During the first decade of this century, Greece felt like a country where things were happening. Businesses were flourishing, the headline economic indicators were rosy and Greece was a proud new member of the core of Europe. The 2004 Olympic Games in many ways epitomized a unique way of Greek achievement.
There was perhaps a way of doing it in the rest of the world, but, the narrative told us, we Greeks operate under the rules of our own domestic Greek reality. The warnings that come from the outside do not apply to us, they are foreign, like those of the Trojan princess Cassandra, the original foreign doom-and-gloomer. We Greeks will always find a way to make it work, we have the genes of “polymichanos” Odysseus.
This narrative (mythos) overplayed the virtues of inventiveness, “filotimo” and putting our best foot forward in adversity, and downplayed the vices of minimal coordination, of rushed half-finished jobs, of excessive above and below the line costs and of no plan for the day after. The core belief of the narrative was that Greece and Greeks could do it “their way” without engaging in a broader conversation with the rest of the world. There was “Greek reality” for the savvy Greeks and then “international reality” for the boring, plodding others.
When in 2008 the rest of the world stumbled and looked around, however inadequately, for the source of its own follies, Greece confidently asserted again its own exceptionalism. The two invoices (logariasmoi) for this exceptionalism arrived in late 2009 and 2010. Having lived beyond its means for a number of years (and stealthily at that), and having lost its ability to sell its wares to the rest of the world, Greece was unable to borrow not only to cover its budget deficit, but also to roll over its existing debt. The price the country paid for the hidden and publicly undiscussed twin deficits – budget and trade – was apocalyptic. The promises of the Greek exceptionalist narrative collapsed and many, mostly younger people, found their lives shattered and their expectations dashed.
In the era of the memoranda, the assertive narrative of Greek exceptionalism faded into a silent disbelief. The description of the failed Greek political economy as being due to the mendacity and sloth of the Greeks was met by a voiceless and passive shame. In continuity with its disengagement with the rest of the world, Greece either accepted the memoranda uncritically or rejected them irresponsibly. The absence of Greek engagement resulted in memoranda micromanagement. Much that can be measured changed, a certain stability returned, but the opportunity to reflect on what went wrong was missed. Fresh out of the memoranda, a new Greek voice to organize the political economy and to engage with the world has yet to emerge. Examining the two deficits and the cures for each provides some clues on Greece’s challenges and opportunities.
Curing the budget deficit is possible in only one way: austerity. When expenses exceed income and one cannot borrow to cover the excess, one has to ask those who spend to do less and those who pay to do more. Austerity means dividing the pie in smaller pieces. Its public morality is divisive between social classes, special interest groups, entrenched rentiers and generations. Its outlook toward the world is reactive, passive and secretive.
Whereas austerity is the only cure of budget deficits, curing the current account deficit is the only way to regain prosperity. Put simply, this requires Greeks to sell more of their goods and services to non-Greeks. This, after a long period of falling competitiveness, itself a symptom of failing to engage with the rest of the world, is a challenge. It requires changes of habits, acquiring new skills, abandoning jobs with no future, building credible institutions, rejecting mediocrity. The cure’s required sacrifices and commitments may confuse it with the cure of austerity, especially when they require the overhaul of economic units and institutions. The confusion is difficult to resolve because, if the cure is successful, prosperity will not necessarily return to all in the same way. Selling more to the outside world is not a cure for domestic inequality.
But unlike the zero-sum game which is austerity, successful economic engagement with the rest of the world increases what is available within Greece. One’s gain is not another’s loss. Everyone can participate in the gains of this prosperity. The core of the political economy of the country can make a change from the passive and defeatist pessimism of austerity to the promise of prosperity and the values it requires: assertiveness, openness, accountability, cooperation, resilience.
Years of proud Greek exceptionalism, followed by years of passive-aggressive acceptance of memoranda, need to be followed by something radically different. The world today is interconnected in complex ways. It will continue to evolve in challenging ways. For Greece to break free of its current isolation, it needs to engage with the world. The means of this engagement is a better and marketable Greek product. The actors who can bring this about are the residents of Greece working better together and becoming bona fide members of the global community. Rising to this challenge will see the return of lasting prosperity and legitimate national pride.
Yannis Manuelides is partner at Allen & Overy in London.