By Dr. John C. Hulsman*
On paper, the just-concluded Greek parliamentary elections were a
triumph for investors. The leftist, populist Syriza party of Prime
Minister Alexis Tsipras has been replaced by the far more acceptable (in
investors’ eyes) center-right New Democracy (ND) party of Kyriakos
The ND won an impressive 40 percent of the overall vote, and a dominant
parliamentary majority of 158 of the 300 seats in the new Greek
Parliament, even as Tsipras and Syriza slumped to 32 percent and 86
seats in total. This dominant victory — at least at first glance — would
seem to give Mitsotakis the electoral mandate he needs to desperately
remake a Greek society that has endured nothing less than an economic
nightmare for the past decade.
Again, on the surface, Mitsotakis is saying everything right. His
electoral platform called for market-oriented structural reforms. First,
the new premier pledges to cut taxes by the start of 2020. Second, the
ND wants to digitize sclerotic Greek public services on the lines of
Estonia’s ground-breaking reforms, making public administration faster,
better and more accountable.
Third, Mitsotakis wants to remove onerous government-imposed private
barriers to public businesses. Fourth, if this highly ambitious program
is enacted and successfully put in place, Mitsotakis pledges to attract
the desperately necessary foreign investment to get Greece off its knees
and back on its economic feet.
Without delving beneath the surface, all this sounds wonderful. And yet
context is everything in political risk analysis. Mitsotakis’ famous
victory has less to do with his platform and much more to do with being
the beneficiary of the growth-starved Greek electorate, tired of both
Syriza’s empty promises and a decade of depression. For the Tsipras
government was, in retrospect, undermined fatally in August 2015, when
the premier saw his domestic credibility vanish as he and Syriza
endorsed European Central Bank (ECB) austerity measures to enable a
third $94 billion bailout.
This came after Tsipras was elected on a strict anti-austerity platform
and a month after Greek voters — in a July 5, 2015 referendum —
decisively opposed the German/EU/ECB-led pressure for Athens to adopt
further austerity measures in return for the further bailout of $94
billion. In return, Greece was required to become little more than a
vassal state of Brussels, ignoring the democratic will of its people and
implementing further tax reform, privatizing public assets, cutting
public spending, and reforming its antiquated labor laws.
Even though it is undoubtedly true that some of these economic
prescriptions were absolutely necessary, in ignoring the referendum and
forcing Tsipras to cravenly cave in to German pressure, the EU showed
itself to be more about Germany and the other great powers protecting
their interests (in this case those of the feckless German banks that
had so unwisely loaned the Greeks money) rather than heeding the popular
will of its members. Sham democracy indeed.
What every side in the Greek tragedy can agree on is that the country
has been in an economic nightmare since October 2009. That was the month
that then-newly elected Prime Minister George Papandreou dramatically
revealed that, contrary to Greece’s own accounts up until that point,
the country’s budget deficit was actually a whopping 12 percent of gross
domestic product (GDP), which was later revised up to 15 percent. This
bolt from the blue prompted credit ratings agencies to downgrade Greek
sovereign debt to junk status by early 2010.
Even after all these years, it is simply indisputable that the tough
economic remedies forced on Greece by Germany, the EU and the ECB have
yet to really work. It is true that, in August 2018, Greece finally
exited its third bailout program, and it now owes the EU and the
International Monetary Fund (IMF) an unimaginable $330 billion. Greek
public debt remains — after the three bailouts designed to “help” the
country — an Everest-like 180 percent of GDP, while Greece has solemnly
committed to running budget surpluses until the highly improbable year
of 2060. Overall, the Greek economy is fully 25 percent smaller now than
when the crisis began.
Even in 2018, while GDP grew at 2.1 percent (it has since slipped to 1.3
percent year-on-year in the first quarter of 2019), overall
unemployment remained at the depression-era level of 20 percent, while
youth unemployment rose to a stratospheric 40 percent in March 2019.
Perhaps most devastatingly of all, the IMF continues to predict that
Greece will require further bailouts before its economy can be made
sustainable once again.
Frankly, the IMF’s prescription passes Einstein’s test for insanity — to
advocate doing the same thing over and over again and somehow expect a
different result. The result here is clear: The EU has destroyed Greece
beyond repair, making it an economic colony even as it has decisively
failed — and here of course the Greek people are also hugely to blame —
to salvage its economy.
Tellingly, many of Mitsotakis’ hoped-for economic reforms are subject to
IMF and ECB overlordship and review before they may go into effect.
Europe, economically sclerotic, is losing even the veneer of democratic
governance. Greece has been ruined beyond repair, both economically and
politically. Who is next?
Dr. John C. Hulsman is the president and managing partner of John C.
Hulsman Enterprises, a prominent global political risk consulting firm.
He is also senior columnist for City AM, the newspaper of the City of
London. He can be contacted via www.chartwellspeakers.com.
1. US Security from Michael_Novakhov (88 sites)