Greek debt crisis strains the EU’s commitment to European solidarity

The grav­i­ty of the debt cri­sis and the pain expe­ri­enced due to the EC/ECB/IMF spon­sored sta­bil­i­sa­tion pack­age for 2010–2014 present­ly dom­i­nate pub­lic dis­course. Dras­tic cuts to salaries and pen­sions, com­bined with high­er tax­a­tion are mea­sures to be faced by the vast major­i­ty of peo­ple in Greece. It is to be expect­ed, though, that the ques­tions raised by lim­it­ed and hes­i­tant Euro­pean sol­i­dar­i­ty in face of the onslaught of the finan­cial mar­kets will lead to deep­er doubts as to Greece’s mem­ber­ship in future.11The lit­er­a­ture regard­ing this mat­ter is already immense, at least in terms of reports and arti­cles pub­lished dai­ly in the Greek and inter­na­tion­al press and the elec­tron­ic media; it is there­fore hard to sum­marise it in this paper. See, for a very brief overview, N. Fran­gakis: Greece is not just Europe’s black sheep – it’s tru­cu­lent, too, in: Europe’s World, Spring 2010, pp. 164–165. In late 2009 and ear­ly 2010, the extent of Greece’s bud­get deficit and the feel­ing that sta­tis­ti­cal data were inten­tion­al­ly fudged made for extreme­ly neg­a­tive com­ments on the part of EU author­i­ties and for increas­ing uneasi­ness on the part of sev­er­al Euro­pean cap­i­tals; still, the new Greek Gov­ern­ment ini­tial­ly insist­ed that a plan to bring back growth (through assis­tance to low­er-income groups) should be applied, with moves such as cut­ting back pub­lic expen­di­ture and rais­ing tax­es com­ing a dis­tant sec­ond. Even more impor­tant­ly, pub­lic opin­ion was large­ly sup­port­ive of this stance, while “Brus­sels pres­sures” (as well as the down­grad­ing of Greek paper by the mar­kets) were viewed as some­thing close to unwar­rant­ed exter­nal intru­sion in nation­al policy-making.

Only the rough ride that Greece expe­ri­enced in the finan­cial mar­kets – with the spreads for Greek paper sur­pass­ing 600 basis point over Ger­man Bunds and with Greek banks risk­ing being shut out of ECB financ­ing fol­low­ing the Greek debt down­grades by Fitch, then S&P, and final­ly Moody’s – brought a belat­ed change of atti­tude. The Greek gov­ern­ment found itself in urgent need of Brussels/EC and Frankfurt/ECB sup­port, not so much to reas­sure the mar­kets but to sim­ply sur­vive. So, when the sup­port mech­a­nism of 110 bil­lion Euros had to be pieced togeth­er under extreme mar­ket pres­sure in order to avoid a Greek default in late March, with a severe sta­bil­i­sa­tion pro­gramme agreed upon by Greece with the EC/ECB/IMF – a front-loaded pro­gramme of extreme sever­i­ty, call­ing for a 10 per­cent or more cut in pub­lic deficits over 3 years and for deep struc­tur­al changes main­ly in social secu­ri­ty and the labour mar­ket – pub­lic opin­ion was stunned. The very sur­viv­abil­i­ty of Greece’s polit­i­cal sys­tem is under ques­tion, espe­cial­ly so if the imple­men­ta­tion of the sta­bil­i­sa­tion pro­gramme were to call for incre­men­tal spend­ing cuts/tax increas­es in fall 2010.

The over­all series of nation­al posi­tions tak­en in the EU on sol­i­dar­i­ty with Greece – cul­mi­nat­ing in the pro­tract­ed process to bend Germany’s unyield­ing stance – has giv­en to Greek pub­lic opin­ion food for thought. The fact that the sta­bil­i­sa­tion pro­gramme, con­di­tion­al to which EU/IMF finan­cial sup­port was pro­vid­ed, was only sup­port­ed by the gov­ern­ing par­ty (PASOK) along with the far-right LAOS, while the main oppo­si­tion par­ty (cen­ter-right Nea Dimokra­tia – ND) vot­ed against it (with the sole excep­tion of ex-For­eign Min­is­ter Dora Bakoy­an­nis, who then prompt­ly quit ND) along with the Com­mu­nist Par­ty (KKE) and (ex) Euro-Com­mu­nists (SYN-SYRIZA), should also be not­ed. What­ev­er the exact future of the sta­bil­i­sa­tion effort in Greece, the country’s “Euro­pean iden­ti­ty” will prob­a­bly be rad­i­cal­ly rede­fined in the process.

    Footnotes

  • 1The lit­er­a­ture regard­ing this mat­ter is already immense, at least in terms of reports and arti­cles pub­lished dai­ly in the Greek and inter­na­tion­al press and the elec­tron­ic media; it is there­fore hard to sum­marise it in this paper. See, for a very brief overview, N. Fran­gakis: Greece is not just Europe’s black sheep – it’s tru­cu­lent, too, in: Europe’s World, Spring 2010, pp. 164–165.

The reports focus on a report­ing peri­od from Decem­ber 2009 until May 2010. This sur­vey was con­duct­ed on the basis of a ques­tion­naire that has been elab­o­rat­ed in March and April 2010. Most of the 31 reports were deliv­ered in May 2010.

The EU-27 Watch No. 9 receives sig­nif­i­cant fund­ing from the Otto Wolff-Foun­da­tion, Cologne, in the frame­work of the ‘Dia­log Europa der Otto Wolff-Stiftung’, and finan­cial sup­port from the Euro­pean Com­mis­sion. The Euro­pean Com­mis­sion is not respon­si­ble for any use that may be made of the infor­ma­tion con­tained therein.