A symbol of European solidarity, a laboratory of austerity or a reflection of national egoisms? It is often difficult to form a clear opinion on the Greek crisis. Many believe that Europeans have been too generous towards a country they consider solely responsible for its near bankruptcy. While others view successive financial assistance programmes as violent shocks of imposed austerity. Still others think that this crisis has forced us to ask some existential questions and made us healthily aware of the eurozone’s fragility.
I have experienced this crisis first hand, from within; first, as French Finance Minister from 2012 to 2014, and since then as European Commissioner for Economic and Financial Affairs. As the stability support programme draws to a close on August 20, the time has come to take stock. I would like to answer the five questions that I hear most often in my travels across Europe. Five questions about Greece, of course; but questions that also say a lot about how Europe works, about the often complex interactions between our countries, politics and the economy. Citizens will be the judge.
1) Were we right to save Greece?
EU Member States and the International Monetary Fund have lent nearly 288 billion euros to Greece in eight years. It is a staggering sum, unlike any mobilised before. Many Europeans wonder whether this was the right decision. It is not an easy question to answer. But I remain certain of two things.
First, it is clear that without European aid Greece would have collapsed, not recovering for decades. It would have fallen into a deep political and economic crisis, the depths of which we Europeans have not experienced in generations.
Second, the costs and consequences of Greece’s collapse on other countries and the European Union as a whole would have been far greater than the billions lent. Our economies would have been dragged, at least partly, into the Greek abyss. And the strong growth we are experiencing today would not have happened.
So yes, I am firmly convinced that Greece had to be saved – to save all our economies, to save the euro and to save Europe. We will come out of this experience collectively stronger.
2) Is the end of this Greek programme the end of the Greek crisis?
Seeing an end to Greece’s financial assistance programme is good news for both Greece and the euro area. It marks the end of eight years that were particularly painful for the Greek people as well as deeply destabilising for the euro area.
Today, Greece is doing better. No other European country has done more to modernise its administration and economy. No less than 450 reforms have been adopted and implemented in the last three years. The Greeks’ sacrifices have finally borne fruit: Greece has returned to growth and the vast public deficit has been turned into a solid budget surplus.
Clearly, the reality on the ground remains difficult. A large part of the population still lives below the poverty line and the unemployment rate is around 20%. Public debt remains the highest in Europe, above 180%. So of course I understand that many Greeks do not yet feel that this crisis has come to an end.
And yet I am convinced that the worst is now behind us. We prevented a disastrous scenario – Grexit – and safeguarded the euro. Growth is now back, unemployment is gradually falling, and the young people who left Greece during the crisis in droves are starting to return. The time for austerity is over. But the end of the programme is not the end of the road. There is still a lot of work to be done so that Greece can stand on its own two feet.
3) Why did the crisis last so long?
The Greek crisis was exceptionally long and hard. I saw a lot of political courage in the face of the unknown. Yet mistakes were also made – in Athens, Brussels, Berlin and Washington – unnecessarily prolonging this crisis.
Today, we must recognise that the EU and its member states did not see this crisis coming and were in no way prepared for it. We had neither the capacity nor the tools, let alone the political culture, to manage major crises at market speed.
We also underestimated the disastrous state that Greece was in when all this started. What appeared to be a simple budgetary crisis was, in reality, a deep crisis of the Greek state and economy. So deep that it took several years to even properly assess it.
As a result, the design of the three consecutive financial assistance programmes was imperfect. The first programme (2010-2012), too short-termist and very focused on public finances, could not respond to the country’s deep structural problems. The second programme (2012-2015) integrated more substantive responses to these problems, but remained too limited in time. The latest programme (2015-2018) was finally able to carry out the much needed structural reforms and implement them.
Greek politics also has a major share of responsibility in this crisis. Starting with those – who have not yet been judged – who chose to mask the deficit figures. Greece’s sometimes Byzantine political life did not help. The demagoguery of the election campaigns, the reversal of positions once in government, and the lack of national consensus, also profoundly affected the country’s recovery.
