International Political Economy Series

Series Editor: Timothy M. Shaw, Visiting Professor, University of Massachusetts Boston, USA, and Emeritus Professor, University of London, UK The global political economy is in flux as a series of cumulative crises impacts its organization and governance. The IPE series has tracked its development in both analysis and structure over the last three decades. It has always had a con- centration on the global South. Now the South increasingly challenges the North as the centre of development, also reflected in a growing number of submissions and publications on indebted Eurozone economies in Southern Europe.

An indispensable resource for scholars and researchers, the series examines a variety of capitalisms and connections by focusing on emerging economies, companies and sectors, debates and policies. It informs diverse policy commu- nities as the established trans-Atlantic North declines and ‘the rest’, especially the BRICS, rise.

Titles include:

Vassilis K. Fouskas and Constantine Dimoulas GREECE, FINANCIALIZATION AND THE EU The Political Economy of Debt and Destruction Hany Besada and Shannon Kindornay (editors) MULTILATERAL DEVELOPMENT COOPERATION IN A CHANGING GLOBAL ORDER Caroline Kuzemko THE ENERGY–SECURITY CLIMATE NEXUS Hans Löfgren and Owain David Williams (editors) THE NEW POLITICAL ECONOMY OF PHARMACEUTICALS Production, Innnovation and TRIPS in the Global South Timothy Cadman (editor) CLIMATE CHANGE AND GLOBAL POLICY REGIMES Towards Institutional Legitimacy Ian Hudson, Mark Hudson and Mara Fridell FAIR TRADE, SUSTAINABILITY AND SOCIAL CHANGE Andrés Rivarola Puntigliano and José Briceño-Ruiz (editors) RESILIENCE OF REGIONALISM IN LATIN AMERICA AND THE CARIBBEAN Development and Autonomy Godfrey Baldacchino (editor) THE POLITICAL ECONOMY OF DIVIDED ISLANDS Unified Geographies, Multiple Polities Mark Findlay CONTEMPORARY CHALLENGES IN REGULATING GLOBAL CRISES Helen Hawthorne LEAST DEVELOPED COUNTRIES AND THE WTO Special Treatment in Trade Nir Kshetri CYBERCRIME AND CYBERSECURITY IN THE GLOBAL SOUTH Kristian Stokke and Olle Törnquist (editors) DEMOCRATIZATION IN THE GLOBAL SOUTH The Importance of Transformative Politics Jeffrey D. Wilson GOVERNING GLOBAL PRODUCTION Resource Networks in the Asia-Pacific Steel Industry

International Political Economy Series Series Standing Order ISBN 978–0–333–71708–0 hardcover Series Standing Order ISBN 978–0–333–71110–1 paperback (outside North America only) You can receive future titles in this series as they are published by placing a standing order. Please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address, the title of the series and the ISBN quoted above. Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, England Greece, Financialization and the EU The Political Economy of Debt and Destruction

Vassilis K. Fouskas Professor of International Politics and Economics, University of East London, UK Constantine Dimoulas Lecturer, Panteion University, Greece © Vassilis K. Fouskas and Constantine Dimoulas 2013 Foreword © Donald Sassoon 2013 Softcover reprint of the hardcover 1st edition 2013 978-1-137-27344-4 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2013 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN 978-1-349-44523-3 ISBN 978-1-137-27345-1 (eBook) DOI 10.1057/9781137273451 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress. To Constantine Tsoukalas, our teacher at the University of Athens (1984–88), in the hope that this work continues the arduous inquiry he began in the 1960s with Nicos Poulantzas and Nicos Svoronos This page intentionally left blank Contents

List of Tables ix

List of Figures xi

Foreword xii

Acknowledgements xvii

Timeline of main events in Greece and Europe (October 2009–March 2013) xix

List of Abbreviations xxiii

1 Introduction 1

Part I Financialization and European ‘Integration’: Theoretical Considerations

2 The Sinews of Capital and the Disintegrative Logics of Euro-Atlanticism 11 2.1 Preliminary remarks 12 2.2 ‘Real’ capital, ‘fictitious’ capital and uneven (and combined) development 20 2.3 Global fault-lines and the imperial geo-politics of debt 34 2.4 Capitalism, populism and the state 45 2.5 Final touches 49

