Thousands of pages, papers, articles, opinions and TV documentaries have been published around the globe, during the last 5 years, aiming to explain the Greek crisis and its causes. In this venture, one of the most dangerous over- simplifications was that one should focus on the 2004-2009 Kostas Karamanlis government era.
Those arguments go as if, during those 5 years, the worst things happened in the country, including debt, budget deficit and huge inflation of the public sector, which finally resulted in the Memorandum and Troika era. A recent joint study of numerous renowned Greek economists, though, (S.A Roukanas, P. G. Sklias (ed.), The Greek Political Economy, Livanis Publications, 2014 [in Greek]) analyzes exhaustively the whole course of Greece’s political economy over the years and sheds light on the causes and those responsible for the Greek crisis.
Surprisingly, for example, many argue that the current 320 billion euros of Greek debt, the amount which resulted after the 2010 bailout, is manageable, simply because, as the same refer, it can be served, although the country has no access to the markets and spreads are over 1000! However, the 270 billions debt of 2009 had been declared as not being manageable, although Greece had access to the markets at the time and the opportunity to cheap borrowing, it was enjoying a growth rate of almost 4% and the unemployment rate was less than 6%.
Having publicly declared that the debt service was not possible anymore, the then Prime Minister George Papandreou claimed that he was obliged to resort to the IMF, accusing Greece and the Greeks of being corrupted, lazy and liars. The latter was referring to the statistical data misuse, as if the issue was not there since 1997 or as if Eurostat was happy with all other EU member states’ use of statistics.
The above-shortsighted approach is usually connected with an attempt to highlight the 2004- 2009 era of governance as the main period in which the Greek debts and deficits were created. However, the fact is that the average annual change of the GDP growth during that era was 2.8, which is the second largest economic performance during the six governance periods in Greece since 1974. Moreover, out of those six periods, during the K. Karamanlis administration, the average annual increase of public deficits in Greece was 7.1, far behind the 10.8 of the G. Papandreou government (2009 -2011), the 10.5 of the K. Mitsotakis government (1990-1993) and the 9.0 of the A. Papandreou government (1981-1989). Regarding the average of the annual changes in the country‘s public debt as a percentage of GDP, during the K. Karamanlis administration (2004-2009), the average increase in Greece’s public debt was 3.3, which again is far behind the 18.6 of the G. Papandreou governance (2009-2011), the 5.0 of the A. Papandreou governance (1981- 1989) and the 3.7 of the K. Mitsotakis governance (1990-1993). All the above data advocate that, in fact, the governance of K. Karamanlis (2004-2009) was not the one which decisively contributed to the creation of excessive deficits and debts in Greece.
Analysts usually fail to mention a series of quite interesting facts, including the level of debt that the socialist administrations created, before 2004, the debt repayment levels, existing obligations undertaken and the payments of military expenditure inherited from the socialist era. Not surprisingly, the military and political elite, which managed military expenditure before the centre-right Karamanlis and during the socialist Simitis era, is now either imprisoned for accepting bribes or accused for doing so.
Let’s also mention some- thing very interesting concerning the size of the public sector, for which the 2004-2009 era has been aggressively accused: latest data of the Ministry of Interior prove that the 2009 number of employees in the public sector has remained that of the 2004 level! Interestingly, those levels are lower or the same with the EU and OECD average ones. And all this without even mentioning the performance of other macroeconomic elements of Greece, as for example the decisive increase of the primary expenditures, the low public revenues and the excessive extension of the State, the evolution of the inflation, the phenomenon of creative accounting starting from the Socialist era back in 1997, etc. It is also worth mentioning that, besides the tremendous increase in Greece’s public debt during the first period of the A. Papandreou governance, in the early 80s, a tremendous increase in public guarantees issued for public enterprises and organizations’ loans was also recorded, as well as those of social welfare public enterprises and the agricultural cooperatives. Another important factor is the increase of public expenditure on public debt service, since the 1980s. More specifically, the public expenditure increased from 1.3% of GDP in 1976 to 14.1% of GDP in 1994, an increase from 4.7% of the general government expenditure to 30.3% in almost misperceptions twenty years.
Finally, things are presented as if Greece is standing and exists alone in the globe and as if this country has not been participating into a multi state players’ environment, in which the rules have been prescribed beforehand, but nevertheless usually not respected. Everybody may agree that Greece, among other countries, entered the EMU on the basis of a political decision and not on mere economic criteria. The rules of the game were not respected by both parts and it remained so for the years to come, not to mention since 1980, when Greece entered the then EC. Things are also presented as if no global crisis emerged in 2007, which hit and is still hitting the EU, thus creating a totally new environment for creditors and lenders, as well as for the global markets overall. This new environment severely affected the weaker economies in particular, which did not manage to adapt to global competition at an earlier stage, including Greece. It has been proven that the EMU was not the appropriate context to provide the more vulnerable countries with the tools and weapons to resist and fight against such a crisis. Surprisingly, the issue was raised for stronger economies as well, including France and Italy. The fallacies of the European Monetary architecture have been more than obvious and the socialist government before 2004 successfully managed to use the so called “creative accountancy” making Greece’s entrance into the EMU possible, nonetheless with a series of structural inadequacies, which it did nothing to correct.
All these demonstrate that the effort made to blame the 2004-2009 administration as responsible for the economic crisis in Greece is short-sighted and cannot be supported. The economic history of Greece does not start in 2004. It goes far beyond.