Greek situation discussed for a long time

The Greek sit­u­a­tion and the pos­si­ble con­se­quences of the severe eco­nom­ic and finan­cial cri­sis that Europe is fac­ing are amongst the most dis­cussed sub­jects in Por­tu­gal since our country’s acces­sion to the Euro­pean Union. Opin­ion mak­ers, eco­nom­ic ana­lysts and polit­i­cal par­ties spread their views on these top­ics on an almost dai­ly basis. The main rea­son for this lies in the fact that, although there are sub­stan­tial dif­fer­ences between the Greek and the Por­tuguese sit­u­a­tion, it is com­mon sense that the Por­tuguese econ­o­my is quite frag­ile and may be affect­ed by the spill-over effects of finan­cial mar­kets’ insta­bil­i­ty in the Eurozone.

The main con­cern of the Por­tuguese author­i­ties at the time the Greek case was report­ed was to high­light the dif­fer­ences between the two coun­tries. This strat­e­gy – which was endorsed almost unan­i­mous­ly – proved to be cor­rect, as it appears now that the said dif­fer­ences were recog­nised by the mar­ket, notwith­stand­ing the gen­er­alised down­grade of Por­tuguese pub­lic debt by the main rat­ing agen­cies. How­ev­er, this strat­e­gy forced the Por­tuguese author­i­ties – also as a result of the pres­sure from the Com­mis­sion and the biggest mem­ber states – to adopt very strict bud­getary mea­sures, which cre­at­ed social insta­bil­i­ty and a sig­nif­i­cant con­cern about eco­nom­ic growth per­spec­tives. This was only pos­si­ble as a result of an agree­ment between the Social­ist Par­ty minor­i­ty gov­ern­ment and the new­ly elect­ed leader of the main oppo­si­tion par­ty, Par­tido Social Democ­ra­ta (PSD).

The imme­di­ate reac­tion to the approval of the finance pack­age for Greece was a feel­ing of relief, although some con­sid­ered that this could lead mar­ket spec­u­la­tors to change the direc­tion of their attacks towards the Por­tuguese mar­kets. But the over­all opin­ion is that Europe was too slow in find­ing the nec­es­sary con­sen­sus and in adopt­ing the required mea­sures to tack­le the Greek case with the risk of cre­at­ing a very com­pli­cat­ed sit­u­a­tion for the Euro­zone as a whole. As pre­vi­ous­ly men­tioned, spe­cial empha­sis was put on the lack of coor­di­na­tion between mem­ber states, Ger­many, but also France, being regard­ed as the main respon­si­ble par­ties for this sit­u­a­tion. In any case, most ana­lysts seem to con­sid­er that the way Europe respond­ed to the need to find a Euro(pean) solu­tion for the Greek case was clear evi­dence that, main­ly in times of cri­sis, mem­ber states still focus on nation­al inter­ests instead of con­cen­trat­ing their efforts on a glob­al solution.

The Greek case clear­ly illus­trat­ed the need to strength­en the Sta­bil­i­ty and Growth Pact (SGP), in par­tic­u­lar its pre­ven­tive side, and showed that with­out cre­at­ing instru­ments that take account of the gen­er­al inter­est of the Euro area and the Euro­pean Union as a whole, the future of the Mon­e­tary Union could be at risk. But the Greek case also demon­strat­ed Europe’s weak­ness­es in deal­ing with “sys­temic cri­sis”, as it seemed too paral­ysed at the time to adopt effec­tive cri­sis-man­age­ment mechanisms.

The reform of the SGP is seen as an urgent need, not only in order to ensure greater bud­getary dis­ci­pline, but also to find new ways to reduce dis­par­i­ties in com­pet­i­tive­ness between mem­ber states’ economies. As a mat­ter of fact, there is some crit­i­cism as to the lev­el of impor­tance which is attrib­uted to the “G ele­ment” of the SGP, con­sid­ered by some as not being duly tak­en into consideration.

It is also worth men­tion­ing the sug­ges­tion made by Min­is­ter for For­eign Affairs, Luis Ama­do, in an inter­view11News­pa­per Diário Económi­co, 17 May 2010 for the intro­duc­tion of a spe­cif­ic pro­vi­sion in the Por­tuguese Con­sti­tu­tion estab­lish­ing lim­its to the lev­els of deficit and pub­lic debt. But this sug­ges­tion was rapid­ly reject­ed both by Prime Min­is­ter Sócrates and the oppo­si­tion par­ties.22News­pa­per Diário Económi­co, 18 May 2010.

