The paradox. The main question that still needs to be answered with regard to the effects of the euro summit on 21 July involves the member state at the source of the summit. The situation is paradoxical because Greece has made historical progress in pushing forward economic and monetary union (EMU) and we wonder whether this country will be able to respect the commitments that it has made in this connection. The paradox is obvious: the eurozone has taken the final step to complete basic monetary union, which has existed for a number of years, by ultimately putting into practice the economic aspect of this union. Nonetheless, we wonder whether the country at the origin of this transformation will be able to fully participate in it. The deepening of EMU will continue over the next few months. Ms Merkel has spoken openly about improving the coordination of economic policies. Together with Mr Sarkozy, she has announced common suggestions on this subject for the beginning of September at the latest. The Commission will put forward formal proposals in October to “improve working methods and strengthen crisis management” (the very last lines of the summit Declaration). Interest rates to fund stability instruments have been cut and repayment deadlines have been significantly extended and so on and so forth. The starting point for all of these developments originated with the crisis in Greece. We have to ask ourselves whether this country will be able to use effectively all of the instruments made available to it.
Difficulties. The uncertainty results from the analyses made on the field and the concerns of observers and experts. My linguistic limitations prevent me from directly following what has been published in Greece but certain personal contacts, translations and reports made on the ground by colleagues from different member states justify a number of comments. The Greek government (Socialist) is finding it difficult to get people to agree to the measures negotiated within the framework of the EU and with the IMF. These misgivings are not specific to Greece. Similar situations exist in other member states. The prospect of austerity is not to anybody's taste. Certain reactions can be understood and are often justified. The Greek case, however, was specific from the very beginning. It was admitted into the eurozone after having falsified what the real monetary situation was, and the country abused the initially very favourable conditions it was provided with thanks to the robustness of the single currency. What happened afterwards is well known and the authorities have admitted that there is a need to change the way the national economy functions, which requires reforms.
Opposition to reforms? Observers have pointed out that among those obviously protesting are those who have lost their jobs and who have strong misgivings about accepting reforms decided on by the Greek government regarding modernisation and competition. Taxi drivers are violently demonstrating against the liberalisation of their profession, and dentists and notaries have gone on strike for similar reasons. The number of civil servants is hugely above the number really required and a considerable proportion of them have been appointed because of their loyalties to political parties. How can this number be reduced? The Inland Revenue is largely oblivious to whom the many yachts and boats filling Greek ports belong. The use of European Structural Funds has raised a number of doubts. According to one survey they have sometimes been directed to “work that has never been finished or indeed that has never begun and the money has disappeared into the pockets of different middle men”.
A good example. The positive aspects, however, should not be ignored. The most spectacular result is the increasing success of the Athens Festival. I will mention the most detailed survey carried out. The festival first of all freed itself from the bureaucratic red tape of the past by removing “the superfluous elements in the steering committee, such as family members, and friends of politicians. The permanent team was reduced to around a dozen people except in the high season when it requires a team of 400 because the festival currently takes place on 14 different sites”. The “abusive invitations to the rich” were eliminated and ticket prices were reduced. Public subsidies were cut (except for those from the Ministry of Tourism, which is logical given the increasing influx of foreign tourists, who benefit everybody). The number of sites and the quality of the events increased and so did the number of spectators. The conclusion is that “ the festival became a phenomenal success in Greek society”.
European control. Let's get back to the economic and financial aspects. The authorities remain aware of the need for reforms and are determined to carry them out. This column has already quoted the prime minister, Mr Papandreou, who has called for “the right to proceed to far reaching changes in our country”. He has also accepted and even demanded that the European Commission set up an ad hoc body to channel these reforms. This body is mentioned in Point 4 of the summit Declaration on 21 July which was published in our EUROPE/Documents series. The main points of it warrant further mention: “the heads of state and government welcome the Commission decision to set up a working group, which will collaborate with the Greek authorities to channel Structural Funds towards competitiveness and growth, job creation and training”. The text also adds: “Member states and the Commission will immediately mobilise all the necessary resources for providing exceptional technical assistance to help Greece implement its reforms. The Commission will produce a report in October on the progress accomplished with regard to this.”
Is it excessive to consider that Greece is now a country which is in practice under external tutelage - tutelage to which it has agreed but which it did not request? All the more so since at the same time it has obtained an expanded access facility to EU Structural Funds which will enable Greece to have €20.2 billion more quickly, which was reserved for the country in this context for the 2007-2013 period and which is still largely available because Greece was unable to raise the required national share. The Commission has now simplified and shortened these procedures. Any mention of a Marshall Plan is perhaps an exaggeration (by analogy with US aid to Europe following the Second World War) but funding is now available.
The Venizelos programme. In this context, why do doubts persist on Greece's ability to achieve (with the support measures made by the summit) the planned results? Evangelos Venizelos, the minister for finance and vice prime-minister, informed Washington on Monday of his country's “Prospects and Opportunities”. He summarised his programme into three points: organising a modern and efficient tax system; radically reducing waste and tax evasion; introducing structural changes to make the Greek economy competitive by removing obstacles to business and trade and reducing the bureaucracy. It is this very programme that clashes with the obstacles mentioned above.
And the military dimension? Sooner or later, it will be necessary to mention another aspect of public spending that has until now been carefully avoided: military spending. This is particularly high in Greece and weighs heavily on the country (often to the advantage of the industry of other member states).
It is quite clear that there are many barriers that need to be overcome, even though the euro summit reduced the Greek burden and significantly extended the deadlines for implementation. As underlined by the president of the European Council, Herman Van Rompuy, Greece should in any case be able to consolidate its public finances and carry out the reforms. He did not hesitate to add that due to widespread tax evasion, Greek citizens sometimes have the impression that the effort and sacrifice demanded of them is unfair.
It would be disingenuous to claim that eurozone countries have responded out of pure generosity. The failure of the Greek programme would create difficulties for everyone. The ancient maxim should not be forgotten according to which a debtor should not be allowed to go under if one hopes to recover some of the debts it owes.
EMU progress has definitively been made. From the point of view of European construction, the result has in fact proved positive because the principle according to which monetary union cannot function without economic union is now quite clear. This realisation can no longer be questioned and has even been acknowledged by those who are asking whether Greece should definitively remain within the eurozone. When the current crisis has been overcome, it will have bequeathed a permanent legacy of incomparable value, which notably involves ultimately real and efficient control of financial activity, the end of abusive tax havens and the removal of the excessive power wielded by the ratings agencies. Many other results are currently being discussed. All this is combined with a very real hope that Greece will overcome the remaining difficulties it is experiencing. Even in the past, Europe has often moved forward by taking advantage of times of crisis.
(F.R./transl.fl)