Part II Greece’s Fault-lines and the Political Economy of Debt

3 The Vassal and the Lords 59 3.1 The beginnings and the ‘birthmarks’ 60 3.2 Exit the 19th century/kampfplatz-1 and default 64 3.3 Enter the 20th century/kampfplatz-2 and default 67 3.4 A tentative conclusion 78

4 Passive Revolution and the ‘American Factor’, 1940s–70s 81 4.1 The geo-political foundations of post-war growth 83

vii viii Contents

4.2 Miracles and mirages: the ‘golden age’ of the drachma 88 4.3 Kampfplatz-3: lines of stress and fault-lines 97 4.4 Summing up 106

5 Kampfplatz-4 and the ‘European Factor’, 1974–89 109 5.1 The peculiarity of Greece: a bird’s-eye glimpse 111 5.2 The Right against the Right 115 5.3 Crisis of crisis management in the 1980s 121 5.4 Concluding remarks 131

6 Debt and Destruction: The Making of the Greek and Euro-Atlantic Ruling Classes 134 6.1 Greece, the Euro-Atlantic world and the power-shift to the ‘global East’ 135 6.2 The Greek workshop of debt and the profile of the new bourgeoisie 139 6.3 The disintegration of the middle classes 168

7 By Way of a Conclusion: Greece’s Debt Crisis Today and Some Normative Reflections 186 7.1 Seisachtheia in Greece, Europe and the world 187

Notes 192

Bibliography 226 Primary Sources 226 Think-Tank Reports 227 Secondary Sources 227

Index 237 Tables

3.1 Foreign loans and bankruptcies of the modern Greek state (1824–32) 62 3.2 Balance of trade, 1920–30 (million drachmas, 1985 prices) 76 4.1 Evolution of the balance between exports and imports of Greece, 1930–2008 90 4.2 Sectoral composition of GDP and rate of growth of GDP at 1958 constant prices up to 1960, and from 1960 to 1974 at 1970 constant prices (million drachmas) 94 4.3 Percentage increase, GDP and manufacturing in selected European countries (1950–70) and Japan (1960–70) 95 5.1 Sectoral structure of GDP at factor costs as percentage of total 117 5.2 Hours lost in strikes (in thousands) for 1976, 1978 and 1980 117 5.3 Balance of payments deficit and invisible receipts (1960–80) in millions USD; current prices 120 5.4 Some key economic indicators, 1974–89 122 5.5 Defence spending in selected countries in 1988 as percentage of GDP 122 5.6 Evolution of GDP, expenditures of the ordinary budget, expenditures for health, welfare and social insurance and public debt in million drachmas in current prices, 1977–91 124 5.7 State aid to manufacturing (selected countries) 125 5.8 Inflation and money supply in Europe in the 1980s 126 5.9 Gross public debt in EEC countries (in % GDP) 127 5.10 General government net lending (+) or borrowing (–) (in % GDP) 127 5.11 EEC/EC transfers during PASOK’s second term, 1987–89 (% change from previous year) 128 6.1 Evolution of public debt in selected countries as percentage of GDP and per person, in nominal USD (2002, 2007 and 2012) 136 6.2 National Elections in Greece, 1974–2012 140 6.3 Athens Stock Exchange share price indices, 1980–2002 152

ix x List of Tables

6.4 Profitability of Greek banks as a percentage of their assets, 1988–2003 153 6.5 Profitability of Greek banks as a percentage of their assets, 2004–10 153 6.6 Mergers and acquisitions in the Greek banking sector, 1997–2010 154 6.7 International activities of Greek banks in 2010 156 6.8 Impact of the EU structural funds on Cohesion (PIGS) Countries, 1986–2006 160 6.9 EU cohesion funds committed to PIGS, 2000–09 (in 1999 prices) 160 6.10 Evolution of the Greek public debt and its relation to GDP in USD, 2000–2012 162 6.11 Annual loans of the Greek State, state receipts, receipts from EC/EU and expenditures, 1998–2008 163 6.12 Annual change of exports over imports, the share prices in Athens stock exchange and GDP in market prices, 1994–2010 164 6.13 Annual expenses of the Greek state in million euros, 1995–2011 179 6.14 Population +15th years and employment in Greece in thousands,1998–2010 180 6.15 Employees according to their occupational status in thousands, 1998–2010 181 Figures

