Papandreou's Three Myths About the Greek Financial Crisis

Former Greek Prime Minister George Papandreou outlined what he called three popular "myths" about the crisis in Greece.

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Greek Prime Minister George Papandreou addresses to the Parliament in Athens, Sunday, June 19, 2011. Opening a three-day parliamentary debate that will culminate in a confidence vote late Tuesday, Papandreou blamed Greece's bloated state sector for bringing the country to its knees and has vowed to effect deep changes.

Hannah Gais is assistant editor at the Foreign Policy Association. You can follow her on Twitter @axi0nestin. Robert Nolan is an editor at the Foreign Policy Association and producer of the Great Decisions television series on PBS. You can follow him on Twitter @robert_nolan

Former Greek Prime Minister George Papandreou has caused a bit of a stir in Athens over a recent series of paid lectures at American Ivy League institutions, including this week at Columbia University, where he will also lead a spring seminar series at the School of International and Public Affairs. According to news reports, Papandreou will be housed by the university in a luxury New York City apartment building where his neighbors will include the likes of Lady Gaga, Matt Damon, and Sarah Jessica Parker. But it's not just the perceived luxuries on Papandreou's lecture circuit that has some Greek and American critics riling, it's the subject matter of his professorship: the European financial crisis for which many hold him responsible.

In Wednesday night's lecture, titled, "Bailouts and Ballots: The New Challenges to Democracy and the Case of Europe," Papandreou sought to defend his record and dispel a number of misperceptions about the Greek debt crisis, a topic we explore in depth in the Great Decisions in Foreign Policy television series now airing on PBS.

Part mea culpa and part debunking of the narrative surrounding the sovereign debt crisis, Papandreou sought to shift some of the blame for the crisis on to his predecessor, Costas Karamanlis and current Prime Minister Antonis Samaras, before outlining what he called three popular "myths" about the crisis in Greece and offering up his vision for a kind of Europe 2.0.

[See a collection of political cartoons on the European debt crisis.]

Myth No. 1:  Greeks need austerity, not reform.

The need to reform ought to have been a lesson Greeks learned from the post-Cold War transitional market economies in central and eastern European countries. Greece—despite undergoing some major institutional and political changes in the 1900s, including a devastating civil war that crippled the economy and civil society, which lead to the military junta of 1967-1974—never underwent a period of perestroika or glasnost. Rather, he said, the nation has been waiting for a period of reform that has failed to materialize, while all the while corruption took root. Indeed, according to one political commentator, corruption in Greece will remain so long as times are tough and there is a stable institutional safety net. Greece today has slipped to 94th place in Transparency International's 2012 Corruption Perceptions Index, tied with countries such as Moldova, Djibouti, Colombia, India, Mongolia, Senegal, and Benin. Sadly, were such corruption properly dealt with and Greece was able to become as transparent as, say, the Nordic welfare states, it would save 8 percent of its GDP annually.  Austerity measures alone will not sufficiently address this core problem, he said.

Myth No. 2: The problem is a Greek problem, not a European one.

Papandreou acknowledged that Greece makes up for just 2.5 percent of the European Union's GDP and that its role within the European economy is a small one. Indeed, at its highest in 2008, Greece's GDP was $341 billion, less than one 10th of Germany's at $3.6 trillion. Yet, Papandreou said, more could have been done by European institutions to stave off a euro zone wide crisis, namely setting up euro bonds and increasing cooperation between European states. In fact, Papandreou claimed the crisis would have been over in 2010 had Greek bonds been guaranteed. However, he said, instead of addressing the crisis quickly and efficiently, the EU has been stuck in a political battle over the role of European institutions, pitting southern Europe versus northern Europe, and opting for austerity measures over better loan packages. Still, as he told Bloomberg News in 2012, "the structures in Europe need to be modernized" and Greece is only a precedent of the deeper problems that Europe is facing, particularly the euro zone.

[Read the U.S. News Debate: Should Greece Leave the Eurozone?]

Myth No. 3: Greece has not lived up to its commitments.

Papandreou spiritedly defended the actions of the Greek government to meet its regional and international commitments under his watch, emphasizing the reduced deficit. He also pointed out that restrictions on regulated professions were removed; the government fought tax havens and bank secrecy; Greece was named the No. 1 reformer in the Organisation for Economic Co-operation and Development; and the current account deficit is the lowest it's been since Greece joined the euro. Yet, even with those advances, unemployment rose to 27 percent in 2012 and the government is still leaping over hurdles to collect taxes.

A New Europe

Following his defense, Papandreou offered up his vision of Europe after the crisis. He proposed a new "grand bargain" for European countries that would include the creation of euro bonds, an expansion of the Erasmus student exchange program, a carbon tax regime, and more debt forgiveness. The sovereign debt crisis and subsequent austerity measures, he said, have shattered the public's confidence in the political process in general, not just in the European experiment. Riots and the rise of extremist groups on both the left and the right, Papandreou said, are the most obvious manifestations of this breakdown. And since violence will not protect or empower citizens, what Greece really needs is "a politics of trust" rather than "a discourse of fear."

[Read the U.S. News Debate: Who Is Handling Its Debt Crisis Better: United States or Europe?]

But were Papandreou's remarks sincere enough for members of the so-called "lost generation" of young Greeks to take seriously? One Greek citizen during the question and answer session asked Papandreou, "Can't you give us a mea culpa?"

"We, the Greeks, messed up," he said, "It didn't just happen in 2009, it's been going on for years, even decades." The problem, he said, was obviously not "zorba dancing and ouzo drinking" or simply a matter of economics, but one striking at the very core of Greek democracy—corruption.

Still, for those who hold leaders like Papandreou, whose linage in Greek politics goes back for generations, responsible for the current crisis, it was a tough sell. Indeed, it's quite unlikely that many Greeks will be drinking and dancing as their former leader shares his recent experiences—Columbia University calls him a "living laboratory"—on this side of the Atlantic.

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