Why does Greece seem to be mired in a cycle of continuous reforms while creditors are convinced it has not done enough? The problem is leadership, but not how one may surmise. Greek leaders certainly share much of the blame for precipitating the crisis that has engulfed the country, but they should not be wholly blamed for reform failures.
There are two reasons for my “kindness.” The first has to do with the fact that resolving the crisis does not wholly depend on what Greeks do. The problem is much bigger and extends to Europe’s economy. Even if Greek leaders did what they were supposed to do (and I am not saying they have), economic growth depends on a host of factors that are beyond their control. Think of competitiveness. Despite the term’s use as the main objective of two gargantuan bailout packages, there is no agreement on what it even means. Does it mean Greece will now begin to export more because its products are cheaper? One would think so given the ubiquitous rhetoric emanating from European capitals, but this is not true. Making Greek products cheaper does not necessarily mean Greeks will export more. It simply means the potential is there for these products to be bought if they get to the right markets and there are buyers. For any transaction there need to be sellers and buyers. If Europe’s economy is in the doldrums, few are buying and there is nothing Greeks can do. The numbers will not improve because in the absence of export opportunities, the only way to balance the trade deficit is to reduce imports. That’s already happening. But it comes at the cost of reduced consumption and the vicious cycle of a deepening recession. Deeper recession lowers revenues below targets implying there will continue to be short-term exceptional measures designed to plug holes in public coffers, which in turn reduce consumption and deepen the recession. Greece will not be able to break this cycle until the rest of Europe also gets its own house in order.
Second, reforms create both risks and opportunities. The only way to legitimize reforms is to incorporate them into a political vision of Greeks, by Greeks, for Greeks. So far leaders have come up way too short partly because they truly are incompetent and self-centered (the infamous political cost) and partly because the state apparatus is completely rotten. But there is an additional dimension to this story. Reforms necessitate strong domestic leadership to cajole, nudge, push, and on occasion throw opposing groups under the bus. Lasting reform requires deliberation, persuasion, and political support. This is structurally not possible at present. It is no secret, external creditors (actually European capitals) determine what will be done, when, and (to an extent) how. Can one lead with hands tied behind the back? Can there be true owning of reforms when vassals must report progress to their lords? Don’t get me wrong. I don’t argue Greeks should be let off the hook. I do argue that reforms require leadership and leadership requires credibility and trust. Unless the bailout is refocused toward re-establishing these two rather nebulous but critically important elements, nothing of lasting substance will occur. Austerity measures appear to be politically and economically motivated. The way to actually give them substance and effect is to ease off on achieving sometimes meaningless targets and focus on helping Greek leaders demonstrate they actually do care about their country’s future. I know they all say they do, but does anyone really believe them? Where there is no trust, there will be no lasting effect.
How do we turn things around? By focusing on a greater balance between revenues and expenditures, by visibly rewarding the creation of private sector jobs through tax incentives, by cutting significantly the salaries and perks of ministers and members of parliament, by dramatically reducing subsidies to political parties, by enforcing the already existing laws, and by stressing measures that improve (even if symbolically) the quality of life such as cleaning up streets or reducing petty crime. These are small things that have a big symbolic impact. What is urgently needed now is restoring trust rather than just filling public coffers.
Reforming Greece at this point feels like climbing the walls of a medieval castle while defenders are throwing scolding oil at you. Don’t be surprised if you get burned. But the fact is castles were never taken by such head-on assaults. Just like those tasks, reform takes cunning and the freedom to inspire and act. Greek leaders need to be allowed to lead and this means the troika must change course as well. It is not only part of the solution it is also part of the problem.
Note: This article gives the views of the author, not the position of Greece@LSE, the Hellenic Observatory or the London School of Economics.
The author is too kind to the leadership and as is customary blames others for Greece’s woes. The same people who brought on the crisis are in charge. Their solution for over 4 years continues to beg for loans to promulgate a corrupt and decayed system. They promise reform but deliver little. Tax evasion is rampant, cartels still control prices, laws are not enforced, and the bureaucracy is crippling investment and jobs creation. New leadership is needed. Leadership that is unencumbered with past corruption, has proven experience and upholds the highest ethical standards. Leadership that will articulate a vision for opportunity and economic development and have the credibility to call on all Greeks worldwide to invest in a new Greece. The international community will help Greece if it first show that it wants to help itself. Begging for loans should stop. Greece must rediscover its dignity.
I don’t disagree with the respondent that new leadership could bring results, but my argument is more nuanced than blaming “others for Greece’s woes…as is customary.” In fact, I clearly state: “I don’t argue Greeks should be let off the hook.” The purpose is to give Greek leaders a chance to do things that are important rather than to allow them the luxury of shifting blame to directives by the troika. Political experience tells us new “leadership that is unencumbered with past corruption” will not come until the old leadership is held accountable. To do this, they (governing parties and the opposition) must own up to their actions instead of hiding behind empty slogans such as renegotiating the Memorandum or pretending to care about the effects of austerity on the poor. In so far as “begging for loans should stop,” I fear it’s not so simple. Loans are the only thing that currently keeps the Greek economy going, now and for the foreseeable future. There is nothing wrong with seeking help when you need it, the problem is what you do with this help. Dignity will be rediscovered only when accountability, credibility, and trust are restored.
I understand the nuances. Nuances are important, and in our dialogue critical. With all due respect I beg to differ. However, I enjoy our conversation because we are touching on issues of utmost importance to Greece that need much more public debate..
Leadership, (independent of party) that has brought the Country to the brink of bankruptcy, impoverished the nation and has yet to articulate a vision to restore hope and prosperity, cannot be reasonably assumed that given more time it will “do things that are important” to put the Country back on the right path. Experience and history teaches that it is more likely that they will make things worse. People are held accountant in the courts and not with renewed confidence that somehow they will get it right the next time.
When you lose your dignity and peoples’ trust, you have nothing left – remember the old saying that “it is better to lose an eye than to lose your reputation”. The Greek dignity, pride and nationalism need to be re-ignited now. They are more important than loans. People will sacrifice for these ideals.
Loans are not what keep the economy going. With each successive loan, the Greek people are further impoverished,humiliated and the national addiction is increased. Loans are worthwhile when used as investment for economic development. Unfortunately, Greece does not have an economic plan to make the economy competitive and create jobs. Austerity is not an economic plan. It needs one urgently!
This is one of the rare moments in public dialogue (especially for Greeks I dare say) when the more we discuss, the more we find out we agree!! Perhaps politicians should take notice. Call it trust or dignity, these are related concepts. The key is: how does one do it? Waiting for new leadership that will save the country is in my opinion similar to waiting for Godot. He (perhaps time for a she?) may show up, but chances are he will not. One has to work with is out there, which is not much I concur.