Greece (2011)

source: Libération 2011-10-29
interview by:  Jean Quatremer
                  of : Nicolas Bloudanis
translation: doxa-louise

The Debt is about Statesmanship

Interview. Already in 1897, the country was under receivership.From the Ottoman period to joining the Eurozone, the historian Nicolas Bloudanis takes us through history to better understand the current bankruptcy.

There is a Greek misunderstanding within the European Community. While no one would think of rciting the Roman Empire in referring to the Italy of Silvio Berlusconi, rare are those who do not make a link form Ancient Greece to Modern Greece. As if the glorious past of the Greeks had given them an edge on the present. Thus it is for its 'contribution to European Civilization' that Valéry Giscard d'Estaing obtained, in 1981, the adhesion of this country to the EEC although it met none of the required criteria. In 2002, Athens was admitted to the euro for almost the same reasons while everyone was well aware that it was economically unready. And today, there are no hesitations to invoking Aristotle to justify the expensive bail-out of a bankrupt country. Although, Modern Greece, whose history begins with independence in 1828, has not much in common with Ancient Greece: there have been four centuries of Ottoman occupation since then.
The Greek historian Nicolas Bloudanis, 54, who lives in Patmos (the island where John the evangelist wrote the Apocalypse), has just published Failles grecques:une fatalité historique( éditions Xérolas). he is also the author of Histoire de la Grèce moderne, 1828-2010, mythes et réalités (Xérolas). He puts forward a caustic version of modern Greek history, stripped ot its nationlistic clichés, shedding new light on the crisis of public debt which threatens the stability of the Eurozone.

Is it fair to say that Greece is a country without a state?

There is a state in Greece, but it functions intermittently.This was the case, for example, after the civil war in 1950, at the end of the dictatorship of the Colonels in 1974. But every time the state more or less functioned, it was an authoritarian state where political and civil liberties were limited. Leaving aside the periods of dictatorship, there were periods where the state was managed by a strong personality, such as Elefthérios Venizélos at the beginning of the century or Constantin Caramanlis during the years 50-60. In the Greek collective memory, the state is thus an authoritarian state which one should be wary of.

Greece is currently under European receivership. Yet, this is not the first time it has found itself in this situation...

Indeed, after the bankruptcy of 1893, Greece was put under receivership by its creditors, principally Great Britain, France and Germany, which had a positive effect, even if 10% of its population emigrated. The guardianship of the time, which took the form of an International financial Commission headquartered in Athens and charged with directly controlling the budget of the State, permitted to build a state. The financial and economic situation got better, the misappropriations and abuses characteristic of Greece at the time (between 1828 and 1892, 75% of all loans were misappropriated by the political class) were limited and the country was once more allowed to borrow in order to make large infrastructure projects that were sadly lacking, the Ottoman Empire having left very little behind.

Most importantly, a modern bourgeoisie and a local capitalism were able to finally emerge: it came to power in 1909 with at its head Elefthérios Venizélos, cheif of the Liberal Party. A new constitution permitted cleaning up political life and justice, the administration started to purge itself of its corrupt elements, social reforms were voted in (income tax, land reform, et c). Greek society thus entered the road to modernization.

But war against Turkey stopped this  movement dead...

Greece wanted to complete the liberation of certain territories (Macedonia, Epirus, Crete...) and of the Greek populations still under Ottoman control. The Balkan Wars, starting in 1912 and ending with the Treaty of London in 1913, were successful: the territory triples in size and the population goes from 2,5 to 5 million.

The First World War permits one to go further into Thrace and Anatolia (in and around Smyrna), the current Turkish coast. But this 'enlarged Greece' played into Turkish nationalism. A new war ends with a disaster: the Lausanne Treaty of 1923 accepts the lost of Smyrna and of Thrace and 1,2 million Greeks living in Asia Minor since two millennia must migrate to a Greece ruined by ten years of war. Imagine the shock: 1,2 million people on top of a population of 5 million. Further, this torrent of population from Asia pulls Greece back to the oriental traditions of its beginnings, a century earlier; a levantine spirit, emphasizing hability, compromise and finesse but also passivity and political indifference, fruits of the Ottoman Empire of the 19th century, re-enforcing the clientelism and corruption which were starting to disappear.

The political class acquires at this time the traits which characterize it today.
This political class then begins to occupy itself more with the maintenance of its power and the ensuing privileges, than the interest of the State. It acquires its proper 'consciousness', during periods of dictatorship, as with that of Metaxas, in 1936-1040, or of the Colonels, between 1967 and 1974; these regimes in effect constitute strong competition for politicians, especially with respect to privileges and possibilities for enrichment reserved for those in power. As much before the war as during the early 70's, we have witnessed a convergence of interests and a solidarity between political factions hitherto enemy, and who had lost their privileges...

After the return of democracy in 1974, a faction of the Greek left, until then rebuked because of the civil war (1946-1949), also became part of the 'family'. With a few rare exceptions, this situation has not changed. Today still, as we demand huge sacrifices from the population, representatives and politicians of all stripes obstinately refuse to lower their own salaries, although immoderate, or to shed one iota of their privileges.

Was the second bankruptcy, that of 1932, due to this incompetence of the State?

I would not say so. The period 1929-1932 was, economically speaking, much more difficult than what we are living through today and many sate went bankrupt, such as Austria, Bulgaria, or even Germany. Moreover, Greece could not permit itself to dilapidate the totality of the credits it had obtained between 1924 and 1930, because most of these were managed by the League of Nations and served to re-settle the 1,2 million refugees of 1922-1923.