6.1 Percentage of employment in agriculture, hunting and forestry. Ireland, Greece, Spain, Italy and Portugal, 1999–2010 169 6.2 Percentage of employees in total employment. Ireland, Greece, Spain, Italy and Portugal, 1999–2010 170 6.3 Percentage of self-employed persons without employees (own-account workers). Ireland, Greece, Spain, Italy and Portugal, 1999–2010 171 6.4 Percentage of contributing family workers in total employment. Ireland, Greece, Spain, Italy and Portugal, 1999–2010 172 6.5 Percentage of self-employed persons with employees (employers). Ireland, Greece, Spain, Italy and Portugal, 1999–2010 173 6.6 Occupational structure of Italy, 1999–2010 174 6.7 Occupational structure of Greece, 1999–2010 175 6.8 Occupational structure of Spain, 1999–2010 176 6.9 Occupational structure of Ireland, 1999–2010 177 6.10 Occupational structure of Portugal, 1999–2010 178

xi Foreword

As I write this foreword, Greece has not defaulted. Not yet. Pundits everywhere declared the default inevitable, or perhaps, on reflection, somewhat evitable and, anyway, some added, it won’t be the end of the world. On 8 March 2012 Robert Peston (BBC News) announced, ‘we should perhaps be hoping that Greece defaults tomorrow’. And then he went on to suggest that, in a way, Greece had already defaulted. Jeffrey Rubin, former chief economist of CIBC World Markets, warned (Huffington Post, 16 May 2012) that it might be the end of the world or, at least, of the world as we know it:

‘Greek default would send shock waves through Europe’s banking sys- tem. Massive write-downs by banks are sure to be followed by even larger taxpayer-funded bailouts. Similar to the response to the sub- prime crisis, governments will argue that some institutions are simply too big to let fail. But the cost of bailouts won’t be limited to Europe. A Greek default would start in Athens, but it wouldn’t be long before it’s felt in Paris, Berlin, New York and Toronto. In today’s inter- twined financial markets, everyone has exposure to everyone else’s problems.’1

If this collective anguish shows anything it is that the world is truly interconnected. It has often been remarked that Greece’s GDP is only 2 per cent of that of the EU and that its population of only 11 million inhabitants is a fraction (also 2 per cent) of the EU’s 503 million. But that is not small. Two per cent of the population makes Greece larger in the EU than, in proportionate terms, Birmingham is in the UK, Naples is in Italy or Lyons is in France. And it is pretty obvious that there would be serious problems for the UK, Italy and France if cities of such size ‘defaulted’. Interconnectedness gives Greece considerable power: if the country did not matter, it would have been allowed to sink without trace long ago. We know this because, as this remarkable book reminds us, Greece has already defaulted many times since 1826. Such events caused barely a ripple in the economic vicissitudes of Europe in the 19th and 20th centuries. As the authors show, dealing with Greece meant dealing with a state whose finances have always been in trouble.

