ECONOMY

Greek economy is no longer the exception

Much has been said and written about how the Greek economy has finally turned a corner, has left behind its old spendthrift ways, and has entered a new era of frugal budgets and industrial privatization, of which entry into the eurozone has been the pivotal benchmark and claim to fame. One sometimes overlooked aspect of this turn toward economic probity is psychological in nature, namely that Greece is seen – and increasingly presents itself – as no longer an exceptional case. There are many benefits, but also potential pitfalls, in such a shift in perceptions. Two recent developments neatly summarize the transitional situation in which Greece finds itself at the end of 2001. One is the confirmation that Greece’s economy will outgrow the eurozone group by a considerable margin, with an expected growth rate of something over 3 percent for the year – a healthy clip by the standards of developed economies, and even more impressive given the severe dent in economic output worldwide resulting from the September 11 attacks. The other was the government’s response to signs of a serious downturn in the country’s all-important tourism industry. Development Minister Akis Tsochadzopoulos declared last month that the falloff in foreign tourism would be made up for by an increase in domestic tourism, for which, as he effectively put it, we (presumably meaning the government, or at least his ministry) have a plan. The apparent message was that Greece will be unaffected by these developments, except when it is affected, and even when it is, the government has the answer. These two developments indicate a curious combination of new dynamism and misplaced, old-style thinking; and they suggest that the shift to a more level playing field, inherent in eurozone membership, will require greater adjustment than the country has undertaken thus far. And it suggests that Greece’s economy, for all its impressive advances of recent years and the breath of fresh air provided by the new economics and finance minister, Nikos Christodoulos, remains in the not-quite-ready-for-prime-time category. Awake to a new world Two decades ago, the ruling PASOK party – the same party in name, if not in spirit, as that which rose to power in 1981 under Andreas Papandreou – reaped handsome political dividends primarily by espousing the view that Greece was genuinely a different country; different in culture, history, politics, and all the things that mattered to a nation-state. The real defining characteristic and selling point of the early PASOK years was exceptionalism, and that allagi – change – from the old way of thinking was needed. But serious economic shortcomings in the 1980s, and the world changes brought about by the 1989 revolutions, the breakup of its northern neighbor Yugoslavia, the 1999 war in Kosovo, the international war on terrorism, and, most recently, the international pressure on Greece and Turkey finally to resolve the long-running Cyprus problem, are all indicative of the vastly changed international circumstances of Greece, which is no longer positioned to argue that its geopolitical situation requires special consideration or recompense. There has been no alternative but to adjust its thinking accordingly. Entry into the eurozone, finally effected this past year, has been of course a huge step for the country. What it has lost in monetary leeway (ability to devalue the currency or manipulate interest rates) it has more than gained in a permanent, dramatic lowering of rates and a newly stable macroeconomic environment. Politically, it does not have the same fundamental impact as joining the EEC had in 1981, but it confirms Greece as an international player. Again, one of the biggest changes may have been psychological; Greece now has a firm, internationally oriented economic base from which it can (if it chooses) plan for the future with a greater amount of confidence, and has a powerful institution, the European Central Bank, behind it. And Greece is not just fulfilling a long-declared aim by entering the eurozone; it is leapfrogging over several other, more reluctant EU member states (Britain, Denmark, Sweden) in doing so. For the first time in Greece’s 20-year EU membership, its move into Europe’s central core is not just a matter of will but of performance. This is a matter of justifiable pride for the Simitis government, but still just the end of the beginning. Not all rosy For all its demonstrable advances, the broader Greek economy remains in something of a minor time-warp. Fortuitous circumstances, more than genuine change from within, have been the primary impetus for movement so far. The assembling of a huge infrastructure-related package by the EU, funds from the various structural funds and the Third Community Support Framework will run until 2006; construction and tourism industries will benefit from Olympic Games-related works for years to come; and Cypriot membership in the EU, if effected as expected by 2004, could bring another economic fillip to the eastern Mediterranean. What we have is a rare conjunction, involving spillover from the past (EU funding of its poorer members and regions, still applicable to Greece), the present (the Olympic Games buildup, massive but one-off) and the expected future (a possible Cyprus solution) that have created a benevolent tide for the country’s economy. Yet many other factors suggest that the Greek economy remains atypical of mainstream European economies, and that efforts to redress any imbalances are themselves lagging, despite the government’s stated aim to achieve real convergence with the rest of the EU by 2010. A mother-knows-best presumption about the State’s role in society remains strong, even while state services remain woefully deficient for the average citizen. Knowledge of, much less concern about, the environmental dimension is still minimal. Troubling concerns (and opposition charges) persist about possible stock market manipulation prior to the April 2000 elections, even if steps have been taken to improve market transparency since then. A genuine consumer culture, in the sense of courteous and efficient service in shops and stores, has not fully emerged. Even the country’s relative insulation from the world economic fallout of September 11 resembles unintended exceptionalism, even if not of the self-conscious variety. And last week’s visit to Greece by Russian President Vladimir Putin provided added evidence that Greece continues to play a role unlike others in Europe. On one hand, it was striking to see the Greek and Russian leaders talking business with a minimum of ideological baggage. Yet on the other, it is clear that Greece is seen as a potential Russian conduit to European energy markets, a role eased by the two nations’ common roots in Orthodoxy and common history of convergent geopolitical interests dating back to the 19th century. Cultural ties and raw materials still matter, even in the technological age of the 21st century. Genuine entry into the European economic mainstream will be far more difficult than simply stepping through the front door of the eurozone. And the very act of becoming a more ordinary economy without the special claims of the past itself puts more, not less, burden on reform and performance at home. Such is the challenge of success.