The 2009-19 Greek adventure seemed to have a special place in German Chancellor Angela Merkel’s farewell reflection. Quite reasonably so. The crisis, or more precisely the difficult management of the consequences of the crisis that had been incubating for decades before becoming unmanageable in 2009, coincided with about two-thirds of Angela Merkel’s total term of office at Germany’s helm and, de facto, that of the European Union.
Moreover, Merkel experienced the whole Greek affair from beginning to end. She was in office during the same time as all the Greek prime ministers of the 2005-21 period. She obviously remembers the discussions on the fiscal and macroeconomic data of the 2005-09 period and the initial pan-European measures of 2008 that were taken under the illusion that the entirety of the eurozone member-states could avoid the vicious cycle that transformed the financial crisis into a fiscal crisis and vice versa. In a period spanning less than two years, this proved to be a false hope, unfortunately.
As chancellor, she was called upon in early 2010 to manage the overturning of the fundamental certainties of the Monetary Union and the Stability Pact, the fundamental problems of turning the basic choices and objectives of fiscal and monetary policy into strict legal rules, armed with the supremacy of the rules of the legal order of the EU. Moreover, she was called to manage the “moral dimension” on fiscal discipline, courtesy of the subordination of the eurozone to the political framework and the framework of values of a Protestant view on the economy. The public debt of member-states was perceived not only as an economic quantity, but also as a sin, according to the connotations of the German version of the Lord’s Prayer.
When Angela Merkel assumed her duties as chancellor, the institutional structure of the Union and its economic governance in particular, had already been shaped and were built for “normal conditions of temperature and pressure.” The mechanisms for surveillance, early warning and crisis prevention were inadequate, and the mechanisms for managing fiscal and financial crises were virtually nonexistent.
My reading is that the chancellor expressed her deep disappointment at the inability of the European Commission to address and combat the issues at hand in a timely manner and took the fundamental decision – agreed upon by her counterparts without resistance – to place the Greek case under the political control of the Eurogroup – i.e. practically the governments with a fundamentally intergovernmental logic and under the technical control of the European Central Bank and especially the International Monetary Fund, which was installed in the institutional heart of the eurozone.
As far as Greece is concerned, Angela Merkel – but not just the chancellor herself – was also heavily influenced by the negative stereotypes that shaped the fiscal, macroeconomic, political, social and anthropological profile of our country. From Greek statistics, the falsification of fiscal data to achieve eurozone membership status (which was then linked to the expediency of Italy’s accession), corruption (with German companies as the instigators in most of the infamous cases nevertheless), the incomprehensible for the Germans (who failed with the socially based shipping companies) “miracle” of the size of Greek shipping and its tax treatment etc.
On the other hand, despite the magnitude of the negative consequences and collateral damage, Angela Merkel’s contribution was salutary and catalytic in a crisis management that evolved along with the crisis and therefore imposed fragmentary, step-by-step decisions, with an empirical method and a conservative mentality – i.e. along a line that aimed to avoid the diffusion of the crisis and the eruption of a strategic/structural hazard for the eurozone. The defeat of the political forces that remained faithful to the policy of responsibility and did not make the easy choice of the policy of their irresponsible so-called conviction is a great collateral damage. But Merkel did not impose this – the Greek people chose it in January 2015; they chose it for the second time with the overwhelming “no” in the July 2015 referendum, and for the third time in September 2015.
Merkel is now reflecting on the Greek experience of 2010-19, but I fear that domestic self-reflection ranges from cowardly to nonexistent.
Greece remained in the eurozone, the total volume of European aid is impressive, institutional mechanisms for crisis management were formed along the way, and, finally, the drastic twin intervention in Greek public debt was implemented with the involvement of the private sector (PSI) and the much larger involvement of the “official” sector (OSI). This intervention has brought Greece this far and will accompany the country for many years to come, providing sufficient fiscal safety.
Of course, everything could have been done more quickly, more efficiently, more gently, with less impact on the cumulative recession, on unemployment, on incomes, on social cohesion, on political attitudes, on the image of the EU in Greek public opinion. With less reinforcement of the easy, “antisystemic,” demagogic, identitarianist, populist current. With less impact on European democracy, which often fears the possible results of elections and referenda in member-states. The crisis of the 2010s was met with the solidarity of the European partners, though mixed with “disciplinary” and punitive attitudes, without taking into account political/democratic dimensions and medium-term consequences. The Merkel-Sarkozy statement at Deauville in the autumn of 2010 was a manifestation of the contradictions of the European directorate faced with novel situations.
We always pointed out all of the above, we backed our statements, providing substantial reasoning. We have always called for a holistic, long-term and forward-looking approach. I did this personally on numerous occasions over the five tough years from 2010 to 2015, as I was constantly present on the frontline of three different governments. We were constantly raising the notorious issue of multipliers. We were highlighting the obvious correlation between debt and GDP. We were asking for debt sustainability studies to be read properly and for the interventions that had already been agreed and concluded to be taken into account. A highlight that has remained in the collective memory is the confrontation with the “troika” in my office at the Ministry of Finance in early September 2011. I interrupted the discussion on additional “blind” fiscal measures under the first program, which had already collapsed and been abandoned, while the crucial thing was to implement the second program, which had been actually agreed on July 6, 2011 between Wolfgang Schaeuble and myself in Berlin and politically approved by the European Council on July 21, 2011. This is exactly what happened.
Greece’s major problem was then and always will be its credibility, the actual implementation of what was agreed, the relentless internal front, the man-eating mania of those who feel that they do not have the burden of power, that they are not in charge of making difficult and damaging decisions, while having no qualms about joining the policy they had denounced at the first opportunity. Behind this lies the phenomenon of society’s short memory. Its natural tendency is to return to “normality,” to escape from any regime of extraordinary restrictive measures, not wanting to hear about difficulties and possible perils.
I was not Angela Merkel’s counterpart during that tumultuous period, but I was present at many difficult meetings, most notably the one in Cannes on November 2, 2011. She is approachable and polite, but firm in her opinions. I always had the feeling that everything we discussed with Wolfgang Schaeuble was already known to her and had her approval. This is also evident from the result. She was always very informed on the Greek political landscape, on the role of individuals, on the correlations of power. For her, dealing personally with a critical issue or intervening in order to deal with an impediment was always a possibility. Behind the referral to the troika and the Eurogroup, there was always room for political rapprochement and what we discussed bilaterally with the German side was also valid within the Eurogroup, in contrast to what happened with other partners.
In Angela Merkel’s overall political reflection, I suppose the Greek case is also linked to the EU’s ability to react quickly and effectively to the pandemic-induced financial crisis: the general escape clause from the Stability Pact, the extension of quantitative easing despite the German Constitutional Court’s decision, the Next Generation EU (NGEU) fund and the issuance of common debt owe a lot to the “Greek Laboratory.”
Leaving the Chancellery, she is much more likable to Greeks and certainly wiser. The question is whether we will also just keep liking our collective self here in Greece or whether we have become wiser ourselves.
Evangelos Venizelos was Greece’s deputy prime minister and minister of finance from 2011-12, deputy prime minister and minister of foreign affairs from 2013-15, and PASOK president from 2012-15.