Structural considerations for a prosperous Greece
Podcast - What does Brexit mean for the UK-Greece relationship?
Podcast - The rise and fall of Golden Dawn
Podcast - What is Greece going to do with the EU's Covid-19 recovery funds?
The risk of losing control before help arrives
Podcast - Covid-19 takes another bite out of the Greek economy
Learning the lessons of Greece's toxic decade
In a recent opinion poll by MRB, those surveyed were asked who they would like to see as next Greek President if the incumbent, Prokopis Pavlopoulos is not awarded a second term. Twenty-six percent said they would like to see former prime minister Kostas Karamanlis be appointed Greece’s new head of state.
This is the man who fell asleep at the wheel when the global financial crisis hit in 2008. He famously claimed at the time that the Greek economy was “fortified” against shocks even though it had a mass of debt to rollover during the next years. In this fraught environment in 2009, he allowed his government’s fiscal performance to collapse and presented a falsified picture to Greece’s European partners, overseeing a catastrophic end to the previous decade for Greece and the sowing of the seeds for a tumultuous decade that is just coming to an end.
If anyone is looking for signs of whether Greek society is emerging from this experience any wiser, the fact that one in four Greeks is even considering the prime minister of the 2004–2009 as a suitable candidate for the presidency is a huge disappointment and does not bode well for the future. It suggests that many Greeks are not willing to punish the populism and political irresponsibility that has cost their country so dearly over the last decade.
The birth of antimnimonio
As early as the spring of 2010, when the recently-elected centre-left PASOK government was struggling to come to terms with Greece’s spectacular fiscal derailment, it became evident that the crisis would form a deep dividing line that would split the political system and Greek society, helping to build the political careers of all sorts of opportunists and snake oil merchants.
New Democracy leader Antonis Samaras sensed handsome political gains by leading a front against the agreement which Greece reached that spring with the only available creditors at the time, the eurozone governments and the IMF. The agreement, or memorandum of understanding (MoU), became the dreaded mnimonio in Greek. This gave birth to the phenomenon of the antimnimonio, anti-memorandum, a label covering a wide range of the political spectrum that raged against the deal.
In May 2010, Parliaments across Europe were asked to approve a package of loans worth 80 billion euros, to what was portrayed at the time as the “lazy Greeks” who wasted their money on alcohol and women, as a subsequent Eurogroup president intimated, in order to avert a messy default that was just days away. Samaras decided to vote against the agreement, a decision that opened Pandora’s box for populism in Greece over the last decade.
Under the guise of disagreeing with the the policy mix that came as condition for the loans, even though it was obvious that there was little room for Athens to influence policy, Samaras realised that there would be strong opposition among voters to the difficult choices George Papandreou’s government would have to make to comply with the programme. The right-wing politician wanted to lead the resistance and scoop up all the political gains.
At the time, Greek politics was dominated by PASOK and New Democracy, which had gained close to 75 percent of the vote in total and 251 seats in the Parliament formed after the October 2009 elections. The Communist Party (KKE) was the third-placed party with 7.5 percent, followed by ultra-nationalist LAOS on 5.6 percent. Alexis Tsipras and SYRIZA were a fringe protest party of just 4.6 percent, with 13 seats.
Although Samaras had failed to anticipate the transformation his tactical maneuver would bring to the Greek political landscape, at the time it seemed a reasonable assumption that he would claim most of the rewards if he became the “architect of antimnimonio,” as he later said.
At a presentation in Zappeio Hall in Athens, a venue that Samaras would use two more times to present his economic platform before he eventually become prime minister, and which became synonymous with fiscal alchemy and economic illusion, he presented in July 2010 the notion of an “inflated 2009 fiscal deficit.” Andreas Georgiou, the head of the Hellenic Statistical Authority (ELSTAT) had not even been appointed yet. Since then, he has been repeatedly accused and cleared of the claim that he orchestrated the fiddling of fiscal data to make Greece’s public finances look worse than they were.