xii Foreword xiii

Historically speaking, defaults are not that unusual: a number of Latin American countries have often stopped paying their debts. Two economists at George Washington University, Graciela Kaminsky and Pablo Vega-García, have pointed out that, between 1820 and 1931, there have been 67 sovereign debt defaults in Latin America from the richest country (Argentina) to the poorest (Bolivia).2 And the world did not end. Today we are not so sure. To understand the basis of the frenetic speculation and anxieties of the last few years of which Greece has been at the centre, it is necessary to step back, take a deep breath and look at the wider context, historically and globally. This is what this book seeks to do and it does so admirably. ‘It’s the economy, stupid’, Bill Clinton declared famously. One should add, ‘it’s never just the economy’. Fouskas and Dimoulas adopt a wider perspective: the economy, yes, of course, but also geography and his- tory and politics. Greek weaknesses and peculiarities are examined: its nature as a laggard as far back as the 19th century; its foreign policy subservience first to the European Great Powers (who after all ‘invented’ modern Greece and gave the country a Bavarian king in 1832) and then, in the post-war era, to the USA; the presence of an exceptionally strong diaspora of Greeks throughout the Mediterranean but also in the USA, Great Britain, Argentina and the Balkans (when Greece was created, four out of the top ‘Greek’ cities were outside Greece); the impact of an issue, Cyprus, which has no parallel in the rest of Europe and which caused the downfall of the regime of the colonels in 1974; the presence in the 1950s and 1960s of a strong Left (mainly Communist), yet unable to achieve its legitimate political place because of overt political repression. Greece was not a Keynesian state in the 1950s and the 1960s when Keynesian policies prevailed in much of Western Europe. It became one in the 1980s when Keynesian thinking had fallen from its pedestal: through- out the 1980s Greece privileged the fight against unemployment over and above controlling inflation, unlike everyone else. This policy was perhaps unavoidable as it enabled the new socialist party, PASOK, to establish the kind of political strength that social democrats had else- where but not in Greece. These policies, which are a proximate cause of the present crisis, cannot be understood if one does not understand the particular anxiety of Greek bourgeois elites and of the intelligentsia to catch up with what they regarded as the core countries (Britain and France in the 19th century to which was added Germany in the second half of the 20th century). And the Greek crisis is not just about Greece. As the authors rightly argue, the country’s political and economic history must be seen in xiv Foreword a comparative perspective. Being anxious about catching up with the ‘advanced’ countries, far from being a Greek peculiarity, is the condi- tion of laggards everywhere: from Russia to 19th-century Japan, from Latin America to other Mediterranean countries such as Italy and Spain. The fate of laggards in history is somewhat curious. They are supposed to catch up yet they cannot exactly replicate the action of the path- breakers, for these operate in an environment in which, by definition, there are fewer competitors. If you are on top and no one challenges you, there is no need to try to change anything: there is a rationale behind the conservatism of old elites. But the elites in laggard countries have to be dynamic because they feel constantly threatened by outsiders who may overtake them as well as by other classes and social groups (workers and peasants) who fear that they will be sacrificed in the race towards modernity. It is one thing to initiate change, it is another to have change thrust upon you. The socio-economic pull of the West was such that, outside the magic circle of the ‘advanced’ world, the elites in peripheral countries such as Greece had to try to lead industrial and political rev- olutions. The external world impinges far more on the laggard than on the pioneers. But ‘laggard’ is a rough category, as is the more recent one of ‘under- developed’. Countries which have little in common are lumped together because the one thing they certainly have in common is that of not being in the top group. Greece was certainly a laggard country, but so was Paraguay. The similarity ends here. As countries ‘caught up’, new and more complex differentiations emerged. In the end, the industri- alization of so-called laggard countries required not only favourable circumstances and resources but also the development of a political will. We should also bear in mind that when we talk of industrially lag- gard countries we use the state as a unit of analysis. But within the territory of each state, one often finds advanced sectors coexisting with backward ones. If we ignored national boundaries, and hence poli- tics, the outposts of the industrial world in mid-19th century Europe would include the British Midlands, the Glasgow area, parts of German- speaking Switzerland, francophone Belgium, Alsace and Lyon in France, the Ruhr in Germany, Moravia (then in Austria-Hungary) and Lombardy in Italy. Thus France as a whole was certainly industrially ‘backward’ compared to Britain and Germany but Alsace, at least in the decades following the Napoleonic wars, outperformed the British average. Sim- ilarly, present-day Greece exhibits significant internal differentiations. Its richest region, Attica (the region dominated by Athens) is richer, in terms of GDP per capita, than Berlin or Manchester or, indeed, the whole Foreword xv of Poland, the whole of Hungary and the whole of Southern Italy (2009 Eurostat figures).3 This is the wider historical setting within which Fouskas and Dimoulas develop their ‘Marxisant’ approach, as they call it. This, mer- cifully, is not some dogmatic attempt to rewrite the crisis as if it were an updated chapter of Das Kapital, but a far more unified approach which starts from an examination of the financialization of the global econ- omy, a phenomenon which barely existed in Marx’s days, and then moves into the realm of politics and, in particular, to the unfinished construction of Europe. This is at the centre of the analysis as the EU is a peculiar hybrid constantly torn between integration and disintegra- tion. The euro countries possess some of the features of a state because they have a currency in common, but there is no strong central author- ity with the necessary powers to supervise the currency or to impose the required fiscal discipline. The authors argue that today the disintegrative tendencies in the EU are stronger than the integrative ones. These ten- dencies are exacerbated by a recent factor, the global downturn and a long-term tendency: the global shift to the East. In theory the collapse of Communism should have reduced the geo- political importance of Greece. But the disintegration of Yugoslavia created a new regional role for Greece: no longer the NATO outpost it was during the Cold War but a launching pad for the financialization and stabilization of the Balkans in the difficult 1990s. This, the book explains, led to Greece embracing neo-liberal economic reforms under the direction of the Left (i.e., the PASOK of Prime Minister Costas Simitis, Andreas Papandreou’s successor). This is what led to the further interconnection of Greece with ‘Europe’, that is Germany and France and their banks. The famed high military spending for which Greece stands justly accused (the highest in Europe as a proportion of GNP) is not due merely to the militaristic nature of Greek society, or to the obsession with the Turkish threat, or the desire to use military spending to keep unemployment down; in the main, the authors argue, it was due to the role assigned to Greece in the Cold War: the militarization of Europe’s ‘soft underbelly’. Dependency was always a feature of Greece, which freed itself from Turkish rule in the 19th century not through a kind of Italian-style Risorgimento but through the direct intervention of the great powers. This, after all, was a country always dependent on others: it had no significant raw materials and was always compelled to import technology and know-how. How to finance this? Had the country developed a thriving economy, it would have been able to raise xvi Foreword