Furthermore, the Greek State remained formally under receivership: the International Financial Commission created in 1897 in effect stayed in Athens until 1936. Few countries under similar circumstances could have managed otherwise. Finally, every year Greek governments would re-negotiate the terms of debt repayment with creditors et paid back between 30 and 45% of the debt. Repayment procedures were then redefined in 1944-1945 and ended in 1969.

America, with the Marshall Plan, also came up against the 'Greek reality'...

In 1947-1949, the United States, as a condition for financial aid, demanded a cleaning up of economic practices and of the social situation of the country. Paul Porter, who was head of the commission charged with evaluating the Greek situation in 1947-1948, described the state of the country in the following terms in his report to Congress: 'The extremely low standard of living of the population is the principal factor of social tension in Greece. The economy is dead, while large amounts disappear in fraudulent financial operations and for the import of luxury goods. The government has no policy other than that of constantly begging for foreign financial aid in order to stay in power and preserve the interests of a clique of merchants and bankers...dedicated to defending their interests with no concern for what this could cost the country.' Quite obviously, Mister Porter was a New Deal man.

Is the shock treatment inflicted on Greece in the last two years by the European Union and the International Monetary Fund adapted to this country?

The economic structure of Greece, largely state-controlled, makes it more like the countries of Eastern Europe coming out of communism at the beginning of the 1990's. One should thus more apply the formulas used on the ex 'People's democracies' in transition, notably by privatizing public enterprises and reducing drastically the size of the public service. One must also attack the fiscal immunity of certain liberal professions and the Orthodox Church. Burdening citizens with new taxes, when the fiscal system works most imperfectly, doesn't get one far if not to foster a sense of social injustice for those who cannot escape taxation. Because a faulty diagnostic was made, the patient receives an inappropriate treatment and his condition worsens inversely to what is happening, for example, in Ireland.


The Greek economy is then not a market economy?
It is not a functional market economy, even if there is, next to the public sector, a large private sector. The problem is that it is largely composed of tiny enterprises ( between one and ten workers), from the tavern to the small factory, not forgetting the artisan. There are also a few large private enterprises which, because they are in contact with the world economy, function efficiently. But these are the exception. Everything else is controlled by the state.

How did things reach this point?

Until the end of the 1970's, Greece was not really an exception in Europe. That was the reign of the 'mixed market economy', the state controlling a large number of enterprises, be it in France or Great-Britain. At the beginning of the 1980's, for good or bad, this model came to be put in question through liberal ideology coming out of Anglo-Saxon countries and this led to a withdrawal of the state from the economic sector.

This movement happened everywhere, except Greece. No doubt because the Greek state had to pinch in throughout the modern history of the country for the lack of native capital which rarely invested locally: it is the state which had to create enterprises or industrial infrastructure.
Worse Greece, a small country totally dependant on its international environment, even went against the grain in making more of its economy state-managed starting in 1981, with the arrival of Pasok (Socialist Party) and Andreas Papandreou, father to the current prime minister. Thus, between 1981 and 1985, no less than 230 enterprises were nationalized. Today, the state employs directly or indirectly 45% of the active population. In France, there were nationalizations in 1982, but one has privatizd anew in 1986.


This state ownership has not been a success...

Indeed it is a stunning failure. Public enterprises are little competitive and innovative: one must add they contain an abundance of personnel paid much better than the salaried of the private sector, but largely incompetent because appointed for political reasons. Worse, they are virtually co-managed by the unions which have their word to say on strategic decisions, but without representatives with much ability. The overall result of Pasok economic policy is catastrophic. The only positive points are that unemployment is down, because the State has created tens of thousands of 'imaginary' jobs, and have put in place a relatively advanced form of social security.


The Socialist Party is thus strongly to blame for the chaos in Greek public finances?

Andreas Papandreou constructed a 'socialism on credit'. But he is not alone responsible: the right is just as state-obsessed as Pasok. Another way of saying that the crisis of public indebtedness does not go back to 2009, even if markets were slow in recognizing a problem. The Greek political class has always confused dramatically revenue and loan. Especially so since entry to the Eurozone , in 2002, allowed Greece to borrow at almost the same conditions as Germany.
rare are those who tried to raise the issue.One has to understand that the political class does not want ot see tis state-oriented approach questioned, because it allows for the creation of political clientelism One doesn't vote for ideologies in Greece, one votes for the one who will help us in a material sense. Indeed, political parties are structured around large families: sons, nephews, followers stay faithful to what is. Thus, one can find within Pasok, the party which has most governed Greece in the last thirty years, people of extreme right-wing sensibility, but who remain faithful out of family tradition. This clientelist system, which forms the basis of Greek society, dates back to the XIXth century and independence.

Thus in 2002, Greece should not have joined the Eurozone?

Objectively, no. But in 2001, Germany and France, who wanted to enlarge the zone with as many countries as possible, put pressure on the Commission so it could join. This being the case, this entry could have been a positive thing for Greece; up until 2005, it would have been possible to turn the situation around. But the right-wing government of Costas Caramanlis ( nephew to Constantin Caramanlis), elected in 2004, did absolutely nothing to displease its clientèle: no privatisation, no reduction in public service,  or reform of the State was undertaken.
And when Pasok came back to power in October 2009, it was too late: the budgetary situation of Greece was out of conrtol. Today, the membership of Greece in the Eurozone is a fact: the federal receivership it is subject to, a direct consequence of choosing Europe, can be positive. It will be obliged to create a law-government State, a market economy worthy of this term et get over all the illusions pertaining to the 'Greek reality' which was used to excuse all manner of deviation.