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tumbled the world over. Rates of interest on Italian and Spanish bonds began to rise. Investors turned en masse to the security of German bonds. The activity was compounded by fears of a crisis in the USA and its effects on the Eurozone. This was not a phase. It continued and became a determining factor in future developments. In order to stop the crisis spreading, the ECB decided to buy Irish and Portuguese bonds by way of support for the two countries; however, it was soon obliged to extend its action to Italian and Spanish bonds. The crisis had an entirely
29 Evaluations of the assistance programme to Greece In May 2013, the Bruegel think-tank1 published an analysis of the reform programmes in Greece, Ireland and Portugal;2 to date, this is the most comprehensive evaluation of the funding packages and associated reforms in the Eurozone. According to the report, the predictions of the first Memorandum with regard to growth, unemployment, the debt to GDP ratio and scope for a return to the bond markets (in Greece by 2013) were ‘unambiguously dashed by events’. While the restructuring of Greek debt was not considered
footing; nor would it guarantee a return to the international bond markets and the cessation of the need for external support. Commentators suggested that Greece’s liabilities to the ECB and other EMU member states that had not yet been subject to restructuring would also have to submit to a ‘haircut’.4 However, the members of the Eurozone were adamantly opposed to any such calls,5 though restructuring made sense. The majority of Greece’s liabilities were now to fellow member states of the single-currency area. These liabilities had primarily arisen as a result of the
12 A year of the Memorandum: seeking a new solution After the March Eurozone summit, a short-lived sense of optimism returned to the EU. But Portugal’s request, on 11 April 2011, for financial assistance from the EU and the IMF indicated that nothing had changed. The crisis was far from resolved. Mirroring such sentiment, the English journal The Economist was particularly despondent in its analysis. It deemed that the summit had been ‘something between a fudge and a failure’: The Brussels gathering did little to help Greece, Ireland and Portugal.… Their
11 An ‘all-encompassing plan’ to solve the crisis in Greece? Τhe May 2010 agreement on the Memorandum initiated a short-lived period of optimism; while uncertainty remained, there was acknowledgement of Greece’s efforts. This optimism came to an end with the European Council held in February 2011, which was followed by a period of insecurity, which turned into intense anxiety and anxiety into calls for further action. This culminated in the Eurozone summit held in July 2011, at which new terms were set to deal with the Greek crisis. The major source of renewed
,5 the cause of the crisis in Greece and in the other peripheral countries was not just fiscal mismanagement: much causal weight must also be ascribed to the fundamental imbalances in competitiveness across the Eurozone. The structural reforms prescribed by the Memorandum were necessary, but they were not sufficient in their own right. The Eurozone, and not just Greece, should have addressed these fundamental challenges. A small country, like Greece, could not deal with it on its own. 189 Greece.indb 189 3/13/2014 1:56:45 PM 190 Part IV: Coalition, PSI and the
this second Memorandum by the Greek Parliament and its approval by the Eurogroup; a decision on the recapitalisation of Greek banks; negotiations with lenders and completion of the arrangements for private sector involvement (PSI); and finally parliamentary endorsement of the new Memorandum in other Eurozone nations, as required. Subsequent to the agreement on, and endorsement of, the second Memorandum, further parliamentary and administrative action would have follow in Greece, to foster the required fiscal measures and structural changes mandated in the text. Given
spending.8 And in this effort, it rolls over as much of the burden onto the faceless crowd as it possibly can. That crowd also protests, but its voice is drowned by the shouts, and the violence, of those who can activate the pressure levers. The state administration obstructed Greek society’s adjustment to the environment of the Eurozone owing to: its deficient organisation; its conservative attitudes; its resistance to change; its poor relation with the citizen; and the corruption permitted by an absence of scrutiny and accountability. In 2012, two cases highlighted the
conference at the 74th Thessaloniki International Exhibition, 13 September 2009. 3 According to PASOK’s Economy Sector Information Bulletin, 28 May 2009, ‘the financial crisis has had a larger effect on the Greek state’s cost of borrowing … Greece’s borrowing costs are higher than those of other Eurozone countries’. 4 Speech at Thessaloniki International Exhibition, 13 September 2009. Greece.indb 23 3/13/2014 1:56:35 PM
Eurozone and the IMF on the basis of these documents, following evidence that the quarterly targets had been met and that updates of the Memorandum had been agreed and approved. This procedure meant that the content of the Memorandum continually grew, to ensure that the original targets for the reduction of the deficit and debt were achieved. Following the November 2010 audit, the ‘updating’ included an obligation on the part of the Greek government to reform the costly health-care Greece.indb 83 3/13/2014 1:56:38 PM 84 Part II: The Memorandum’s first year of