It’s been four years since Greece signed the first memorandum. Back then Prime Minister George Papandreou had come into an explosive situation given that the markets had already predicted that the country, unable to pay back its loans, would go up in flames in the spring of 2010. Putting aside the issue of Papandreou’s opposition to absolutely everything – from discussing the debt with his predecessor Costas Karamanlis, when the latter was PM, to various privatizations – what remains incomprehensible is why he did not take advantage of the pass given to him by Karamanlis: The latter had been crystal clear on the need to take immediate fiscal measures. Perhaps it was hypocritical on Karamanlis’s part or he was trying to dodge the issue, as he could have taken steps when Giorgos Alogoskoufis was finance minister. The fact is that his New Democracy successor, Antonis Samaras, also urged Papandreou to take measures initially.
Papandreou was aware of the size of the deficit and the debt. But he opted to follow partisan advice which dictated that taking measures would result in him losing credibility. History would be more lenient toward him had he had admitted to being wrong and unable to fulfill his promises, and had proceeded with cuts right away. What followed was a period of chaotic management during which certain officials went looking for loans, unsuccessfully, from China, Russia and several Arab states.
Meanwhile, the hard core of PASOK did everything in its power to thwart even the most basic cuts. This was accompanied by open consultations with anyone holding an opinion on how to deal with the problem. The premier and the government adopted dramatic tones but no tough measures were taken. Things came to a head when Berlin showed reluctance to help Greece early on. It is not known who supported the idea of involving the IMF in a Greek bailout program but some reports suggested that Papandreou insisted on this, influenced by his US center-left advisers as a means of exerting pressure on the eurozone.
The fact is that either the ECB nor the European Commission wanted the IMF in their way at the start. The decision was finally taken by German Chancellor Angela Merkel who wanted to protect herself politically on the local level by appearing to take a strict stance toward Greece. Eventually Greece signed the memorandum. Some still support the idea that Papandreou could have pressured the eurozone as it was not ready to protect its banks from a unilateral Greek default, though this theory underestimated the danger of a disaster. Experts in world affairs agree that some abrupt fiscal adjustment was unavoidable either through a softer program or by entering the program later on.