The truth about Greece: A Greek tragedy and a European drama

by Alexandra Ktisti

That was precisely the title of the report conducted by the “Alliance of Liberals and Democrats for Europe” (ALDE), the “Institute for Regulatory Policy Research” and the Greek party “To Potami”, presented by the head of ALDE, Mr. Guy Verhofstadt, during the European Parliament plenary session in Strasbourg on October 4, 2016.

The research detects accurately the cause which led to the Greek crisis and which is no more than the structural problems of the Greek institutions’ organization and functioning model. 

By analyzing the problems, based on interesting facts and examples from the Greek public life, the report suggests four simple but effective actions that could help to achieve the streamlining of the state functioning, an effective reform and finally the end of the crisis.

After 6 years in deep crisis, 3 memoranda and 3 adjustment programs the situation in Greece today can be sketched as follows: the debt reaches 179%, there is zero growth and unemployment rate touches 25.1%.

The Greek side responded wrongly to its economic problems and this is due to the fact that the crisis was only perceived as a crisis of the economic indicators rather than a crisis of the growth model and country’s institutions. 

As a result, the whole attention focused on treating the symptoms of the crisis rather than eliminating its operative events.  Indicatively, the fiscal and public debt caused by poor governance and inefficient administration, the financial instability as a consequence of clientlism, the inability to succeed primary surplus and repay the loans are due to weak institutions and lack of competitiveness. 

Furthermore, today, imbalance in the budget adjustment is killing the economy and putting the whole burden on the shoulders of citizens and SMEs, as the 90% of the state incomes are coming from taxes and just 10% is saved by reductions in public expenditure. 

The first problem regarding the adjustment program’s implementation is the low compliance rate. Most of the public life domains need to be reformed but just few of them have been examined and even less have been really changed. 

This is mainly because the monitoring is deficient. On the one hand, EU turns a blind eye to prevent an open fight with Greece and disturb the financial markets and on the other hand, Greece shows unwillingness to implement reforms in order to protect special interests. 

However, in order to succeed an effective adjustment program, the monitoring is a necessary tool and it should be an objective fact finding mission for every part of the agreement.

The second problem is about the reversal of past reforms. Reforms have either extensive conditional clauses or are reversed by later decisions. 

It is now a commonplace to sign an agreement and when it comes to the legislative body in order to be ratificated, then, to be amended and finally defaulted, away from the spirit of the original agreement.

In connection with this, we could mention a third problem concerning the Greek government infighting, which takes decisions that cancel or neutralize the initial desired outcome.

The fourth problem regards the lack of transparency in governance. Governing by executive order has become the rule, which was 3% during G. Papandreou premiership, incrementally increased during L. Papademos and A. Samaras premierships at 12% and 13% respectively and today reaches 34% during the term of A. Tsipras.

The fifth and very serious issue in Greece is the governmental attacks against independent authorities. The government attacks independent authorities and institutions that are protected by the Constitution and transfers their competences to ministers. For example 4 out of 9 independent authorities do not have a president and the term of office for 50 of 86 members of their boards has expired.  

Finally, the sixth obstacle that Greece faces on its way to change is the fact that public administration is still greatly controlled by political parties. A typical example is that the laws in ‘de-politisation’ of the public administration were changed at the last moment reversing the entire purpose of them thus leaving secretary generals of ministries coming from political parties.

Could the third adjustment program provide a solution to all the above mentioned? The program funding amount is around EUR 86 billion; it has a time horizon of 3 years and contains some good “new” objectives, such as enhancing competitiveness and modernizing public administration.

Despite all these, there are four reasons that predict its failure and this is because: it doesn’t focus on better governance, more efficient institutions and especially getting rid of clientelism that undermines the economy, contains fiscal and financial measures that only lead to hyper-taxation, it has no simple action strategy and finally because the IMF’s “one size fits all” solution proved wrong once again. 

Another way for Greece, another approach for Europe

Apparently, Greece should follow a new approach regarding its economic problem issue, which will lead to an effective and permanent solution. We need to get rid of the old style MoU’s that just focus on the symptoms instead of the root cause of the problems. We need a new joint Greece-EU plan to drastically modernize the country and also a new initiative for the governance of Eurozone. 

The core of this plan could be based on four actions, so as to improve the business environment, kick-start the economy and attract foreign investment.

The first step should be removing barriers and invest in growth. Greece should eliminate the many legal, regulatory and administrative barriers in Greece’s products and service markets (e.g. real opening of closed professions) and create a more investment-friendly climate for private investments. Also, the financing by the European Fund for Strategic Investments should be increased for Greek start-ups and SMEs. Finally it is necessary to impose targeted cuts for low and middle incomes and especially of SMEs.

The second action should be the reform of public administration by combating clientelism. Necessary requirements for the achievement of this target is the depoliticisation of public administration and the establishment of an evaluation system for civil servants, the creation of transparent regulation regarding the loans of parties and media and finally the highly desired transition to electronic governance.

Third necessary activity is the modernization of the justice system. It would be wiser to achieve the digitalization of the system, the codification and modernization of the legal framework, the selection of the High Court judges taken place without partisan criteria  and finally, reform and strengthen law enforcement in general, especially property and investor protection laws.  

The tax collection reform consists the last but very requisite plan. There is a strong need for stabilizing the tax legislation and increasing the number of trade done by credit and debit cards. Last but not least step is to enforce electronic networking of all the controlling authorities and implement an electronic invoice system as well. 

As it is clearly perceived, this presentation does not contain any surreal formula that we had not imagined until now. The solution always comes by eliminating the problem’s root. This is what the witnesses of the Greek crisis were trying to convince us for years.

Contrary to the image of an “unreformable state”, Greece is capable to change its fate by its own just by correcting the mistaken attitudes and reforming the series of burdens regarding the state apparatus which is now dysfunctional, ineffective and after all, failed.

In this way the Greek tragedy, can hopefully result in a happy end. As long as the Greeks leave aside the theater and decide that they must proceed with the necessary reforms that lead to catharsis and redemption.