The future ain’t what it used to be.Facets of the Crisis (economic, social and political) impact and responses developed in the Greek case

Nikos PapadakisAssociate Professor & Head of the Dept Political Science

University of CreteMember of the UNDP/ RCPAR Advisory Group

1st Roundtable in the framework of the Regional Forum on Governance Reforms in the aftermath of the economic crisis - taking stock of crisis impact and responses

Chisinau, Moldova, 6- 7 July 2010

I. What went wrong? Sketching the historical background. Some insights on State and Politics

II. Prometheus boundThe fiscal crisis: aspects, facets and figures

III. Being imbalanced, getting unstable: back to politics

IV. Is there any future left? Policy proposals on PAR

and Governance.

I. What went wrong? Sketching the historical background. Some insights on State and Politics

On the historical background of politics and political culture of the 3rd Hellenic Republic

Preliminary remarks on the Greek Polity

- Political System subjected to a Presidential Parliamentary Democracy - Focal constitutional point: The popular sovereignty as the corner stone of the polity:

On the historical background

- Essentially monocultural state building and recent (2 decades) transition to multiculturalism-(ex?) positive stance vis-à-vis Europeanization and European integration (Lavdas & Papadakis 2003)-Europeanization as a key-challenge, consisting of interactions between European and domestic political and socio-economic patterns,

…..but on the other hand-Strong clientelism tradition (combined to patrimonial modalities), affecting both active politics and patterns of governance - a stillborn civil society subjected to power politics and protest discursive practices

Greeks have traditionally expressed an interest in politics and at the same time used to appear to possess a rather positive view about/on politics (in fact, much more positive than the view taken by respondents in other Southern European states – Italy, Portugal, Spain- see Lavdas & Papadakis 2003), however combined with comparatively low levels of overall citizen satisfaction (see Demertzis 1997: 107-121, Contogeorgis 1998).

• According to a rather old but still existing explanatory framework, the rather exceptional, superficially controversial (even underdeveloped) conception of the public character of the political (namely the “privatization of the public’’- see Charalambis & Demertzis 1993: 223) can account for the fact that ‘‘Greek political culture is characterized by a merging of the public and the private […] That is why the Greek [interest in politics] is really not paradoxical. Provided that politics is regarded in private terms, there is no antithesis between high political interest and low political efficacy’’ (Charalambis & Demertzis 1993: 224).

Tradition proved powerful enough: Since the very first state-building period, the tendency towards a stronger process of state-building pushed for a centralized state with strong executive and rationalized administrative structures prevailed over the retaining of power to localities and subsequently led to more centralized governmental structures.

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State interventionism and political culture

It can be argued that the particular mix of individualism and decreased state interventionism which came to characterise developments in various West European contexts failed to become the dominant pattern in the development of the modern Greek state (see Lavdas & Papadakis 2003, Lavdas 1997, Papadakis 2003).

Despite the (positive) impact of the “arise” of the 3rd Greek Republic (which altered the whole context) and the subsequent empowerment of tolerance, the constant institutional building, the rapid Europeanization, the mixture of state interventionism and clientalistic politics, the changing stimuli (see Lavdas 1997, 2000b) and the diverse conceptions of politics (including distributive coalitions in Olson’s terms) formulated new discursive practices and constituted a complex and multi-layered political culture in Greece.

On all these grounds, civil society has never developed enough means to operate as a counter-balance mechanism to distorted administrative practices, while “morally directed individual economic actions” (in Amartya Sen’s terms- Sen 1987), encouraging the emergence of “digressive” types of moral action, as the epicurism (welfarism- see Gravaris 1999) were usually undermined by bureaucratism and lack of institutional trust combined to established and legitimated corruption. Greeks kept on working harder and harder, salaries were practically “frozen”, a lot of success stories contributed in the overall development, new and promising institutions were built….yet bureaucracy wasn’t defeated, the State didn’t change, corruption survived, evidence-based policy making was never established as the prevailing policy-planning paradigm, modernization got delegitimized, PAR is still in quest and the economy was de-stabilized.

Is the crisis (apart from being a nightmare) Hellenic Republic’s last chance?

The State reform: a brief history of failures

Huge, complicated and eminently centralized State…. ….justifying the constant request for a major state retreat and an

efficient public administration reform (dozens of missed chances)….