The rationale behind the accusation was that the deficit of 2009 was intentionally inflated to make it worse than Ireland’s and push Greece into an IMF programme, allowing foreigners to impose their economic will on the Greeks and plunder the country’s wealth.
A few months later, at the Thessaloniki Expo in September, Samaras told journalists that New Democracy’s programme would completely wipe out the entire fiscal deficit by the end of 2011, in just over a year, when the MoU with the troika estimated a deficit of 2.6 percent of GDP by the end of 2014.
Given that the deficit in 2009 landed at roughly 35 billion euros, and was expected to reach 25 billion in 2010, arguing that it could be brought down to zero in just one year was beyond a joke.
At around the time of the one-year anniversary of the first bailout being signed, Samaras launched what was nicknamed Zappeio II, his main platform for “renegotiation” of the programme. He also presented a new policy mix that would boost the economy and as a result bring in close to 10 billion euros in revenues from increased economic activity, and more than 4 billion euros from savings.
The fact that the economy was tanking at annual rates of -10.2 percent and -8.8 percent in the quarters prior to his presentation did not deter him from claiming such figures were realistic or having philosophical debates about growth-inducing fiscal policy.
In the meantime, Greece entered its summer of unrest. Tens of thousands of protesters were on the streets throughout June and July of 2011, attempts were made to blockade Parliament, government MPs were under severe pressure and Papandreou was forced to seek broader consensus.
Few details are known about the telephone call that took place between Papandreou and Samaras, but it made no sense for the ND leader to jump onto a sinking ship just as his strategy appeared to be paying dividends. The government taking all the blame for the MoU’s impossible conditions.
The strategy of attrition was going exactly as planned until October 2011, when under immense pressure even from his own party, Papandreou surrendered the premiership to former central banker Lucas Papademos. Samaras was forced into a wider coalition with PASOK and, briefly, LAOS. This administration would oversee the Private Sector Initiative (PSI) for Greek debt and sign the second adjustment programme with the eurozone and IMF.
Although Papademos managed to deliver on his main objectives, Samaras could sense that, with PASOK deeply wounded, the top job in Greece was in sight. No other threats were visible to the conservative politician. SYRIZA was polling in single digits in early 2012 and was promoting some radical ideas that included using a eurozone exit as a negotiating tool for better debt terms, summed up in Tsipras’s claim that the country’s currency is not a taboo.
Samaras, though, had crossed his main red line and was now associated with a mnimonio (MoU). This left the other side of the divide to be exploited by others who could use his previous formula as a guide.
Not being able to lead the opposition against the MoU any longer, Samaras was just left with the option of promising improved terms for the MoU he had just signed along with a new set of policies, known as Zappeio III. He promised everything to everyone through lower taxes, abolition of levies, correcting “injustices”, even a tax amnesty for those who would bring their deposits back to Greece. His proposals were mocked across the political spectrum and by every self-respecting analyst.
Tsipras had the anti-MoU field all to himself and SYRIZA’s May 2012 election campaign focused on the hardships that Greece had to endure, arguing that with the country’s dignity shattered after two programmes it was time for resistance against the economic policies being dictated from abroad. Tsipras simply stood on Samaras’s shoulders.
In a shocking election result, New Democracy dropped under 19 percent, followed by SYRIZA at 16.8 percent and PASOK third with 13.2 percent. A new party that had split from New Democracy after it signed the second programme, called Independent Greeks (ANEL) managed to exceed 10 percent despite having no serious platform other than opposition to the MoU.
Neo-Nazi Golden Dawn gained close to 7 percent with its own ultra-nationalist, anti-MoU message. A group that split from SYRIZA under the name of Democratic Left (DIMAR) also managed to exceed 6 percent.
May 2012 was the worst result in New Democracy’s history. Samaras’ tactics ended up forming a wide front against the adjustment programme and streamlining all sorts of ideas that could mask the true reasons of Greece’s demise.
