The crisis we are facing today constitutes an existential threat for both the Eurozone and the EU. It is obvious that no easy political or economic remedies exist. Although the crisis emerged around 2008 and escalated in 2010, its roots go back to the formation of the common currency: yesterday’s inadequate institutional architecture and the national mismanagement especially in the countries of the periphery, continues to haunt the policy decisions of today.
It is not possible to overcome the crisis without a political union. The current financial crisis should be addressed with a single coordinated strategy and the European Union needs a political union as much as it does an economic one, if not even more so.
European political union would be based on four pillars:
The EU needs a central coordination of public finances. As Mr. Van Rompuy stressed out in his report in June, the EU needs:
Finally, I believe it needs wide European Investment Project concerning the cooperation of the PPP (private public partnership) for the major networks of:
A famous quote is attributed to Antonio Gramsci, ancient leader of the Italian Communist Party: “The Old is dead. The new cannot be born. This is the age of monsters”.
For many, Greece’s “age of monsters” began with the result of its recent elections on the 6th of May which saw the electoral collapse of the two main Greek parties – the Socialists and the Conservatives, the entry of the “Golden Dawn” Neo-Nazi party in Parliament and the significant rise of the Radical Left SYRIZA party to the second spot. The inability of the parties to form a viable coalition, especially due to the unwillingness of the radical left, led to new elections that are planned take place on the 17th of June.
However, it is important to properly understand what led to this electoral balkanization.
A short answer is that, in effect, Germany chose to forsake its own past. The Treaty of Versailles, ratified after the end of World War I in 1919 created a dynamic that produced recession, hyperinflation and political instability for the main losing party, Germany. The treaty carried within it the seeds of its own undoing and effectively led to the rise of National Socialism in 1933. After the end of World War II the lesson from the Versailles Treaty was very clear for the Allies. The Marshall Plan, conceived by the American government, led to the reconstruction of Europe and in a matter of decades, Germany was, once more, the locomotive of European growth.
Europe is at the most serious of crossroads. Usually, at times of crisis, it rises to the occasion and provides political answers to pressing problems. But today, the Eurozone looks broken and the question arises: is there the will to save it? And if there is the will, is there the way?
There is talk of a bond market that no longer functions, a banking sector with interbank lending virtually at a standstill, entire zones which are cut-off from credit, a run by global investors and an alleged, quiet bank run by citizens. Credit is on the verge of disappearing altogether, confidence is low and decreasing, and governments are forced to adopt austerity measures which, in turn, fuel all the above, increase social tensions and strengthen opposition forces based on populism and opposition to rationalization of finances.
The financial crisis hit the European shores with clear adverse effects on production, GDP, employment and growth. The eruption of the Greek crisis threatened to hit the EU right at its foundation. It tested the endurance of its institutions and the limits of its political will.
It raised questions of trust and betrayal, effectiveness and free-riding, and even on the strength of the Eurozone. But, I believe that the Greek crisis, and European response to it, highlighted all kinds of shortcomings but also brought to the fore many of Europe’s strengths.
The Greek financial crisis exposed the Greek governments’ chronic deficiency in exercising an efficient economic policy. It exposed its shortcomings both in dealing with important obligations that stem from the country’s participation in the EU’s Economic and Monetary Union, and in exploiting related opportunities for economic growth and restructuring. We were faced with chronic problems of mismanagement, lack of transparency and decreasing competitiveness.
It is a great joy to be here today, at the Friedriech Ebert Stiftung Institute in Berlin, in my new function as Greek Minister of Development, Competitiveness and Shipping.
This crisis that we are all facing today constitutes an existential threat for both the Eurozone and the EU. By this point, it has been established that no easy political or economic fixes exist. Although the crisis emerged around 2009 and escalated in 2010, its roots go back to the formation of the common currency – and yesterday’s faulty institutional architecture continues to haunt the policy decisions of today.
As you well know, the Private Sector Involvement Agreement and the discussion on haircut of the Greek debt have been almost completed. The question now for Greece is the one exactly put on the title of this panel: jobs and growth. Austerity is necessary in difficult times in terms of eliminating wasteful spending and creating a leaner and more capable state --- however it can achieve few things without a clear plan for growth.
If Charles Dickens was invited to write a novel for Greece today, he would probably probably start by combining the titles of two of his most renowned novels and second, he would start the writing of the story from the title:
“Hard Times and Great Expectations”