….with not any remarkable success. On the contrary, complicated legislation and regulatory framework, too many laws and overlapping control-mechanisms (i.e. a powerful but bureaucratic Audit Court usually acting as a sort of Supreme Court) kept on increasing the administrative costs and undermining any attempt to reduce bureaucracy and empower simplification

An un-sufficient Local State (high rates of corruption), intermediated by interest politics, power politics and institutionally and operationally depended on the Central State, its patterns and modes of governmentality

The generators of regulations in Greece

Source: Stefopoulou, Ministry of the Interior, 2008

What about the human capital in Public Administration?

Lack of needs-assess tradition related to any systematic public-servants’ reskilling

Bureaucratic, complex and sometimes inefficient institutional framework concerning HRM and HRD

Attachment in the hierarchical relations and entrenchment of duties and competences, combined with an incomplete development of personnel as a result of too little use of incentives, job descriptions and management by objectives (see Moustakatou, High Level AG for PAR, 2008),

Low effectiveness of training to support the structural and institutional changes in PA

No tradition in management by objectives and performance appraisal (linked to wages and other incentive)

II. Prometheus boundThe fiscal crisis: aspects,

facets and figures

Preliminary remarks

The Greek fiscal crisis is the outcome of a combination of high debts and fiscal deficits.

Greek economy is considered probably the most complicated and encumbered case, among the South Economies (Portugal, Ireland, Greece and Spain) troubling EMU.

Searching for the causes of the recent fiscal crisis, one could share Domenico Lombardi’s argument that the Greek crisis was triggered, but not originated “by the recent global financial crisis….Greece's membership in a currency union left the country with no monetary and exchange rate policies to manoeuver, which further escalated concerns among market participants” (Lombardi 2010).

Of course, both the assymmetries and palinodes within EU and EMU regarding the mode and the extent of support to the Greek economy (mainly because of the German resistance to vast majority’s approach to the Greek case and its initial request for harsh penalties to EU aid recipients such as Greece) and the subsequent inability of the euro area countries to agree early enough to a rescue-plan deepened the debt-crisis and the speculative pressures to the Greek economy. The “lack of timely action underscored early European reactions…while the euro area partners showed little willingness in the beginning, to come forward with help” (Lombardi & Mark 2010) made the bailout-danger more explicit than ever.

The Greek fiscal crisis in numbers: leading figures

I. The estimate about Greece ’s public debt: €300-320 billion,

equal to 115% of GDPEntering the EMU the dept was up to 106,6% (but decreased at 2003 to 102,4%). The national budget spending versus income produced proves a major imbalance. The debt that accumulated now reflects that the country owes far more than it is earning.In addition, the fact that the Greek economy is mainly based on the public sector ends in inelastic public spending and major difficulties to cost-cutting (the Public Sector represents 40% of GDP, while tourism and maritime are a vital-source - since Greece attracts more than 16 million tourists each year, contributing 15% to the GDP, while the maritime sector generates more than 7% of the GDP)

III. Over the next two years (2011 and 2012), €130-160 billion will be required

for debt repayment.

III. Deficit revised was up to13,6% (beginning 2010)but it decreased 38,7% during the period January- May

2010

IV. Unemployment: The rate is increasing (still much more less than the Spanish case but it keeps on increasing):

unemployment rose to 11,7%600.000 unemployed (we’ ll back on this issue)

The Greek fiscal crisis in numbers: leading figures

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The debt crisis in Greece threatened the stability of the European financial system. In fact, a sufficient reaction to the Greek debt crisis became a stake directly related to the self-preservation, even the survival, for the entire EMU. A supportive financial mechanism was developed by the EU, the European Central Bank and the IMF in order to prevent the Greek economy from total collapse.

Greece will be paying an interest rate to the IMF and the other euro area countries for the EUR 110 bn (that is, about $145 bn) package that will be disbursed in a three-year period starting from May 2010.