He was meant to be the main beneficiary of this populist approach, but it blew up in his hands.
With New Democracy and PASOK failing to agree a coalition government, repeat elections were held in June 2012. The campaign was heated and essentially presented Greeks with a choice of staying in the eurozone or taking a risk with the SYRIZA radicals.
Greeks decided that trusting Tsipras was a step too far. They opted for Samaras instead, but it was close: Nearly 30 percent against 27 percent. The result suggested that SYRIZA was now a force to be reckoned with.
The left-wing party’s antimnimonio stance proved potent, quadrupling SYRIZA’s support in just six months despite the absence of coherent policy proposals.
Its influence would grow as Samaras suffered the consequences of leading a coalition government with PASOK, and, for the first year, DIMAR that implemented a full adjustment programme. Of course, there was no room for the ND leader to follow through on his Zappeio policy promises and “renegotiation” pledges.
As early as the summer 2012, Samaras backtracked on the idea of making changes to the MoU, arguing that Greece would have to regain some of its credibility. By autumn, as the negotiations with lenders were dragging on, Samaras presented Greeks with a dilemma that they had heard before: Agree to the terms of the official lenders or face default.
After being let down so gravely, it was only a matter of time before Greeks would channel elsewhere the resentment towards the MoU policies. Having managed just 12 percent of the vote in the previous elections, PASOK was steadily disappearing as it continued to be associated with the implementation of unpopular bailout terms, this time with New Democracy, the party that had been its fierce rival for decades.
SYRIZA took a lead in the opinion polls as the months rolled by and it began to look certain that authority would just fall into Tsipras’s lap at the next elections. Victories in key contests in the regional elections and an overall win in the European Parliament elections in mid-2014 were the final proof that the once-marginal radicals were ascending to power.
But Tsipras did not want to wait until 2016, when the next elections were scheduled. The tenure of the Greek President was due to end in early 2015 and, based on the process at the time, snap national elections would be called if Parliament could not agree on a successor to the outgoing Karolos Papoulias.
Tsipras went to the Thessaloniki Expo in September 2014 and presented his policy agenda. The Thessaloniki Programme, as it would come to be known, would return to haunt him during his premiership because it epitomised how immature the party was in terms of governing. It showed a complete lack of understanding of the dynamics in Europe and among Greece’s lenders, while the policy mix was an artifice of untenable policies.
It was a continuation of the proposals Samaras had presented at the Zappeio Hall three times, only with a leftist twist.
Worst of all, Tsipras had decided that by taking a confrontational stance with the lenders he would be able to achieve better terms. If his policy mix was an illusion, the fact that he thought he had any leverage to push things to the wire was a sign of delusion. It was obvious that he would have to concede within a matter of months.
Samaras struggled to deliver on his fifth programme review in the autumn of 2014 as he could not deliver on the demanding commitments. Under pressure, he brought the presidential vote in Parliament forward. With MPs unable to elect a new head of state, snap general elections were held in January 2015.
A failure foretold
Tsipras stormed to an election victory by taking more than 36 percent and a near-majority of 149 parliamentary seats. New Democracy garnered just under 28 percent.
It became evident from the first day after the elections that Tsipras would see through his antimnimonio tactics of confrontation when he formed a coalition with right-wing nationalists ANEL instead of the centrist liberals of To Potami, which had come fourth and had more seats.
Tsipras showed his intentions by appointing Yanis Varoufakis as finance minister to lead the negotiations with the lenders and by selecting Prokopis Pavlopoulos, the interior minister during 2004-2009, who had overseen tens of thousands of politically motivated hirings in the public sector, to be the next Greek president.
Tsipras thought that he would put New Democracy under pressure by choosing one of their own for the role but he simply confirmed that he was a political tactician of the populist mould, unwilling to let principles get in the way of achieving his goals.
The first half of 2015 unfolded as anticipated, Tsipras ran out of options and called a referendum in July 2015 as he was facing a default on ECB bonds coming due and a messy exit from the euro that he did not want to manage or leave as his legacy.