The second programme could have been concluded positively in December 2014, if the New Democracy/Pasok coalition had politically accepted the need for key reforms – of pensions and an increase of VAT on the islands. Instead, elections were held. The people chose Syriza, the radical left, on the basis of a diametrically opposed electoral programme that then launched six months of tensions with both European partners and markets.
European political leaders also have their share of responsibility. Perhaps paralysed by the risk of the euro imploding, they took too long to react, hiding behind Greek procrastination. Ulterior motives were very strong and many on the European right wished that the Syriza government of Alexis Tsipras, which won against New Democracy, would fail. Emotions sometimes prevailed over politics. I saw German Finance Minister Wolfgang Schäuble say to his Greek counterpart: « I no longer trust you ». I even separated the Dutch Finance Minister, Jeroen Dijselbloem, and the Greek Finance Minister, Yannis Varoufakis, who were on the verge of coming to blows. It took a great deal of patience to re-establish dialogue in the summer of 2015 and to reach an agreement on a subsequent programme, which might never have been needed had it not been for these political quarrels.
Finally, I will not forget the role of the institutions responsible for running the programmes. Collaboration between the European Commission, the European Central Bank, the International Monetary Fund (IMF), and later the European Stability Mechanism has not always been easy. The financial expertise of the IMF was initially necessary and has been useful; but certain positions were too brutal and personal, antagonised relations with the Greeks and even led the Eurogroup to adopt reforms that, in my opinion, were too harsh, particularly those on pensions due to kick in in 2019.
Eight years of crisis is far too long. Politicians bear some responsibility and I will accept my share. But many of us have also done the best we can to help the Greek people. I have persistently led this battle, sometimes alone or with Jean-Claude Juncker at the Eurogroup. And I am proud to have been consistent in that pursuit.
4) Did technocrats prevail over democracy?
Was the will of the people not respected? Did an alliance of markets and technocrats- the famous Troika with its « men in black » – impose their measures on the Greek parliament? Should the keys really have been given to unelected officials when politicians no longer wanted to assume their responsibilities?
It must be recognised that the methods used were sometimes intrusive and that these officials had a major influence on the process. But it must also be understood that we needed expertise in the field and on the ground to diagnose the country’s deep problems in order to help it address them.
Greek democracy was respected in all its principles. The Greek people chosen to remain in the euro and we respected this sovereign choice. It is true that the precise reform measures were often designed by the institutions. But it was always on the basis of the mandate given by EU finance ministers, who were accountable to their respective parliaments.
It was, however, the Eurogroup that took the final decisions, without any real democratic control. I myself felt uneasy when we decided, behind closed doors, the fate of millions of Greeks. I said it last year and I say it again today: it is a democratic scandal. Not because ministers acted with any kind of ill will, but because they often were not fully informed or did not have a precise mandate from their national parliaments. I draw a clear lesson from this: the Eurogroup must become more democratic, more transparent and better monitored.
5) What future for Greece and the euro area?
I remain convinced that the conclusion of the European Stability Mechanism programme is a historic moment for Greece and for the whole of Europe. Greece is preparing to regain its rightful place in the eurozone and greater autonomy in economic policy-making.
That does not mean, however, that the European Union is abandoning Greece. Much remains to be done. Reducing public debt and pursuing reforms must be the government’s top priorities.
The European Commission will ensure that Greece’s commitments are respected, while remaining an ally of Greece. The monitoring that will take place is not a fourth programme in disguise: it does not involve any new measures or reforms. For Greece, it is a matter of ingraining the support of all partners for the completion of key reforms needed to ensure a stable future for the country. For the European partners, it is a question of ensuring that Greece respects its past commitments. No more, no less.
The eurozone, on the other hand, must pursue its integration and think about the next crises, which will inevitably come. It must anticipate, rather than wait until it is at the edge of the abyss. We have made proposals: I hope that our member states will have the wisdom to look to the future with confidence.