On April 23, 2010, the Greek government requested that the EU/IMF bailout package (made of relatively high-interest loans) be activated. IMF’s responded "prepared to move expeditiously on this request". The size of the first bailout-package was €45 billion (Bloomberg 2010). Despite the fact that the Greek debt rating was decreased to BB+ (a “junk” status) by Standard and Poor’s (27 April) and the “responding” decline of the stock markets worldwide and the Euro currency to this announcement (BBC 2010), the activation of the bailout-package and the enactment of a series of measures by the Government provided both Greek economy and euro zone with a substantial relief. What has also followed, was an almost 1 trillion financial security package, outlined by EU for MS economies-at-risk.

The new Greek Government was forced to take “drastic austerity measures” (Brookings Institute 2010). These measures contributed in persuading the last remaining holdout (namely Germany), to sign on to a 110 billion euro bail-out package for Greece.The abovementioned measures include on the spending side,• decrease on public sector salaries and raising of the retirement age,and on the income side, • increase in taxes and major changes concerning the tax-legislation

and the subsequent status-quo, mainly aiming at confronting tax evasion and reducing relevant privileges.

Additionally, the new Greek Government has already planned and proceeded in implementing major structural and institutional reforms concerning the Public Administration and the Local State, towards the rationalization of the State- operation, the active decentralization of the State, the promotion and establishment of transparency and efficiency in many aspects and facets of the Public Sector as well as the enhancement of measurable productivity.

Coping with the Crisis impact: Austerity

Measures and Structural Reforms

Remarks on the social impact of the crisis- the unemployment factor

According to the National Statistics Service, Greek unemployment soared during the first three months of 2010.

The state of play regarding the diverse parameters of unemployment is highlighted on the following table.

The social cost of unemployment rate’s increase is inestimable, due to the multifaceted nature of the relation between unemployment, social exclusion and social disadvantaged groups:

The more vulnerable a group is, the more exposed to the unemployment-risk it gets. People entering the labour market for the first time, women, long-term unemployed, people looking for a job for more than one year, social disadvantaged groups, young people, are those mainly affected by the ongoing labour-market crisis.

TAXONOMIC CATEGORIES FIGURES REMARKS

1 Unemployment rate (end of Q1 2010)

11,7 % According to other estimations rose to 12,1 %

2 Unemployment in total numbers 586,767 (people in Greece are currently unemployed)

3 Increase within a year 25,8%

Female unemployment 15,5%

4 percentage of newly unemployed people (was

23.6% It concerns those people who entered the labour market for the first time in the same period 2010)

5 percentage of long-term unemployed - or the percentage of people looking for a job for more than one year

44,6% Higher than ever in the recent history

6 Youth unemployment (15- 29) 22,3% Comparatively extremely high

7 Youth female unemployment 27,4% Deepening the gender-imbalance and undermining any gender mainstreaming initiative

III. Being imbalanced, getting unstable: back to politics

In the aftermath of the Greek fiscal crisis, the current political discourse is dominated by the impact of the crisis and the patterns for facing it, while the public sphere is dominated by a generalized criticism against the political personnel, triggered by part of the mass media and contextualized in

Poll: Citizens on the Crisis

Source: Kapa Research & “To Vima” (4 July 2010) http://www.tovima.gr/default.asp?pid=2&ct=32&artId=341308&dt=04/07/2010

On the other hand, the majority seems to understand and agree (to a certain extent) the necessity for the austerity of the measures taken by the Government (49%) and keeps largely trusting the Prime Minister Giorgos Papandreou.

anger; 35,5

dissapointment ; 33,3

fear; 21,1other; 10 anger

dissapointment

fear

other

fear, anxiety and lack of trust and confidence in the political system.

Divided we fall….Confidence in the political system, major political parties and political personnel is getting rapidly deconstructed:

52% never trust governments in Greece, while40% trust them only partially and occasionally

(according to a Public Issue-Poll on “Institutions & Political System”, recently conducted and published in the newspaper Kathimerini- 13 June 2010http://news.kathimerini.gr/4dcgi/_w_articles_politics_1_13/06/2010_404433)

The political-opportunity structure opens again (in Charles Tilly’s terms), new challengers raise their issues, independently on the systemic patterns, and subsequently symbolic and corporeal recourses are mobilized (proving new-Institutionalism approach in such cases): 72% ask for an extended “refresh” of the political personnel

(according to another recent poll, recently conducted by Pulse- 13/ 06/ 2010)The blame for the crisis and its social impact is willingly attributed to the relationship between politics, interest groups and (established) corruption within the State and the Public Sector:

65% believe that “corruption in politics and state is always too extended” while

72% argue that the most direct cause for the crisis lies on the use of the “public income/money which was traditionally wasted, because of corrupted or inefficient politicians (according to the abovementioned poll by Public Issue)

…..united we stand (?) Within such a context, who is

gaining in popularity, power and positive political visibility? The governing socio-democratic party (PASOK) still rules the polls, while citizens seem to trust the Prime Minister.

