, which already resembles an ancient Greek drama in four acts.

First act: The birth of the euro (1991-2001)

The beginning of the Greek economic drama begins, like most stories, in the hope of a better future. The government at that time led by Andreas Papandreou in the role of Prime Minister of Greece and the Minister of Finance Yiannos Papadoniou see the accession to the European dream of a monetary union as the solution of many local economic problems. End of exchange oscillations and uncertainty, and access to cheap long term loans, along with all other benefits of duty-free trade. The problem is that even then, Greece had serious external liabilities and its competitiveness has been far from the standards established in most Western countries. Der Spiegel determines the economic model of Greece-before-the euro as a developing country. Papadoniou himself admits that the main economic advantages are olive oil, yogurt, sea transport, tourism and the euro will lead to urgent reforms, which obviously the Greeks are not able to apply themselves. The German Finance Minister at that time Theo Waigel initially strongly opposes the idea of ​​Greece joining the single currency, but then somehow miraculously becomes a fan of the idea. All know the allegations that Greece has falsified the statistical data before entering the single European currency. A statement the former Minister of Finance Yiannos Papadoniou explicitly denies today, "We did not do anything different than what other countries did." Moreover, the then president of the Bundesbank, Hans Tietmeyer, confirms the bitter truth.

Second act: Life with the euro (2001-2008)

New hope is born and with the enthusiasm of a neophyte, euro area countries go into taking low-interest loans. Deutsche Bank buys Greek government bonds, Societe Generale invests in Spanish bonds, and security funds from America and Japan buy bonds of different member states that have no higher return, but no higher risk either. At least the investors think so at the beginning. At that time, currency balances are formed which will make Greece a financial bomb and years later, it threatens the entire euro area. Meanwhile, Papadoniou determines the euro as a kind of paradise. Still in 1999, an organization of the foreign debt is established headed by Christofors Sardelis. With the coming of the euro, Sardelis promotes the Greek bonds as an attractive investment. Today, he is retired and a board member of the insurance company of the National Bank of Greece. According to him, his job then was to attract funding in the local market in the best way possible. He claims that he warned that this method of financing could create some problems in the future, but there was nobody to hear. The illusion is that the monetary union can solve the problems of Greece, but instead of carrying reforms to strengthen the macroeconomic positions of Greek, it all continues as before, and even carelessly, especially in the period before the Olympic Games.

The country falls into lethargy and laziness, says Sardelis. The Commissioner for Internal Market at that time Frits Bolkestein has offered to ease the criteria of Maastricht and has accepted the observations of the former President of the European Commission Romano Prodi, reads Der Spiegel. When Greece wants € 150 million to make a development plan, Prodi approves the allocation of the subsidy. Typical for the Greeks, the project is frozen a year later. This makes Europeans definitely angry and Frits Bolkestein insists the money be returned, in case it will not be used. Der Spiegel notes that with the help of the then Commissioner Anna Diamantopoulou, Greece is paid only € 75 million and Bolkestein wants to know where the rest of the money is. Nobody can answer him. Then the scandal with the statistical data comes in 2004 during the government of New Democracy, which insists the statistical office to investigate the former Socialist government. Eventually it becomes clear that the budget is tailored to the needs and it is never performed following its initial form. Consumption grows and the statistics registers growth, but it is based on loans instead of production and exports. Greeks consume more than they produce, costs are always more and in 2006 the public debt reaches 14.7 per cent of GDP.

At the same time, cheap lending provides the Greeks with a high level of imports. They buy German cars, goods and services. The German GDP grows. The Greek reforms lag behind and the European leaders look to the other side. Nobody pays attention to the growing bureaucracy, corruption, fraud and subsidies in the wrong direction. The results of this can be seen today in the abandoned industrial sites in northern Greece and closed shops across the country. Administrative inefficiency, corruption and tax chaos hamper bold investment projects and productivity becomes heroic.

Tags: EconomyMarketsGreeceCrisisEuroDer SpiegelDrama
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