finance through taxation. As it is, major projects such as railway con- struction and the building of the Corinth canal had to be undertaken through foreign borrowing (including borrowing from Greeks living abroad) and foreign investment. Once the rule of the colonels collapsed (1974) and after a short con- servative interregnum, all the new PASOK government could do was to build a kind of welfare state by borrowing heavily, against the trend of neo-liberalism. The alternative would not have been to follow the neo-liberal trend, for this would have destabilized the new democratic regime. The alternative would have been to construct a welfare state concurrently with a restructuring of the economy. The failure of PASOK, argue Fouskas and Dimoulas, was not due to welfare spending but because of the wrong kind of economic policy. The ‘fault-line’ analysis deployed in this book goes beyond the nation- alist horizon still too often prevailing in these kinds of studies and far surpasses the rather narrow journalistic accounts which see the causes of the Greek predicament to be solely due to Greece and the Greeks. In the era of globalization, political and historical analysis needs to be globalized too. And this is what Fouskas and Dimoulas have achieved with remarkable skill and dazzling scholarship.

Donald Sassoon Professor of Comparative European History University of London Acknowledgements

We acknowledge a very special debt of gratitude to Constantine Tsoukalas, to whom we warmly dedicate our book. We are grateful to Donald Sassoon and Leo Panitch who read a first draft of our argument in 2011, offering valuable advice and comments. Then Donald, brushing aside his busy schedule, kindly agreed to write the Foreword. We are also indebted to Savas Robolis for his constant advice and encouragement in completing this research. Martin Wolf has discussed with us the Greek/eurozone crisis and spent half a day with our students giving a lecture on ‘Will the Euro-zone Survive the Crisis?’ His answer was, 50:50. This is still the case. From the early 1990s until his untimely death in June 2009, Peter Gowan had been a constant discussant, especially on the notion of ‘hub-and-spoke’ imperialism: we are still influenced by his original and thought-provoking insights. We are also very thankful to Gilbert Achcar for many stimulating and engaging conversations on the concept of ‘global fault-lines’ and for the interest he has shown in our work on the Greek debt crisis. Constantine Dimoulas is very thankful to Catherine Michalopoulou for helping him see complex sociological meanings behind the numbers, and Athena Trelli for her immense support, despite her everyday duties and commitments. The theoretical argument we put forth in Chapter 2 has benefitted from comments by Joseph Choonara, Maria Markantonatou, Darrell Whitman, Yiannis Tolios and Irena Ateljevic. Once again, we thank Bülent Gökay, the pioneer of the concept of global fault-lines, as well as the editorial team of the Journal of Balkan and Near Eastern Studies.Weare very thankful to Gül Tokay and Ayla Göl for a wonderful and illuminat- ing conversation on the concept of geo-culture over a nice pub meal in London in January 2013. Vassilis K. Fouskas will always be indebted to the Stanley J. Seeger Center in Hellenic Studies at Princeton University, for giving him the opportunity to use the facilities of the Center and the Firestone Library of the university on two occasions, in 2005 and 2011. Some of the material incorporated in this book has been researched, presented and discussed in the Center’s unique intellectual and friendly environment.

