Greece: Like Any Other European Country?

Greece: Like Any Other European Country?

Mini Teaser: Greece is fundamentally a status quo country in part of the world where the status quo is being challenged from many directions. Its future prosperity and security depend on reforms at home and a more prudent diplomacy.

by Author(s): Loukas Tsoukalis

In the early 1990s, it became fashionable to portray Greece as an awkward partner or indeed a black sheep in the European Union: an economic laggard, falling behind in the European income league, with large budget deficits and double-digit inflation, who also acted in a particularly uncooperative manner in the attempts made by its Western allies to stabilize the Balkan region. This followed a decade of economic mismanagement and rhetorical outbursts in the area of foreign policy, coupled with the habit of adding dissenting footnotes to joint communiques issued by the European Community (as it was still called at the time) and NATO.

For those who use the term "Balkans" in a pejorative fashion, Greece was behaving like a Balkan country in the EU, adding to the problem instead of trying to be part of the solution in a notoriously unstable and conflict-ridden region. And then came Samuel Huntington, who argued that the clash of civilizations was bound to replace the struggle between liberal democracy and communist totalitarianism, and who then proceeded to identify the major fault lines cutting across the European continent. Greece found itself on the wrong side of Huntington's map, because of its Orthodox tradition, not to mention several centuries spent under Ottoman rule. It all made sense, of course; and it was therefore utterly predictable.

The situation has, however, changed substantially in recent years. Greece is now receiving praise from European and American political leaders and journalists for its moderation in the foreign policy field, and its cooperative stance in dealing with the internal crisis in Albania, the problem of Kosovo, and the non-deployment of the S-300 missiles on the divided island of Cyprus. As well, the improvement registered since 1993 in the main macroeconomic indicators has been impressive, and has been confirmed by the vote of confidence cast in financial markets. The Athens stock exchange has
reached unprecedented heights, registering one of the largest increases among European bourses in 1998, while the drachma has been trading at several percentage points above its central rate since it was admitted to the European Exchange Rate Mechanism in March 1998. At long last, Greece seems to be making a successful transition from the status of an emerging market to that of a mature economy, and the bets are heavily on Greece's admission to the European Monetary Union by the year 2001. Even domestic politics have become less polarized and personalized--and perhaps verging on the boring for the taste of some Greeks, used to charismatic leaders and interminable fights between the good and the evil.

Change and Continuity

This apparent transformation from black sheep to a more ordinary member of the European herd invites a closer look at the kind of change that Greece has undergone over a longer period. During the last quarter of the century, the country has been faced with three major challenges: the transition to democracy, after the fall of the military dictatorship in 1974; the adjustment to EC/EU membership since 1981; and the creation of a new political (dis)order in its northern neighborhood, following the collapse of communist regimes and the bloody disintegration of Yugoslavia. Greece has coped with those challenges at varying rates of speed and with varying degrees of success.

Let us start with the good news. There has been undoubtedly a remarkable consolidation of parliamentary democracy. The fact that this is now taken completely for granted is a sure sign of the tremendous progress achieved since 1974. The dictatorship had lasted for seven years and was usually regarded as one more episode in the highly unstable history of modern Greece to that date. The consolidation of democracy has been accompanied by a major change in the constitutional order, including the abolition of the monarchy--on the basis of a clear majority expressed in a referendum--and the incorporation of large groups of society into the political system, groups that hitherto had been excluded through a variety of mostly informal measures in the aftermath of the civil war that ended in 1949. Consolidation has also been accompanied by a very substantial redistribution of income between different social groups, and between city and countryside. In more recent years, democratic Greece has had the problem of coping with a large influx of economic and political refugees from its neighboring countries and farther afield, without experiencing the ugliness of organized forms of racism and xenophobia.

The ability of the new democratic system to absorb these changes more or less successfully is an unmistakable sign of its resilience. Political parties have succeeded each other in power in a smooth fashion, institutions are broadly respected, and the system of checks and balances functions reasonably well. By the standards of the region, including the countries under communist rule until 1989 as well as Turkey with its own peculiar version of "guided democracy", Greece is a model case of political stability and functioning democratic institutions. Its successful transition to and consolidation of parliamentary democracy has many parallels with the experience of Spain and Portugal.

Now comes the bad news. The quality of democracy in Greece, although unprecedented in the modern history of the country, still leaves many things to be desired. The main weakness lies in the combination of an overblown state and a relatively underdeveloped civil society. The Greek state is both omnipresent and fundamentally weak. Its pervasive influence has been intimately linked to the functioning of a clientele system that it has been precisely intended to serve. On the other hand, state institutions are inflexible and inefficient in performing the traditional Weberian functions. Dimitri Sotiropoulos has aptly described the Greek state as a "colossus with feet of clay." The pressure for change has been mounting. Membership of the EU constitutes a powerful factor pushing for change, and so does Greece's exposure to international competition.

Instead of catering to particularistic interests and the perpetuation of the clientele system, Greece needs state institutions that provide stable and transparent rules of the game, flexible regulation of markets, monetary stability, the promotion and management of economic change, and, last but not least, flexible mechanisms of social solidarity. Such institutions it certainly does not have at present. Administrative reform remains the most important and urgent task--a task from which parties in power have tended to shy away, because the gains associated with such reform would take a long time to materialize while the costs would have to be paid more or less immediately.

In a country where politics has been about anything and everything, and where political parties--either directly or through state institutions--try to exercise control over everything from admission to hospitals to the running of universities and sports, civil society has remained underdeveloped. The quality of democracy in Greece largely depends on the strengthening of independent groups and associations of citizens, which can act as effective controls on the all-expansive tendencies of the state. The relatively recent mushrooming of citizens' movements, mainly concerned with environmental and human rights issues, is therefore a most encouraging sign.

Learning to Fit In

The European Union is now much more than the incomplete common market it had been for many years. Yet European construction is still very much about economics in the wider sense--"low politics" perhaps in classic international relations jargon, but the bread and butter of political life in contemporary democratic societies. European economic integration encompasses three processes: the opening (and regulation) of the internal market for goods, services, persons and capital; the redistribution of resources, mainly through structural policies; and now economic and monetary union (EMU).

Accession to the EC/EU has meant for Greece a radical change in the relationship between the state andthe market. The country has had a long history of high external protection and extensive state intervention in the economy, usually arbitrary and non-transparent, and directly linked to the operation of the clientele system. As a member of the Union, Greece has been forced to adjust to open and highly competitive markets, and also to the requirements of joint rule-setting in Brussels. With the deepening and widening of the process of European integration, the scope of joint rules and externally imposed constraints has been greatly extended, now covering not only different barriers to entry into the domestic market but also inflation, budget deficits and interest rates. In other words, economic sovereignty in the context of the EU has become a relative concept.

Greece experienced considerable difficulties in adjusting to this new economic reality, much more so than the two Iberian countries that joined a few years later. Its maladjustment, which lasted for several years, at least partly explains the tensions that developed between it and both European institutions and partner countries. Greece often asked for exceptions in order to protect its domestic producers; either deliberately or because of administrative inefficiency it was slow in implementing European directives and regulations, and it was sometimes accused of wasting the money allocated to it through EU structural policies. In the meantime, trade deficits kept on growing, financed in part through EU transfers. Macroeconomic instability characterized Greece for many years. Tracking the process of compliance with the so-called convergence criteria set out in the Maastricht treaty, the admission ticket to the final stage of EMU, statisticians of the Union had to add little inserts to their graphs on inflation rates, budget deficits and interest rates in order to accomodate Greece, whose figures were for several years way above those of any other EU country.

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