Abstract
The European Union (EU) failed repeatedly to hold Greece accountable for violations of the Treaties it signed over the past five decades. In particular, the EU not only did not express reservations in the face of these violations, but on two crucial occasions, in 1979 and again in 2000, it even rewarded Greece with concessionary decisions, which contributed significantly to its present calamities. Hence, there arises the following question: How can we explain these EU failures in the case of Greece? The objectives of this paper are twofold: First, to highlight the circumstances which prompted the EU Authorities to treat Greece as a special case, and second, to sketch briefly the rudiments of an answer to the preceding question.
In arriving at the present version of this paper I benefited significantly from the insightful comments and editorial suggestions of D. Katsoudas P. Vourloumis and A. Volbert, as well as discussions with S. Manos, P. Mihas and M. Pelt. To all of them I should like to extend my sincere appreciation. However, all responsibility for errors of fact of interpretation rests with me.
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Notes
- 1.
The European Union (EU) has evolved in many directions. Two of them are the number of participating countries (e.g., EU6 refers to the six founding member-countries) and the nature of the union from an economic point view (e.g., the European Economic Community (EEC) was a custom union). Henceforth I shall refer generally to EU and to particular abbreviations like EEC only when needed for reasons of emphasis.
- 2.
For reasons that have become subject of very intensive research, during the 1970s and 1980s western economies experienced a significant productivity slowdown. I have been advised that this may have contributed to the slowdown of economic growth in Greece. If it did, in all probability its influence should have been minimal.
- 3.
In the preamble to the Agreement of Association the contracting parties recognize that “The support given by the EEC to the Greek nation’s efforts to improve its standard of living will eventually facilitate the accession of Greece to the Community.” Furthermore, the contracting parties agreed to consider the possibility of accession: “when the operation of the Association Agreement makes it possible to envisage the integral acceptance by Greece of the obligations under the Treaty establishing the European Economic Community [GB: they meant the Treaty of Rome].” (Article 72)
- 4.
The treaties of Greece’s accession to the EEC and to the Eurozone were ratified in 1979 and 2000, and came into force in 1981 and 2002.
- 5.
After 1974 Greece progressed further into a statist country. Gwartney and Lawson (2006) find, for example, that from 1980 to 2008 Greece with respect to: (a) property rights protection, fell the 50th position from the 25th; (b) the conditions for commerce, mainly towards third countries, tumbled to the 80th position from the 39th; and (c) state regulations in credit markets, labour markets, and enterprises, slipped to the 90th position from the 72nd. It is also noteworthy that on the basis of price controls and barriers to entry, Mylonas and Papaconstantinou (2001) find that in 1998 Greece ranked as the most illiberal country in the European Union.
- 6.
This criticism applies mainly to EU’s leaders, since from official documents we know that the technocrats in the European Commission expressed strong reservations about the preparedness of Greece to enter as a full member into the EEC. For example, According to the opinion that the European Commission presented to the Council in January (1976):
The Greek economy at its present stage of development contains a number of structural features which limits its ability to combine homogeneously with the economies of the present member states. (p. 8)
- 7.
Whatever the failings and derelictions were on the part of the EU during the period of association, certainly they do not absolve the Greek side of its responsibilities. However, failure to act early on by the EU might have been interpreted by Greeks as encouragement to continue. The time element is important because, the deeper one slips into a bad situation, the harder it becomes for one to adopt the necessary remedies to get out of it.
- 8.
By then he had forgotten what he wrote in Papandreou (1962) and many other books as a research economist with top notch international reputation. In retrospect, it now seems that once he turned to politics, nothing was more useful for him than the means and the slogans to stay in power.
- 9.
This term was used to describe the extensive nationalisations that were undertaken by the supposedly conservative government of New Democracy (ND) under prime minister Constantine Caramanlis.
- 10.
Through the so-called Organization for the Restructuring of Enterprises (ORE), besides nationalizing healthy companies such as the Heracles Cement Company, PASOK used the control of the National Bank of Greece and other big banks to nationalize nearly bankrupt groups of companies such as Piraiki-Patraiki, which were kept alive by loans not justified on “business” terms. This was done in order to avoid unemployment in politically sensitive areas. From the 67 enterprises that were taken over by ORE, all but 3, which are still running with government supports, have shut down. Unfortunately, this policy, i.e. of not allowing the natural death of moribund enterprises for reasons of political expediency, has been followed by all subsequent governments and as a result, to some extent, we are faced with the same problem today.
- 11.
Modest estimations show that the cost to taxpayers from the operations of the so-called Organisation for the Reconstruction of Enterprises reached 3 billion Euros.
- 12.
Mitsotakis’s government had only a one seat majority in the parliament. As a result, it was politically weak and it could not control the powerful unions in the wider public sector, and most particularly in the electricity, telephone and transportation state-owned enterprises. This experience should have given ample warning to the EU authorities regarding the structural deformities that dominated labor and other markets in Greece.
- 13.
In the late 1990s numerous researchers stressed that even before entering the European Monetary Union (EMU) Greece had more regulations of markets for goods and services and more of labour markets than any country in the EU. On this, see for example Nicoletti et al. (1999).
- 14.
- 15.
Aside of the explanations referred to below, one could think of several others. For example, non-German countries might have an interest to keep Greece in the EU in order not to weaken the weight of the “rest of Europe” in the light of the massive political and economic power of unified Germany. In the text I did not occupy myself with such scenarios because I construed them as highly unlikely.
- 16.
Perhaps it is of some importance to note that Greece re-entered into the military branch of NATO on October 22, 1980.
- 17.
A reader has suggested that the EU decision in 1981 may have been influenced also by two additional factors: Namely, the interest of certain key European leaders in the purchases of military equipment by Greece, and the solidarity among socialist parties which were coming to power at the time. Perhaps they did play some role. But there is no way of knowing and in any case, with the major challenges that Greece presented, their influence could not be more than marginal.
- 18.
To be sure, the possibility of a so-called “butterfly effect”, according to which a small and insignificant disturbance somewhere in the world might cumulate under certain circumstances into a catastrophic event, was long known to experts. But at the time there was no precedent of such an occurrence happening in actuality, so it would be quite farfetched to hold European leaders and technocrats responsible for not allowing for it in advance.
- 19.
In other words, in the absence of such an assessment, Greek citizens are entitled to suspect that the overwhelming emphasis placed on the view that Greece was admitted in the Eurozone on the basis of falsified statistics is a cheap excuse to avoid discussion of the substantive issues raised above.
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Bitros, G.C. (2015). European Union Failures in Greece and Some Possible Explanations. In: Bitros, G., Kyriazis, N. (eds) Essays in Contemporary Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-10043-2_1
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