xvii xviii Acknowledgements

We thank Jairo Lugo for many enlightening conversations on the Latin American debt crisis and Wolfgang Deckers for giving us so many insights on Germany. We thank Nikos Kotzias, John Milios, John Kitromilides, Elias Ioakeimoglou and Costas Lapavitsas for many discussions on the global financial crisis in general, and the Greek debt crisis in particular, although none of them may be entirely satisfied with the outcome they see here. Sabine Spangenberg sent us comments on sections of Chapter 6: we are very thankful to her. Paul Hoffman, our MA student, had volunteered to put the bibliography together: we are very grateful to him. Tim Shaw is an excellent Palgrave-Macmillan series editor, and Christina Brian and Amanda McGrath have put up with all our tedious requests. They have also put up with us missing so many deadlines for the delivery of the manuscript. We are indebted to them. Parts of the text and tables that appear in Chapter 6 have been pub- lished in our joint article, ‘The Greek workshop of debt and the failure of the European project’, Journal of Balkan and Near Eastern Studies, v. 14, n. 1, March 2012. We thank Taylor & Francis for giving us permission to reproduce some of its copyright material here. We would also like to thank Richmond University, the American International University in London, for a grant it gave to Vassilis K. Fouskas to visit Paris in 2012 for fieldwork on this project. Last but not least, we would like to thank Tolis Malakos, one of the finest brains of our generation, for so many stimulating conver- sations on Greek and European politics. We also thank Alex Kazamias for drawing our attention to Nikos Beloyiannis’ book on Greece’s debt problem; Stan Draenos for many interesting discussions on the role of Andreas G. Papandreou in the 1960s; and Takis Tsakonas for ‘not let- ting us get it wrong’ on Greece’s policy of rapprochement with Turkey. Maritsa V. Poros has been more than kind by offering to read the entire manuscript. She has made very valuable comments and suggestions, for which we both thank her. Timeline of main events in Greece and Europe (October 2009–March 2013)

5 October 2009 PASOK wins election after more than five years of ND rule February 2010 PASOK reveals that official statistics concerning Greek debt and growth data have been manipulated May 2010 Troika and EFSF are established. They agree to a bailout package of 110 billion Euros for Greece; first austerity measures implemented. EFSF firepower at 440 billion euros. 28 November 2010 85 billion euros for Ireland agreed February 2011 IMF country report on Greece; Finance Minister almost instantly produces ‘Greece: Medium Term Fiscal Strategy 2012–2015’ 3 May 2011 78 billion euros for Portugal agreed 10 June 2011 On admission by the EU that Greece needs a second package, Germany asks for private sector involvement (PSI) 29 June 2011 PASOK government wins parliament vote for austerity by 155 to 138. One PASOK MP who voted against the bill expelled from the party 21 July 2011 EFSF lending ability boosted further in order, presumably, to enable banks to absorb costs from Greek default. Troika agrees to second bailout for Greece worth 109 billion euros, offering a ‘haircut’ of 21 per cent 8 August 2011 ECB intervenes to steady Italian and Spanish bonds

xix xx TimelineofmaineventsinGreeceandEurope

September–October Untold austerity measures by PASOK (public 2011 sector lay-offs, complete welfare state retrenchment; further wage and pension cuts; VAT increase to 23 per cent; property taxation and emergency taxation inserted into electricity bill; abolition of minimum wage; total sell-off of state assets). Official unemployment at 19 per cent and GDP contraction at 6.5 per cent 21 October 2011 Report by international lenders indicates that Greece is insolvent and a ‘haircut’ of up to 60 per cent is needed in order to make debt and the second bailout sustainable via further austerity measures. Cypriot banks, especially Laiki Bank and the Bank of Cyprus, are affected 27 October 2011 European leaders agree to another bailout for Greece worth 130 billion euros and to a ‘voluntary’ agreement with private lenders for a 50 per cent ‘haircut’ in exchange for safer debt through further austerity measures for Greece; Greek banks under enormous pressure 31 October 2011 George Papandreou announces that the new deal should be tested in a national referendum, causing shockwaves in Greece and across the eurozone; two days later, after meeting Sarkozy and Merkel, he drops the referendum amid accusations of subservience November 2011 PNB Paribas, the French bank most exposed to eurozone and Greek debt, writes down 60 per cent of the value of its Greek holdings; Papandreou resigns; formation of government of national unity under Lucas Papademos, former ECB vice president and former governor of the Bank of Greece under Costas Simitis’ cabinet in the late 1990s November PASOK, New Democracy and LAOS, an 2011–February anti-migrant right-wing party, back Papademos’ 2012 technocratic government; Greek political scene in complete disarray; elections scheduled to be held on 19 February eventually postponed as TimelineofmaineventsinGreeceandEurope xxi