The idea of “a strong coor­di­na­tion of eco­nom­ic poli­cies in Europe” seems to be quite well received in Por­tu­gal. There is a broad con­sen­sus over the fact that it is nec­es­sary to give a real impulse to the eco­nom­ic union and to strength­en eco­nom­ic gov­er­nance. This is not real­ly new as many in the past have point­ed out that a sin­gle mon­e­tary pol­i­cy would hard­ly sur­vive with­out an equiv­a­lent lev­el of coor­di­na­tion of eco­nom­ic policies.

For­mer Min­is­ter of Finance and cur­rent Pres­i­dent of the Court of Audi­tors, Guil­herme d’Oliveira Mar­tins, strong­ly plead­ed in favour of an effec­tive coor­di­na­tion of eco­nom­ic poli­cies which still do not exist in the Euro­pean Union and stat­ed that this fail­ure to coor­di­nate eco­nom­ic poli­cies is the result of “a lack of bold­ness” of mem­ber states and Euro­pean insti­tu­tions.33Lusa news agency, 31 May 2010. Sev­er­al voic­es also point to the need of ensur­ing a greater social cohe­sion with­in the Euro­pean Union and are afraid that the reforms in progress will not take this issue in due con­sid­er­a­tion.44As it is the case of for­mer Pres­i­dent Soares, cit­ed above, or pres­i­den­tial can­di­date Manuel Ale­gre in sev­er­al pub­lic speech­es in his ongo­ing cam­paign (name­ly in Bra­gança, 19 March 2010, in the candidate’s blog).

Appar­ent­ly, the key objec­tives which were defined by the task force on eco­nom­ic gov­er­nance, which met for the first time on 21 May 2010, are broad­ly accept­ed. But it is com­mon ground to say that they are still too vague and one should wait for more detailed infor­ma­tion before com­ing to any con­clu­sions. The debate on the pos­si­ble solu­tions to be adopt­ed only began at end of June 2010, when the first con­crete mea­sures were out­lined. New penal­ties, either finan­cial or non-finan­cial, were already expect­ed and did not raise any spe­cial con­cerns. The new bud­getary pro­ce­dure, pro­vid­ing for some coor­di­na­tion between the mem­ber states on the basis of the bud­get guide­lines each one will have to sub­mit by the end of the first semes­ter, seemed to be quite well accepted.

Con­trary to its pre­de­ces­sor – the Lis­bon Agen­da – the Europe 2020 Strat­e­gy seemed not to be a pre­ferred top­ic for dis­cus­sion, to say the least. The rea­son for this lies prob­a­bly in the fact that every­one is pay­ing too much atten­tion to the eco­nom­ic and finan­cial cri­sis, as referred by for­mer Euro­pean Com­mis­sion­er António Vitori­no.55António Vitori­no: Con­de­na­dos a enten­derem-se, Diário de Notí­cias, 18 June 2010.

Social and eco­nom­ic pri­or­i­ties for the next ten years in terms of eco­nom­ic growth and job cre­ation are cru­cial for the future of the Euro­pean social mod­el, Vitori­no says. But the fact is that very few seem aware of the impor­tance of this debate. João Crav­in­ho, for­mer Min­is­ter in sev­er­al Social­ist gov­ern­ments and cur­rent­ly mem­ber of the board of the Euro­pean Bank for Recon­struc­tion and Devel­op­ment (EBDR) has recent­ly made severe cri­tiques of the lack of debate on the Europe 2020 Strat­e­gy in his week­ly pro­gramme at Rádio Renascença.66Avail­able at: http://www.rr.pt/informacao_prog_detalhe.aspx?fid=114&did=94077 (last access: 27 July 2010). He said that it is very strange that this sub­ject is being total­ly ignored, includ­ing by the gov­ern­ment. Crav­in­ho urges the gov­ern­ment to take the lead and to pro­mote a great pub­lic dis­cus­sion on this sub­ject. So far, there is noth­ing but silence. Not even the agree­ment on the new strat­e­gy reached by the Euro­pean Coun­cil on 17 June 2010 or its pub­lic announce­ment changed the sit­u­a­tion. Apart from the news pub­lished in the press, there is still no sign of any debate.

    Footnotes

  • 1News­pa­per Diário Económi­co, 17 May 2010
  • 2News­pa­per Diário Económi­co, 18 May 2010.
  • 3Lusa news agency, 31 May 2010.
  • 4As it is the case of for­mer Pres­i­dent Soares, cit­ed above, or pres­i­den­tial can­di­date Manuel Ale­gre in sev­er­al pub­lic speech­es in his ongo­ing cam­paign (name­ly in Bra­gança, 19 March 2010, in the candidate’s blog).
  • 5António Vitori­no: Con­de­na­dos a enten­derem-se, Diário de Notí­cias, 18 June 2010.
  • 6Avail­able at: http://www.rr.pt/informacao_prog_detalhe.aspx?fid=114&did=94077 (last access: 27 July 2010).

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.