Staring at defeat

Illustration by Manos Symeonakis

Some had hoped for a dramatic and inspiring last throw of the dice to drag a confused, beleaguered and sometimes reluctant country forward, but Prime Minister George Papandreou’s speech in Thessaloniki last weekend felt distinctly like an admission of defeat.

Any address that begins by focusing on the failings of the previous government, as Papandreou’s did by rehashing the argument about New Democracy’s disastrous management of the Greek economy, is condemned to look back rather than forward.

While the debate about what went wrong in Greece over the last decade and beyond must take place, the country’s politicians have proved that they cannot be the ones to lead the discussion. Over the last two years, they have shed no light on the issue and have shied away from any process that would apportion blame to decision makers.

To choose this as your opening gambit in a keynote speech at a time when Greece is sliding toward bankruptcy can only mean you want to claim a good spot from which to climb out of the rubble that will be left. Papandreou did not speak like a man who believes the collapse can be avoided.

There was an attempt to strike a more optimistic note by focusing on tourism, agriculture, renewable energy sources and gas exploration as possible sources of growth in the years to come but the references were too nebulous to stir hope in a country whose economy is set to shrink by 5 percent of gross domestic product this year, the third straight year of recession. Sprinkling salt on a stone cold meal won’t make it taste better.

The appetite for such empty gestures has long disappeared. Just like promises to reform the public sector, Greeks have heard the assertions about “green growth” and other well-intentioned projects many times before but little has materialized. This is as evident to those who walk down the street as it to those who study economic statistics. According to this month’s state budget report, ordinary revenue is at 30.6 billion euros, almost 2 billion down on last year, and expenditure, at 47.4 billion, is nearly 4 billion higher than it was last year. That’s hardly a sign of progress.

It’s the same story with tax evasion. The government has repeatedly told voters it will hunt down tax dodgers but at the Thessaloniki International Fair, the prime minister simply issued an embarrassed plea to business owners to pay their dues. In a telling moment, TV cameras showed Constantinos Michalos, the head of the Athens Chamber of Commerce and Industry, wriggling in his seat and grimacing with annoyance after the premier dared to suggest that some of his members might carry some blame for the country’s ills.

Soon after this entertaining charade, the working and middle classes were hit by yet another tax to fill a new hole in Greece’s finances. Homeowners – including families that supported the construction sector they were told was so vital for the Greek economy by buying homes at inflated prices over the last decade with loans from banks benefiting from cheap credit – will have to pay an average of four euros per square meter to raise the 2 billion euros that Athens needs to secure the next round of funding from the European Union and the International Monetary Fund. Economists, meanwhile, estimate that this real estate tax will lead to the economy contracting by another 0.5 percent of GDP this year.

In these circumstances, Papandreou’s speech can only be seen as a formulaic response to a problem for which all known formulas have failed. The prime minister has been content with scuffing his shoes kicking up dust when he needed to get in the game and change it. Greece accepted hands-down from its lenders a damaging package, described by the Telegraph’s international business editor Ambrose Evans-Pritchard this week as the “most violent fiscal deflation ever inflicted on a modern developed economy.” Athens acquiesced, knowing it was incapable of implementing it and then kept renegotiating targets that it could never meet. In the process, it used up the eurozone’s good will and allowed its people to be portrayed as Europe’s delinquents. All the time, it failed to use its only strong card — the fact that eurozone banks were exposed to Greek debt — to push its partners to choose bolder remedies and rethink the euro.

Instead, Greece has been relegated to the role of a whipping boy that could be cast adrift at any moment. “Instead of recognizing the collective EU failure at every stage of this debacle, the creditor powers are taking out their fury on what is now a victim,” wrote Evans-Pritchard.

Rather than reaching for solutions to the problem afflicting Greece and affecting others, eurozone members are gradually turning their backs on each other. Worthwhile ideas such as Eurobonds and closer economic governance are buckling under the weight of domestic political concerns and are being replaced by talk of sanctions and expulsions.

“Politics, it is said, is the art of the possible,” wrote Harvard University professor Dani Rodrik this week while commenting on the economic problems in the US and the eurozone. “But possibilities are shaped by our decisions as much as they are by our circumstances. As matters currently stand, when future generations place our leaders in historical perspective, they will most likely reproach them, above all, for their lack of institutional imagination.”

This ingredient was just one of many things that were missing from Papandreou’s speech on Saturday and the government’s efforts over the last two years. The absence of this imagination is one of the many reasons that Greece, like its prime minister, is beginning to look as if it has accepted defeat.

Nick Malkoutzis

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