PASOK and ND needed time to discuss post-election coalition deals and pass a new electoral law in their favour in order to survive the debacle February–March PSI involvement attempts to re-structure Greek 2012 debt via a mammoth 206 billion euros bond swap. The new bonds issued will now be subject to English law, which means that Greece remains locked in paying its debt in euros even if it decided to default and exit the eurozone adopting a new drachma 6 May 2012 Elections in France and Greece bring victories to the socialist Left (France) and the coalition of radical left forces in Greece, Syriza; but no government is formed, with elections rescheduled for 17 June. May–June 2012 Bankia, Spain’s banking conglomerate, in need of liquidity. Conflict between the Spanish government and ECB on whether EFSF funds can be used to support Bankia’s nationalization. Germany insinuates plan for a Europe-wide Redemption Fund, which involves Germany’s exploitation of eurozone’s gold reserves in return for debt-sharing via issuing of euro-bonds – a form of transfer union constitutionally guaranteed by all member-states 10 June 2012 Mariano Rajoy, Spain’s right-wing embattled PM, receives 100 billion euros bailout from EFSF/ESM. He boasts that the deal he negotiated is better in that it does not involve rigorous quarterly inspections and humiliating memoranda, as was the case with Greece, Portugal and Ireland. 17 June 2012 Syriza receives 26.89 per cent of the vote, less than three percentage points behind New Democracy (29.66 per cent). A tripartite government is formed with ND, PASOK and DIMAR, a moderate left party xxii Timeline of main events in Greece and Europe

November 2012 Greece’s ‘domestic troika’ (ND, PASOK, DIMAR) signs up for a third austerity memorandum with the troika so that funds up to 44 billion euros can be released. The aim of austerity measures is for Greece to achieve primary budget surplus by 2016 so that it can amortize by 2020, bringing the total debt down to 124 per cent of GDP. Social struggle intensifies and opinion polls bring Syriza to the first position, although neo-Nazi Golden Dawn is also on the rise. The last quarter of the year shows Greece having a contraction of 7.2 per cent and official unemployment over 26 per cent (youth unemployment above 56 per cent) November– Greek political scene is dominated by the case of December the so-called Lagarde list. In 2010, before she 2012 became head of the IMF, Christine Lagarde, then French finance minister, gave her Greek counterpart a list with 2059 names of wealthy Greek individuals for investigation of possible tax evasion. Shipowners, industrialists, bankers, artists and even politicians and their relatives were on the list and an estimated 13 billion euros had moved through the accounts on the list between 1998 and 2007. The destination was Swiss banks, especially a branch of HSBC in Geneva. Both PASOK and ND governments had systematically tried to cover this up until Fall 2012, when journalist Costas Vaxevanis published the list. Typically, Vaxevanis was sued for allegedly violating the country’s data protection laws. March 2013 Crisis in the Greek Cypriot banking sector induces the ‘troika’, for the first time, to impose a ‘haircut’ on bank deposits over 100 thousand euros and liquidate Laiki Bank. Bank of Cyprus survives. Geo-political competition re-opens in the Eastern Mediterranean between Turkey, Germany, Israel, USA, Britain and Russia

Sources: The authors’ diary and The Economist, ‘Is anyone in charge?’, 1 October 2011. Abbreviations

