One of the most hotly debated issues in Germany ahead of the federal elections due to take place on 22 September is the future of Greece. But, unfortunately, what we mostly hear is the terrible noise of populism. There are hardly any voices of reason to soothe our ears. People have started throwing numbers around, in the most irresponsible and incomprehensible fashion, without any serious evidence to support their claims: “Greece will need 10 more billion euros,” says incumbent Finance Minister Wolfgang Schaeuble; “Greece’s financing needs are 77 billion,” responds Carsten Schneider, the opposition SPD’s spokesman on budget issues; “Greece should leave the eurozone and have its debt erased,” say the euroskeptics of Alternative fuer Deutschland (AfD). And so on…
The truth is, of course, that all of these numbers and claims are arbitrary. Therefore, they undermine the prospects for a well-informed public debate on the future of the eurozone periphery – a debate that German voters ought to have before they cast their vote in a few days time. The reality is that Greece has beaten its budget implementation targets for 2012, and data for the first seven months of 2013 support the projection that the country will do better than expected once again this year, finally reaching the seminal target of a primary surplus (i.e. a budget surplus, excluding payments for servicing old debts). The manufacturing PMI for August reached a 44-month high and Markit Economics now says it is not unlikely that recovery will get under way before the end of this year – earlier than previously anticipated. Early recovery means higher tax revenues, lower recapitalization needs for the country’s banks, and increased confidence, which will fuel investor interest for Greece’s privatization projects; in other words, less – if any – new money from the eurozone stability mechanisms.
Other indicators – namely unemployment, which currently stands at a jaw-dropping 27.6 percent of the working-age population, and Economic Sentiment (ESI), which fell for a fourth consecutive month in August – do not leave much room for optimism. In other words, Greece could go either way.
In light of these conflicting signs, the most responsible thing for German leaders to do would be to put their calculators back in their bags and stop mentioning numbers. Strangely enough, the most sober German view on the future of Greece comes from Klaus Regling, the managing director of the Luxembourg-based European Stability Mechanism: “Nobody knows how the world economy will look, how Europe will be doing or how important neighbors for Greece, like Turkey, will be doing in 10 months’ time,” he said in a recent interview, and questioned the “quality” of all those numbers that we hear, arguing that they are “very tentative.”
Hence, instead of trying to look through the crystal ball, German politicians should instead try to inform their voters on their vision for Europe and Germany’s place within it. On the rare occasions that they do just that, they project the completely misplaced stereotype that Germany’s participation in the support programs for the European periphery was a “philanthropic” operation. Well, it wasn’t. Not only has Germany not lost a cent from the loans it has provided to Greece – and other troubled countries in the periphery – but the emergency facilities which were created in 2010 have also ensured that the global financial system did not suffer a cataclysmic collapse, following a Greek bankruptcy domino. Greece would stand to lose as much as Germany after such a dramatic development. After all, Germany has probably gained more from the creation of the eurozone and the record-low interest rates after the outbreak of the crisis than any other member state of the Union. And finally, since it always takes two to tango, German taxpayers should be reminded that German companies are involved in many of the economic scandals that brought the Greek state to the edge of the cliff.
Stench of populism
What is even more worrying is that, once again, Greek people are hearing mainstream German politicians issuing threats and ultimatums. “Greece won’t get a cent without reforms,” said incumbent Chancellor Angela Merkel. Such statements really stink of populism. If the view of a Greek is not convincing enough, let me refer to independent assessments: Both the German Regling, and the Finnish vice president of the European Commission, Olli Rehn, have repeatedly said that Greece has achieved the largest fiscal adjustment of any country ever in history (more than 12 percent of GDP in the last three years). The sum total of austerity measures required to achieve this adjustment exceeded 49 billion euros, or 22.6 percent of Greece’s GDP in just two years.
Progress in structural reforms has also been impressive: The country earned first place on responsiveness to OECD growth recommendations in the latest OECD Going for Growth report. Moreover, Greece improved its global ranking by a staggering 22 places in the 2013 Doing Business report published by the World Bank. In addition, “in the last 12 months Greece has been the runaway leader among eurozone countries in terms of compliance with plans for its fiscal adjustment and in promoting reforms,” according to the annual “Euro Plus Monitor” report for 2012, issued by the Lisbon Council think tank and Berenberg Bank. Finally, according to both the European Commission and the OECD, Greece consistently records the highest number of hours worked by full-time employed persons in Europe and the developed world, and definitely much more than Germany.
In short, Greece started from a very low point, and an extremely precarious position, following a series of grave mistakes that led to effective default, but it has come a long way since 2010. The Greek people have made more efforts and paid a heavier price than all the other eurozone nations combined during these years. No stone was left unturned: The pension system, healthcare, labor market, public administration – everything changed in these years, amid wartime-like economic depression and draconian cuts. This violent adjustment took its toll on Greek society. Greece is suffering from the largest GDP contraction in its peacetime history, the highest ever levels of unemployment, and skyrocketing poverty levels. So, please, give us a break… If there is one thing that German voters should be reminded by their political leaders, ahead of these elections, it is that there are limits to how much can you can impose on a democratic society, before it implodes into something really ugly.