Greek situation discussed for a long time

Luis Pais Antunes
The Greek situation and the possible consequences of the severe economic and financial crisis that Europe is facing are amongst the most discussed subjects in Portugal since our country’s accession to the European Union. Opinion makers, economic analysts and political parties spread their views on these topics on an almost daily basis. The main reason for this lies in the fact that, although there are substantial differences between the Greek and the Portuguese situation, it is common sense that the Portuguese economy is quite fragile and may be affected by the spill-over effects of financial markets’ instability in the Eurozone.
The main concern of the Portuguese authorities at the time the Greek case was reported was to highlight the differences between the two countries. This strategy – which was endorsed almost unanimously – proved to be correct, as it appears now that the said differences were recognised by the market, notwithstanding the generalised downgrade of Portuguese public debt by the main rating agencies. However, this strategy forced the Portuguese authorities – also as a result of the pressure from the Commission and the biggest member states – to adopt very strict budgetary measures, which created social instability and a significant concern about economic growth perspectives. This was only possible as a result of an agreement between the Socialist Party minority government and the newly elected leader of the main opposition party, Partido Social Democrata (PSD).
The immediate reaction to the approval of the finance package for Greece was a feeling of relief, although some considered that this could lead market speculators to change the direction of their attacks towards the Portuguese markets. But the overall opinion is that Europe was too slow in finding the necessary consensus and in adopting the required measures to tackle the Greek case with the risk of creating a very complicated situation for the Eurozone as a whole. As previously mentioned, special emphasis was put on the lack of coordination between member states, Germany, but also France, being regarded as the main responsible parties for this situation. In any case, most analysts seem to consider that the way Europe responded to the need to find a Euro(pean) solution for the Greek case was clear evidence that, mainly in times of crisis, member states still focus on national interests instead of concentrating their efforts on a global solution.
The Greek case clearly illustrated the need to strengthen the Stability and Growth Pact (SGP), in particular its preventive side, and showed that without creating instruments that take account of the general interest of the Euro area and the European Union as a whole, the future of the Monetary Union could be at risk. But the Greek case also demonstrated Europe’s weaknesses in dealing with “systemic crisis”, as it seemed too paralysed at the time to adopt effective crisis-management mechanisms.
The reform of the SGP is seen as an urgent need, not only in order to ensure greater budgetary discipline, but also to find new ways to reduce disparities in competitiveness between member states’ economies. As a matter of fact, there is some criticism as to the level of importance which is attributed to the “G element” of the SGP, considered by some as not being duly taken into consideration.
It is also worth mentioning the suggestion made by Minister for Foreign Affairs, Luis Amado, in an interview[1] for the introduction of a specific provision in the Portuguese Constitution establishing limits to the levels of deficit and public debt. But this suggestion was rapidly rejected both by Prime Minister Sócrates and the opposition parties.[2]
The idea of “a strong coordination of economic policies in Europe” seems to be quite well received in Portugal. There is a broad consensus over the fact that it is necessary to give a real impulse to the economic union and to strengthen economic governance. This is not really new as many in the past have pointed out that a single monetary policy would hardly survive without an equivalent level of coordination of economic policies.
Former Minister of Finance and current President of the Court of Auditors, Guilherme d’Oliveira Martins, strongly pleaded in favour of an effective coordination of economic policies which still do not exist in the European Union and stated that this failure to coordinate economic policies is the result of “a lack of boldness” of member states and European institutions.[3] Several voices also point to the need of ensuring a greater social cohesion within the European Union and are afraid that the reforms in progress will not take this issue in due consideration.[4]
Apparently, the key objectives which were defined by the task force on economic governance, which met for the first time on 21 May 2010, are broadly accepted. But it is common ground to say that they are still too vague and one should wait for more detailed information before coming to any conclusions. The debate on the possible solutions to be adopted only began at end of June 2010, when the first concrete measures were outlined. New penalties, either financial or non-financial, were already expected and did not raise any special concerns. The new budgetary procedure, providing for some coordination between the member states on the basis of the budget guidelines each one will have to submit by the end of the first semester, seemed to be quite well accepted.
Contrary to its predecessor – the Lisbon Agenda – the Europe 2020 Strategy seemed not to be a preferred topic for discussion, to say the least. The reason for this lies probably in the fact that everyone is paying too much attention to the economic and financial crisis, as referred by former European Commissioner António Vitorino.[5]
Social and economic priorities for the next ten years in terms of economic growth and job creation are crucial for the future of the European social model, Vitorino says. But the fact is that very few seem aware of the importance of this debate. João Cravinho, former Minister in several Socialist governments and currently member of the board of the European Bank for Reconstruction and Development (EBDR) has recently made severe critiques of the lack of debate on the Europe 2020 Strategy in his weekly programme at Rádio Renascença.[6] He said that it is very strange that this subject is being totally ignored, including by the government. Cravinho urges the government to take the lead and to promote a great public discussion on this subject. So far, there is nothing but silence. Not even the agreement on the new strategy reached by the European Council on 17 June 2010 or its public announcement changed the situation. Apart from the news published in the press, there is still no sign of any debate.

[1] Newspaper Diário Económico, 17 May 2010

[2] Newspaper Diário Económico, 18 May 2010.

[3] Lusa news agency, 31 May 2010.

[4] As it is the case of former President Soares, cited above, or presidential candidate Manuel Alegre in several public speeches in his ongoing campaign (namely in Bragança, 19 March 2010, in the candidate’s blog).

[5] António Vitorino: Condenados a entenderem-se, Diário de Notícias, 18 June 2010.

[6] Available at: (last access: 27 July 2010).