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Calliope Spanou

November 3rd, 2022

Crisis, reform and the way forward in Greece

1 comment

Estimated reading time: 10 minutes

Calliope Spanou

November 3rd, 2022

Crisis, reform and the way forward in Greece

1 comment

Estimated reading time: 10 minutes

For more than a decade Greece was confronted with multiple external and domestic crises. Economic, political, migration, security, a global health crisis and the ongoing energy crisis due to a war on the European continent. In such a context of increased volatility, what matters most is how problems are approached. In other words, government matters.

Understanding a crisis as deep and long as the debt crisis in Greece may provide some direction for the future. Therefore the importance of questions such as: how much did Greece manage to adjust to a changing international environment; how did its political and institutional system dealt with, and responded to, the crises; and how did society react to these combined challenges?

The underlying issue connecting these factors concerns the “reform capacity” of the Greek state. What kind of policy responses did it provide to critical economic challenges — for instance encouraging and attracting investments, improving the business environment and correcting labour market distortions. How did it try to reform itself, how were reforms conceived? This inquiry is closely linked to deeper governance issues that needed to be addressed.

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A crisis is supposed to be a window of opportunity to tackle old problems in new ways. To overcome so called “path dependencies” and undertake deep reforms. Most of the time such conditions imply a domestic reconsideration of past policy choices. Indeed the “crisis as opportunity” mantra played strongly during the early years of the crisis. The consensus was that “a new growth model” –centered on investments and exports rather than consumption– was necessary. It implied structural reforms to address low competitiveness and state inefficiencies.

However, it is hard to predict what may come out of a crisis. The way involved actors use the “opportunities” cannot be predetermined. This challenge meets the discussion of reform capacity in Greece. The presence of external actors (the so-called troika, or, later the institutions) complicated things. Gradually the reform agenda changed hands, and was shaped by external pressure due to the strict conditionality of the economic adjustment programmes. Under conditions of extreme fiscal pressure on society and the political system, the “crisis as opportunity” idea did not manage to survive. It lost both credibility and purpose.

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But there are additional issues. First, the appropriateness of the reform agenda. To what extent were the remedies promoted -i.e. the long list of structural reforms- really needed? It seems that they did not always correspond to policy priorities that are critical for the future of Greece. They often focused on short-term fiscal results and a mechanistic “box-ticking”. There was no evaluation of the policies implemented and the results achieved.

Despite their extent and ambition, administrative reforms did not always touch upon critical priorities. Public sector restructuring did not really focus on stimulating competition. While asymmetrical growth between the non-tradable and tradable sector was at the heart of the crisis, the shift towards an export-led economy was insufficiently prioritized.

In sum, reforms were hastily designed and implemented, short-term and fiscally oriented, and often with unclear priorities and long-term goals. A valuable side-effect was however the building of tools in various policy areas. While their primary goal was to monitor the situation and compliance with the economic adjustment requirements, their existence could contribute to better policy-making in the future.

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A further issue is that reform needs agency, which raises the question of the role of domestic vs. external actors. The role of domestic actors is frequently considered as one of permanent resistance to change, insufficient or superficial implementation. Achievements tend to be credited to external actors and the pressure they applied. At a closer look, such a description seems unfair. Governments had a critical role to play in promoting change. ”Reform fatigue” was acknowledged in 2014 as a result of drastic fiscal consolidation alongside successive waves of legislative changes.

The issue is the depth of reform. Reform can be understood in many ways. Smaller or deeper changes, incremental or drastic ones, etc. If reform is perceived after B. Guy Peters as “a significant departure from the status quo”, it is a demanding process that challenges policy legacies and corresponding social arrangements. In that sense, reforms have been uneven depending on the policy sector and the specific period of time. However changes took place in –and despite- these difficult conditions. Domestic agency played a large part and it should not be underestimated.

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Last but not least, is an issue often missing in this discussion: the time dimension of change. It has been suggested by various authors that an appropriate time span to assess policy change is a 10-year period in order to allow time for implementation and the production of results. Seen under this light, early assessments that reforms did not advance were by definition hasty, only confirming the stereotype of Greece as a “reluctant reformer”. Even more, difficulties increase when structural reforms are undertaken in parallel with drastic fiscal consolidation. Reform is not a technical but also a social process. It is sensitive to questions of legitimacy, timing and levels of social tolerance.

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In conclusion, what might be more interesting to take from this experience is the pattern of reforms undertaken during difficult economic adjustment years. This pattern refers to domestic as well as the external agents. It involves the way the reform agenda was set, reform priorities identified and the strategies, the continuity and consistency of effort and the legitimacy of external constraints.

Despite the variety of situations, changes have occurred, sometimes too many, too frequently or too fast, insufficiently targeted or prioritized. Certain issues were missed, underestimated or discretely left untouched. Hence, the general assessment is mixed. In certain sectors deeper change occurred, in an incremental but consistent way. It deserves to be noted that an avalanche of so called drastic but inconsistent or superficial changes, often proves counterproductive.

In a nutshell, what was at stake during this 10-year period, and remains important for the future, was the development of the domestic capacity to set goals and to design and implement corresponding policies. But this was not the objective of the adjustment programmes. Not only does external pressure have limits, but it is hardly ever meant to develop internal capacity for endogenous reforms. This needs to be part of a domestic learning process which appears to have started, albeit unevenly, and is at times undermined by political polarization. Ideas need to mature within society and the political system, thus preparing for a future increasingly unpredictable.

 

Note: This article gives the views of the author, not the position of Greece@LSE, the Hellenic Observatory or the London School of Economics.

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About the author

Calliope Spanou

Calliope Spanou is Professor of Administrative Science and Public Administration at the National and Kapodistrian University of Athens, Greece. From 2011–2015 she was the Greek Ombudsman and she served as Deputy Ombudsman from 2003–2011. She has extensive experience in administrative reform in Greece and in other countries. She holds a PhD (Doctorat d’Etat) in Political Science and Public Administration from the University of Picardie, France. She has been a guest researcher or professor at various academic institutions in Europe, including the Fondation de la Maison des Sciences de l’Homme, Paris, France, and the Robert Schuman Centre for Advanced Studies, European University Institute, Florence, Italy. Her latest publications include (ed.). Crisis, Reform and the Way Forward in Greece. Routledge 2022 and Ποιες Μεταρρυθμίσεις; Κυβερνώντας υπό εξωτερική πίεση (Which Reforms? Governing under External Pressure). Πατάκης 2021.

Posted In: Crisis | Economy

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