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The Greek Crisis, and What It Means for Europe

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The Greek Crisis, and What It Means for Europe The Greek crisis, And what it means for Europe Ruby Gropas University of Thrace & Hellenic Foundation for European & Foreign Policy, Athens Main points Background & brief outline of the main aspects of the Greek crisis Understanding what led to the crisis How the Greek crisis impacted the rest of Europe The wider context & why this is not exclusively a Greek problem The challenges for Europe: Disintegration & Global Irrelevance? Protest & citizens’ opposition What next for Greece? What Kind of Europe? What does this mean for democracy? Relationship between democracy and financial markets: tense & fragile The Greek crisis in numbers 5th consecutive year Greece has been in a recession. GDP has declined by 20% Official statistics put unemployment rate at 22%. 350,000 jobs have been lost in the past year alone. Youth unemployment rate for (up to 24), has soared over 46% while the EU average is at just over 20% Demonstrations, riots, sit-ins, strikes are a daily phenomenon in Athens average of 3 demonstrations per day over the last two years— The economic cost of these protests are huge. Especially during this time of crisis In Athens, there was up to 60% fall in revenue for businesses directly associated with the Indignados sit –in and the riots over the past year Greek crisis in numbers 3 fundamental deficits: Sovereign debt Current accounts Credibility March 2012: Biggest sovereign debt restructuring in history Yet its still not enough ‘Haircut’ to ensure that the public debt will fall from 164% to 120.5% of GDP in 2020 to make it ‘sustainable’ according to the projections of Troika (IMF, EU Commission & ECB). 53.5% reduction in its debt burden to private creditors, while any profits made by eurozone central banks on their holdings of Greek debt will be channelled back to Greece. Bailout: 110 bln euro 2010-2011 130 bln euro in 2012 Fragmented political scene at May 6th elections and polarised pro & anti-bailout camps 20 18,85 18 16,8 16 14 13,18 ND 12 PASOK 10,6 SYRIZA 10 8,5 KKE 8 DHMAR 6,7 6,11 Ind. GR 6 Xrisi Avgi 4 2 0 Political Parties in May 6th Elections Austerity Salaries & pensions have already been cut by 20-25% Further cuts in government spending equal to 1.5% of GDP, cuts in pensions and thousands more civil service job cuts. Taxes will increase by 3.38bn euros in 2013, following a 2.32bn euro increase in 2011. The increase includes a solidarity levy of between 1% and 5%, a cut in the tax-free threshold, a rise in VAT rates, and luxury taxes on yachts, pools and cars. In the public sector, pay will be cut and many bonuses scrapped. Some 30,000 public sector workers are to be suspended, wage bargaining will be suspended, and monthly pensions of above 1,000 euros cut by 20%. The government also aimed to raise about 50bn euros by 2020 from privatisations by selling land, utilities, ports, airports and mining rights, but recently this target has been revised down substantially because of the worsening economy. the cost of doing business in Greece must also go down How did we get here and why? From periphery to core Europe Persistence (if not exacerbation) of structural weaknesses of state, politics and economy Clientelism, corruption, bribery, populism Failure to reform The ‘Golden’ years 1999-2004 December 2008 riots Global financial crisis 2008 Spill over to Europe & Greek debt crisis breaks out in 2010 “We are all Greeks now” “Greek crisis and the End of the End of History” “The Greek crisis & the end of capitalism” The European dimension: Europe ‘broke’ or broken? From Euro-euphoria to deep crisis Systemic failures Completely unexpected & unthought of developments Financial lobbies, political power: disconnect between ‘elite Europe’ & ‘people’s Europe’ Tense relationship between financial markets and democracy Discontent from both the North (EU as a Transfer Union) and the South (EU as a Neoliberal Austerity driven Union) Debate about what kind of Europe? Trends of this period of transition, contestation & decline… Disintegration Weakening of EU institutions & return to intergovenmentalism Populism Contestation & protest Return of ‘nationalists’ Economic Decline Global Irrelevance Priorities & challenges Challenges of adjustment & reforms, especially for the weakest economies- distribution of the pains and costs of reforms Rethink Europe: Need to openly debate again what kind of Europe we want and can have Political leadership to articulate a new vision/ narrative for Europe’s economic development Politicians who didn’t “survive” the crisis across Europe Romania, Hungary, Ireland, Portugal, Spain, Italy, & Greece Ireland: Brian Cowen (Fine Gael) was replaced by Enda Kenny (Labour). Brian Cowen Enda Kenny (7.5.2008-9.3.2011) (9.3.2011- ) Portugal: José Sócrates Carvalho Pinto de Sousa (Socialist) was replaced by Pedro Manuel Mamede Passos Coelho (People’s Party) José Sócrates Carvalho Pinto de Pedro Manuel Mamede Passos Sousa (12.3.2005-21.6.2011) Coelho (21.6.2011- ) Spain: José Luis Rodríguez Zapatero (Socialist) was replaced by Mariano Rajoy Brey (People’s Party ) José Luis Rodríguez Zapatero Mariano Rajoy Brey (17.4.2004-21.12.2011) (21.12.2011- ) Italy: Silvio Berlusconi was replaced by Mario Monti (technocrat) Silvio Berlusconi Mario Monti (8.5.2008-16.11.2011) (16.11.2011- ) Romania: Emil Boc was replaced by Mihai Răzvan Ungureanu (political party: Independent). Cătălin Marian Predoiu served as the interim Prime Minister from only 6.2.2012 to 9.2.2012. Emil Boc Mihai Răzvan Ungureanu (22.12.2008-6.2.2012) (9.2.2012- ) Hungary: György Gordon Bajnai was replaced by Viktor Orbán (political party: Fidesz) György Gordon Bajnai Viktor Orbán (14.4.2009-29.5.2010) (29.5.2010- ) Greece: George A. Papandreou (Socialist) was replaced by Lucas Papademos- technocrat (unity government) George A. Papandreou Lucas Papademos (6.10.2009-11.11.2011) (11.11.2011- ) .
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