Greek debt crisis strains the EU’s commitment to European solidarity

Greek Centre for European Studies and Research

A.D. Papagiannidis and Nikos Frangakis
The gravity of the debt crisis and the pain experienced due to the EC/ECB/IMF sponsored stabilisation package for 2010-2014 presently dominate public discourse. Drastic cuts to salaries and pensions, combined with higher taxation are measures to be faced by the vast majority of people in Greece. It is to be expected, though, that the questions raised by limited and hesitant European solidarity in face of the onslaught of the financial markets will lead to deeper doubts as to Greece’s membership in future.[1] In late 2009 and early 2010, the extent of Greece’s budget deficit and the feeling that statistical data were intentionally fudged made for extremely negative comments on the part of EU authorities and for increasing uneasiness on the part of several European capitals; still, the new Greek Government initially insisted that a plan to bring back growth (through assistance to lower-income groups) should be applied, with moves such as cutting back public expenditure and raising taxes coming a distant second. Even more importantly, public opinion was largely supportive of this stance, while “Brussels pressures” (as well as the downgrading of Greek paper by the markets) were viewed as something close to unwarranted external intrusion in national policy-making.
Only the rough ride that Greece experienced in the financial markets – with the spreads for Greek paper surpassing 600 basis point over German Bunds and with Greek banks risking being shut out of ECB financing following the Greek debt downgrades by Fitch, then S&P, and finally Moody’s – brought a belated change of attitude. The Greek government found itself in urgent need of Brussels/EC and Frankfurt/ECB support, not so much to reassure the markets but to simply survive. So, when the support mechanism of 110 billion Euros had to be pieced together under extreme market pressure in order to avoid a Greek default in late March, with a severe stabilisation programme agreed upon by Greece with the EC/ECB/IMF – a front-loaded programme of extreme severity, calling for a 10 percent or more cut in public deficits over 3 years and for deep structural changes mainly in social security and the labour market – public opinion was stunned. The very survivability of Greece’s political system is under question, especially so if the implementation of the stabilisation programme were to call for incremental spending cuts/tax increases in fall 2010.

The overall series of national positions taken in the EU on solidarity with Greece – culminating in the protracted process to bend Germany’s unyielding stance – has given to Greek public opinion food for thought. The fact that the stabilisation programme, conditional to which EU/IMF financial support was provided, was only supported by the governing party (PASOK) along with the far-right LAOS, while the main opposition party (center-right Nea Dimokratia – ND) voted against it (with the sole exception of ex-Foreign Minister Dora Bakoyannis, who then promptly quit ND) along with the Communist Party (KKE) and (ex) Euro-Communists (SYN-SYRIZA), should also be noted. Whatever the exact future of the stabilisation effort in Greece, the country’s “European identity” will probably be radically redefined in the process.

[1] The literature regarding this matter is already immense, at least in terms of reports and articles published daily in the Greek and international press and the electronic media; it is therefore hard to summarise it in this paper. See, for a very brief overview, N. Frangakis: Greece is not just Europe’s black sheep – it’s truculent, too, in: Europe’s World, Spring 2010, pp. 164-165.

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