ABS Asset-Backed Securities ASE Athens Stock Exchange ASEAN Association of South East Asian Nations BP British Petroleum BSEC Black Sea Economic Cooperation CDO Collateralized Debt Obligations CDS Credit Default Swaps CIA Central Intelligence Agency (USA) DEI ημo´σια Eπιχειρηση´ Hλεκτρισμoυ´ (Public Electricity Corporation) DIMAR ημoκρατικη´ Aριστερα´ (Democratic Left, Greece) DO Division of Offsets (Greek Ministry of Defence) ECA Economic Cooperation Administration ECB European Central Bank ECOFIN Economic and Financial Affairs Council (Council of the European Union) ECU European Currency Unit EDA Eνωμενη´ ημoκρατικη´ Aριστερα´ (United Democratic Left) EEC/EC/EU European Economic Community/European Community/European Union EEZ Exclusive Economic Zone EFSF European Financial Stability Facility ELSTAT Hellenic Statistical Services EMU European Monetary Union EOKA Eθνικη´ Oργανωση´ Kυπριων´ Aγωνιστων´ (National Organisation of Cypriot Fighters) ERD Economic Research Department ERE Eθνικη´ Pιζoσπαστικη´ Éνωση (National Radical Union) ERM Exchange Rates Mechanism ESM European Stability Mechanism ESY Eθνικo´ υστημα´ Yγεια´ ς (National Health System, Greece) ETVA Eλληνικη´ Tραπεζα´ Bιoμηχανικη´ς Aναπτυξη´ ς (Hellenic Industrial Development Bank) EUROSTAT European Statistics (Directorate-General of the European Commission)

xxiii xxiv List of Abbreviations

FDI Foreign Direct Investment FIR Flight Information Region FYROM Former Yugoslav Republic of Macedonia GAD General Armaments Directorate (Greek Ministry of Defence) GDP Gross Domestic Product GM Genetically Modified (food) GNP Gross National Product GSEE ενικη´ υνoμoσπoνδια´ Eργατων´ Eλλαδα´ ς (General Confederation of Greek Workers) ICEC International Commission of Economic Control IDEA Iερo´ςεσμo´ς Eλληνων´ Aξιωματικων´ (SacredBondof Greek Officers) IMF International Monetary Fund INE-GSEE Iνστιτoυτ´ oEργασια´ ς-ενικη´ςυνoμoσπoνδια´ ς Eργατων´ Eλλαδα´ ς (Labour Institute-General Confederation of Greek Workers) IFC International Financial Commission IPE International Political Economy IR International Relations KKE KoμμoυνιστικoK´ o´μμα Eλλαδα´ ς (Greek Communist Party) KKEes KoμμoυνιστικoK´ o´μμα Eλλαδα´ ς Eσωτερικoυ´ (Greek Communist Party Interior) KYP Kρατικη´ Yπηρεσια´ ληρoϕoριων´ (State Information Service, Greece) LAOS α¨ικo´ς Oρθo´δoξoςυναγερμo´ς (Popular Orthodox Rally) LNFC League of Nations Financial Committee MSA Mutual Security Agency NATO North Atlantic Treaty Organization ND Nεα´ ημoκρατια´ (New Democracy) NHS National Health System OAED Oργανισμo´ς Aπασχoλησεω´ ς Eργατικoυ´ υναμικoυ´ (Manpower Employment Organisation) OASA Oργανισμo´ς Aστικων´ υγκoινωνιων´ Aθηνων´ (Civil Transportation Organisation of Athens) OECD Organisation of Economic Cooperation and Development List of Abbreviations xxv

PASOK ανελληνι´ o oσιαλιστικoK´ ινημα´ (Pan-Hellenic Socialist Movement) PCI Partito Comunista Italiano (Italian Communist Party) PESEDE ανελληνια´ Éνωση ημoσιων´ Éργων (Pan-Hellenic Union of Public Works) PKK Kurdistan Worker’s Party PI(I)GS Portugal, Ireland (Italy), Greece, Spain PSI Private Sector Involvement REE Rare Earth Elements RSC Refugee Settlement Commission SIPRI Stockholm International Peace Institute SPD Sozialdemokratische Partei Deutschlands (German Social Democratic Party) Syriza-USF υνασπισμo´ς Pιζoσπαστικη´ς Aριστερα´ς (Coalition of the Radical Left - United Social Front, Greece) ‘Troika’ The EU-IMF-ECB policy group formed in 2010 to supervise the debt crisis in the periphery states of the EU UK United Kingdom UN United Nations US/USA United States/United States of America USSR Union of Soviet Socialist Republics VAT Value Added Tax WTO World Trade Organization