On paper, the just-concluded Greek parliamentary elections were a triumph for investors. The leftist, populist Syriza party of Prime Minister Alexis Tsipras has been replaced by the far more acceptable (in investors’ eyes) center-right New Democracy (ND) party of Kyriakos Mitsotakis.
The ND won an impressive 40 percent of the overall vote, and a dominant parliamentary majority of 158 of the 300 seats in the new Greek Parliament, even as Tsipras and Syriza slumped to 32 percent and 86 seats in total. This dominant victory — at least at first glance — would seem to give Mitsotakis the electoral mandate he needs to desperately remake a Greek society that has endured nothing less than an economic nightmare for the past decade.
Again, on the surface, Mitsotakis is saying everything right. His electoral platform called for market-oriented structural reforms. First, the new premier pledges to cut taxes by the start of 2020. Second, the ND wants to digitize sclerotic Greek public services on the lines of Estonia’s ground-breaking reforms, making public administration faster, better and more accountable.
Third, Mitsotakis wants to remove onerous government-imposed private barriers to public businesses. Fourth, if this highly ambitious program is enacted and successfully put in place, Mitsotakis pledges to attract the desperately necessary foreign investment to get Greece off its knees and back on its economic feet.
Without delving beneath the surface, all this sounds wonderful. And yet context is everything in political risk analysis. Mitsotakis’ famous victory has less to do with his platform and much more to do with being the beneficiary of the growth-starved Greek electorate, tired of both Syriza’s empty promises and a decade of depression. For the Tsipras government was, in retrospect, undermined fatally in August 2015, when the premier saw his domestic credibility vanish as he and Syriza endorsed European Central Bank (ECB) austerity measures to enable a third $94 billion bailout.
Even though it is undoubtedly true that some of these economic prescriptions were absolutely necessary, in ignoring the referendum and forcing Tsipras to cravenly cave in to German pressure, the EU showed itself to be more about Germany and the other great powers protecting their interests (in this case those of the feckless German banks that had so unwisely loaned the Greeks money) rather than heeding the popular will of its members. Sham democracy indeed.
What every side in the Greek tragedy can agree on is that the country has been in an economic nightmare since October 2009. That was the month that then-newly elected Prime Minister George Papandreou dramatically revealed that, contrary to Greece’s own accounts up until that point, the country’s budget deficit was actually a whopping 12 percent of gross domestic product (GDP), which was later revised up to 15 percent. This bolt from the blue prompted credit ratings agencies to downgrade Greek sovereign debt to junk status by early 2010.
Even after all these years, it is simply indisputable that the tough economic remedies forced on Greece by Germany, the EU and the ECB have yet to really work. It is true that, in August 2018, Greece finally exited its third bailout program, and it now owes the EU and the International Monetary Fund (IMF) an unimaginable $330 billion. Greek public debt remains — after the three bailouts designed to “help” the country — an Everest-like 180 percent of GDP, while Greece has solemnly committed to running budget surpluses until the highly improbable year of 2060. Overall, the Greek economy is fully 25 percent smaller now than when the crisis began.
Even in 2018, while GDP grew at 2.1 percent (it has since slipped to 1.3 percent year-on-year in the first quarter of 2019), overall unemployment remained at the depression-era level of 20 percent, while youth unemployment rose to a stratospheric 40 percent in March 2019. Perhaps most devastatingly of all, the IMF continues to predict that Greece will require further bailouts before its economy can be made sustainable once again.
Frankly, the IMF’s prescription passes Einstein’s test for insanity — to advocate doing the same thing over and over again and somehow expect a different result. The result here is clear: The EU has destroyed Greece beyond repair, making it an economic colony even as it has decisively failed — and here of course the Greek people are also hugely to blame — to salvage its economy.
Tellingly, many of Mitsotakis’ hoped-for economic reforms are subject to IMF and ECB overlordship and review before they may go into effect. Europe, economically sclerotic, is losing even the veneer of democratic governance. Greece has been ruined beyond repair, both economically and politically. Who is next?
Dr. John C. Hulsman is the president and managing partner of John C. Hulsman Enterprises, a prominent global political risk consulting firm. He is also senior columnist for City AM, the newspaper of the City of London. He can be contacted via www.chartwellspeakers.com.
