Loan culture

People in the know were hardly surprised by the findings of the government’s public deficit review. The problem of public finances, which first appeared in Greece’s postwar history, with massive budget overruns in the early 1980s, never really came under scrutiny. In fact, Socialist mismanagement helped shape a new political culture. Borrowing was elevated to a fundamental tool of social policy while a loan culture was instilled in society. The body politic was engulfed in a wave of populism and consumerism gripped society as it was driven by a fake climate of euphoria. Many saw the State as a bottomless well of benefits, a conviction that prompted a wave of social demands. Inevitably, deficit and debt figures skyrocketed while occasional bids to put the brakes on spending were in vain. A first attempt in 1985 fell through when the government overcame foreign exchange worries. The stabilization campaign and the «We consume more than we produce» slogan soon gave way to former Finance Minister Dimitris Tsovolas’s lavish handouts. A second initiative in the early 1990s made the problem known to the broader public but the results were disheartening. The Socialist switch in the 1994-1995 period – expressed in Andreas Papandreou’s famous saying that «either the nation will eliminate the debt, or the debt will eliminate the nation» – was short-lived. From then on, governments tried to disguise the swelling crisis. The loan culture became a default political policy. The new conservative administration is faced with a dual populism-borrowing culture. We shouldn’t delude ourselves. Replacing this mentality will take long and painstaking efforts. If the government wants to change the mentality of people and politicians, it will have to enforce new policies and far-reaching reforms.