Many of
us have pondered how is it possible for Greece to have missed most if not all
the targets that were set by the Troika? How incompetent can they be? Why is it
that after two years with Greece on the brink of oblivion the Greek politicians
still play games and refuse to implement what they signed up to? How difficult
is it to reform the Greek economy? What can Germany do?
German Experience
Let me
attempt to answer using my personal experience. Back in the late 1990’s I found
myself as a postdoctoral fellow in Germany with the Max Planck Gesellschaft. It
was in the city of Jena (Thuringia) of the former East Germany. Jena is famous
for the Carl Zeiss optics and also for the battle (1806) that subjugated
Prussia to the French empire (Napoleon) which in turn gave its name to a Paris
Metro station. When the German unification (or takeover) happened Jena changed
drastically. More than 20,000 people working at the Carl Zeiss Jenoptik factory
were fired and in a city of 100,000 it meant misery. Unemployment soared and
political extremist was rife. Despite the resources thrown by Germany,
Thuringia was still a Least Favourite Region 7 years (EEC classification) after
the “change”. Incidentally, the whole of
Greece was classified as a Least Favourite region for most of the 80-90’s. At
work even after 6 years you could divide your colleagues into two groups. Those
that embraced the new order of things and those that chose to resist and live
in the past. It was not an age division but rather a cultural and a character
differentiation. Sometimes the more enthusiastic proponents of change were of
the older generation. My professor was in charge of reading the Staatssicherheit files
(Stasi) and making sure that people who did serious harm were put aside. Although
many “politicians” that were entangled with the old regime conveniently
reformed themselves to survive, many were side-lined or forced to early retirement.
Slowly the 2-stroke Trabants were replaced by the Audi’s vorsprung durch technik. It took many years and the enormous
resources of West Germany to make the change. Germany run deficits of up to
13.2% and threw more than ½ the total savings of West Germany to subsidise the
East. Europe also help by first endorsing the unification and also financial
even unwittingly. The result in Europe was the collapse of the Exchange Rate
Mechanism through the rapid appreciation of the DM caused by the increase in
interest rates. Effectively, the rest of Europe paid for the unification
efforts of Germany through the devaluations.
Greece
I
mentioned East Germany because there are many parallels with Greece. Although
Greece was on the other side of the Iron Curtain (Churchill 1946), the economic
policies for many years were little different. Greece had and still has a state
run economy. Decades of state mismanagement has created not only a state
monster but also generations of politicians and people who learned to accept
and navigate this labyrinth as was the case in GDR. Many of the ones with a conscience
that refused to accept corruption, political oppression and nepotism as a way
of life left the country. Contrary to East Germany there was no wall to stop
them. As a result the forces of healthy change were weakened. Politicians were
voted in on the promise of favours or job allocations. No one cared about
prudent policies or good governance. In addition, the EEC (later EU) subsidies
provided the requisite money with few if any strings attached (remember
COMECON). Politicians used these subsidies in order to get re-elected. There
was no need to change anything! Thus, Greece started exhibiting many of the
characteristics of a failed state. The bureaucracy failed and together Greece
failed.
The EU
woke up to the problem rather late and it demanded from Greece to change all
this in space of few months. However, none of the politicians or the political
parties that are heavily responsible for this mess has been removed, reformed
or changed. The analogy with Germany is trying to change Ostdeutschland
into West Germany by
keeping Eric Honecker and its party fully in control of the implementation. It
cannot happen.
Conclusion
I am not
trying to excuse Greece or the Greeks from their responsibility. Greece needs
help from Europe in order to reform, not just financial assistance. They need to
change their memes (cultural genes) and this takes time. The money that Troika
is pledging to Greece is seen by many as way to propel and support a corrupt
political system. After all, the Greek cabinet is little changed from two years
ago. Strict conditionality should be placed on the politicians. Perhaps the EU
could help by encouraging the current PM to form a new political party to cover
the middle ground that is now disintegrating. Not doing so would push ordinary
Greeks to the extreme left and right. This is not in the benefit of Europe.
Please
excuse my exaggerated and possibly dramatic analogy (being Greek I cannot help
it) with East Germany. East Germans suffered hard and long and many generations
paid a high price in terms of lost potential, lost aspirations and lost lives. We
should try to avoid a repeat of this bad movie.
Greece needs
more than financial help. It needs a dream and a hope. Many East Germans dreamt
and hoped of the day their country and families would be united. What are the
Greeks dreaming about? More taxes? What are the aspirations of the young
unemployed Greeks? Immigrating? The Greek political establishment in power for
the last 30y has failed and needs to be swept aside. Europe is more than just
an economic union. It is an ideal fostered and hammered through many centuries
and many bloody wars. Now is the time for the European ideal to take the
driving seat.