But on the other hand, according to recent (June 2010) polls, the two Greek leading parties can count on the support of just about 40% of the voters, while 8 months ago they got 77,4% in total. In addition, smaller parliament parties do not increase their power, not even their popularity. Who’s winning then? In systemic terms, no one actually

SYRIZA

PASOK

Communist Party

New Democracy

0

5

10

15

20

25

New Democracy Communist Party LAOS SYRIZA

Obviously, the fiscal crisis is resulting in a multi-parametric social crisis and it is reproduced as both a representation and legitimization crisis….. Within the above-mentioned context, the major challenge is the one related to the actual demand for an extended and multi-faceted reform of the political system, the electoral legislation, the state itself and undoubtedly the mode of governenance. Expressis verbis governmentality per se….

The Greek Prime Minister has already undertaken the mission to proceed in structural reforms, aiming at fostering transparency, enhancing the Local State, increasing accountability, eliminating corruption and decentralizing the State. Two of the major reforms, based on new Law-acts (Kallikratis on the Local Administration and “Diaygeia” on transparency and accountability) are explicitly aligned with the abovementioned promise.

IV. Is there any future left?

Policy proposals on PAR and Governance.

Seeking for a paradigm shift:lessons learned, recommendations developed

On all these grounds, the actual stakes for the ongoing Greek PAR are crystal clear: - to meet citizens’ needs, - to contribute in combating corruption, - to prevent Greece from costly compliance failures, - to relieve citizens from administrative burdens, - to improve quality of public policies and to fill in the implementation gaps and - to build confidence between the State and the Citizen.

Measuring the cost of business start-up (bureaucracy vs effectiveness)

The above-mentioned regulatory status quo is under reform at the moment.The reform promoted by the Ministry of Economy and Competitiveness moves towards simplification and cutting of the administrative costs

Source: Stefopoulou 2008

Developing crisis (effective) responses, what is actually needed is a smaller State and a more flexible, rationalized and operational, Public Administration and a transparent operation of Public Services. These presuppose:

- a less complex regulatory framework and respective institutional arrangements (focusing on reducing administrative burdens everywhere and strengthening the Local State):i.e. The “Kallikratis” new regulatory and operational framework, redraws the map of Greece's local government including a new structure for the municipalities and regions, that are becoming fewer in number and covering a larger area, having more powers, funding, and staff in order to gain in efficiency, transparency and openness to society". The plan foresees municipalities being be cut down to 333, or 343, while prefectures will be abolished and replaced by 13 peripheries.

- Initiatives to re-build the operational balance between executive and legislative, aiming (among others) at filling in the implementation gap in key-areasi.e. The Government has recently presented and the Parliament voted the new Law- Act on Pension System (accompanied by the reform on labour market and relations) in order to “re-build” the pension system. It aims at making the debt-ridden country's pension system more rational and ensure its long-term viability.

……- new patterns of institutional building combined to capacity building- extended use of e-governance (focal-point of the ongoing reform process by the Government)-better regulation aligned with procedures-simplification -enabling benchmarking & performance budgeting, while demising unsustainable and insufficient norms -change of government's architecture and operation, aiming at improving inter-ministerial coordination and fine tuning in policy planning and implementation - policy improvement based on impact assessment and external support in these initiatives (yet policy and social coalitions are rather difficult to achieve, because of the current overall political status)

Could such goals be met within the present context? Conditio sine qua non is, among others, a more rationalized public sphere, the establishment of horizontal consensus within society (where the main prerequisite is immediate outcomes produced by some of the abovementioned policy- initiatives) a new electorate legislation reducing MPs’ dependence on media and interest groups, clear regulations against corruption, initiatives towards the strengthening of civil society and a new set of check and balances between the central state, the local state and the social partners (based on an effective interface between public consultation and decision making process)

References

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…..thank you for your kind attention