Greece in the German Election Debate
One of the most hotly debated issues in the run-up to Germany’s federal election due to be held on 22 September, is the future of Greece. Unfortunately, it is the terrible sound of populism, which dominates, and there are hardly any voices of reason to soothe our ears. Politicians have started juggling with numbers, in the most irresponsible and incomprehensible fashion, without any serious evidence to support their claims. “Greece will need another 10 billion euros,” says incumbent Finance Minister Wolfgang Schäuble; “Greece’s financing needs are 77 billion,” responds Carsten Schneider, the oppositional SPD’s spokesman on budget issues; “Greece should leave the eurozone and have its debt erased,” say the Eurosceptics of Alternative für Deutschland (AfD). And so on…
The truth is that all of these numbers and claims are arbitrary and, therefore, undermine the prospects for a well-informed public debate on the future of the eurozone periphery – a debate that German voters ought to have indeed, before they cast their vote in a few days. The reality is that Greece has beaten its budget implementation targets for 2012, and data for the first seven months of 2013 support the projection that the country will do better than expected once again this year, finally reaching the seminal target of primary surplus (i.e. a budget surplus, excluding payments for servicing old debts). The manufacturing PMI index for August reached to a 44 month high, and Markit Economics now says that it is not unlikely that recovery will get underway before the end of this year, earlier than previously anticipated. Early recovery means higher tax revenues, lower recapitalisation needs for the country’s banks and increased confidence, which will fuel investor interest for Greece’s privatisation projects; in other words, less, if any, new money will be needed from the Eurozone Stability Mechanism.
Other indicators, namely unemployment, which currently stands at a jaw-dropping 27.6% of the working age population, and Economic Sentiment (ESI), which fell for a fourth consecutive month in August, do not leave much room for optimism. In other words, Greece struggles to find a new growth model, amidst conditions of severe credit crunch, and its effort could go either way. In light of these conflicting signs, the most responsible thing for German leaders would be to put their calculators back into their pockets and stop mentioning numbers, which rather than adding light to the debate scare and confuse German voters. Strangely enough, the most sober German view on the future of Greece comes from Klaus Regling, the Managing Director of the Luxembourg-based European Stability Mechanism: “Nobody knows how the world economy will look, how Europe will be doing or how important neighbours for Greece, like Turkey, will be doing in 10 months' time”, he said in a recent interview and questioned the “quality” of all those numbers that we hear, arguing that they are “very tentative”.
Hence, instead of trying to look through the crystal ball, German politicians should try to inform their voters on their vision for Europe and Germany’s place within it. On the rare occasions when they do that, they tend to project the completely misplaced stereotype that Germany’s participation in the support programmes for the European periphery was a “philanthropic” operation. Well, it wasn’t. Not only did Germany not lose a cent from the loans it has provided to Greece and other troubled countries in the periphery, but the emergency facilities which were created in 2010, also ensured that the global financial system did not suffer a cataclysmic collapse as a result of a domino effect caused by a Greek bankruptcy. Germany would have lost as much as anyone else from such a dramatic development. After all, Germany has probably gained more from the creation of the eurozone and the record low interest rates after the outbreak of the crisis than any other EU Member State. And finally, since it always takes two to tango, German taxpayers should be reminded of the fact that German companies have been involved in many of the economic scandals that brought the Greek state to the edge of the abyss.
What is even more worrying is that, once again, Greek people hear mainstream German politicians issuing threats and ultimatums. “Greece won't get a cent without reforms,” incumbent Chancellor Angela Merkel said recently, according to media reports. Such statements are subject to the smell of populism. In case the view of a Greek is not convincing enough, let me refer to two independent assessments. Both, the German Klaus P. Regling, current Chief Executive Officer of the European Financial Stability Facility (EFSF) and Managing Director of the European Stability Mechanism, and the Finnish Vice-President of the European Commission Olli Rehn have repeatedly said that Greece has achieved the largest fiscal adjustment of any country ever in history (more than 12% of GDP in the last three years). The sum total of austerity measures required to achieve this adjustment exceeded 49 billion euros, or 22.6% of Greece’s GDP, in just two years! Progress in structural reforms has also been impressive: the country earned the 1st place in responsiveness to OECD growth recommendations in the latest OECD Going for Growth report. Moreover, Greece improved its global ranking by a 22 places, in the 2013 Doing Business report, published by the World Bank, and by 6 places, in the World Economic Forum’s 2013-2014 Global Competitiveness Index. In addition, “in the last 12 months Greece has been the runaway leader among eurozone countries in terms of compliance with plans for its fiscal adjustment and in promoting reforms” according to the annual Euro Plus Monitor report for 2012, issued by the Lisbon Council think tank and Berenberg Bank. Finally, according to both the European Commission and the OECD, Greece consistently records the highest number of hours worked by full-time employed persons in Europe and the developed world, and definitely much more than Germany.
In short, Greece started from a very low point and an extremely precarious position, following a series of grave mistakes that led to effective default, but it has come a long way since 2010. The Greek people have made more efforts and paid a heavier price than all other eurozone nations combined during these years. No stone was left unturned: the pension system, healthcare, the labour market, public administration – everything changed in these years, amidst wartime-like economic depression and draconian cuts. This violent adjustment took its toll on Greek society. Greece suffers from the largest GDP contraction in its peacetime history, the highest-ever levels of unemployment and skyrocketing poverty levels. So, please, give us a break… If there is one more thing that German voters should be reminded of by their political leaders in the run-up to these elections, it is that there are limits to how much you can impose on a democratic society, before it implodes and turns into something really ugly.
Dr Nikos Chrysoloras is a Brussels-based EU Correspondent for Kathimerini, Greece's leading newspaper, and a Research Associate at the Crisis Observatory of the Hellenic Foundation for European and Foreign Policy (ELIAMEP). An earlier version of this article was also published in Kathimerini.