Although Greeks rejected the proposed third bailout in the plebiscite, just as Tsipras had asked them to, he performed the ultimate somersault just days later. The SYRIZA leader went to Brussels and asked for a new programme, that was broadly exactly like the one he had rejected in the preceding weeks.
Another populist had ridden the antimnimonio wave and fanned the public’s discontent to achieve his goals only to surrender a few months later. It was essentially the same path Samaras followed, only with more drama and a different ideological hue.
Although he did manage to win the September 2015 elections, forming the same coalition with ANEL, before voters had fully realised what had happened, it soon became evident that Greeks would never forget, or forgive.
Tsipras proceeded to implement the programme he had signed, and New Democracy elected a new leader, Kyriakos Mitsotakis, who was supposed to bring new values to Greek politics and a more liberal approach in terms of policies.
Although in his early days as head of the opposition Mitsotakis claimed that he would not follow the old style of politics, it only took a few weeks before he started asking for elections.
Tried and tested formula
With the actual election date set for 2019, and needing some time to reshape the party and his policy proposal, he realised that the opportunism inherent in the antimnimonio formula could serve him well.
Although he never went as far as Samaras and Tsipras in Zappeio or Thessaloniki, he stood against the programme and went as far as suggesting that Tsipras had signed a fourth MoU by agreeing some measures after the programme was due to be completed, knowing too well that this was standard practice for ensuring policy commitments would be met.
It was obvious Mitsotakis was becoming uncomfortable seeing Tsipras completing reviews and heading towards what seemed like the end of the MoU era. In the meantime, SYRIZA had parted ways with the radical side of the party in the summer of 2015 and started developing working relationships with the lenders, international institutions and local embassies as it gradually delived on commitments.
Given that the end of the programme was in sight for Tsipras - something that no previous PM had managed to deliver - and having secured another round of relief measures that would settle debt concerns up to 2032, when eurozone lenders committed to taking another look if more interventions were needed, Mitsotakis would have to look to other areas for ammunition against Tsipras.
New Democracy focused on other weak points for SYRIZA and the centre-right party often took the populist stance as it hoped to maximise its gains over the incumbent leftists.
During the surge of the refugees crisis in 2015, the main line of New Democracy was to attack the government, accusing it of failing to properly police Greece’s sea borders with Turkey and essentially adopting an open arms policy that invited the waves of refugees, who were arriving by the tens of thousands each month. In fact, serious geopolitical factors in the region and instability in various countries, most notably Syria, were the main driver behind the surge that ended up with close to one million refugees reaching northern Europe, before the borders across the Balkan route closed down gradually and the EU-Turkey deal was signed in March 2016.
It is true that the SYRIZA administration, having just recovered from the tumultuous negotiation period with the lenders in the first half of 2015, completely misread the situation, thinking that Greece would remain a transit country, failing to anticipate the gradual closure of the route to northern Europe. But the suggestion by New Democracy that the Greek government was itself a pull factor in the greatest refugee crisis Europe experienced since the Second World War wave was wide of the mark.
The issue came back to bite New Democracy in its first months in office. It had suggested in its election campaign that it would act more firmly on the issue, with stricter patrols, closed reception centres and summary deportations for those not eligible for asylum.
Instead, Mitsotakis found himself having to deal with a pick-up in numbers as relations with Turkey turned sour again. Although the arrivals are nowhere near the scale of 2015, local communities are expecting a quick solution to the issue that will not involve refugees being hosted in their areas.
Mitsotakis and his government have been enjoying strong opinion poll ratings but a consistent exception has been the poor score they have received for dealing with the refugee issue. ND ministers, meanwhile, have acknowledged the geopolitical complications and the unhelpful role of Turkey.
Settling the name dispute with the Former Yugoslav Republic of Macedonia, now called North Macedonia, was another front where Mitsotakis opted for the populist approach. Aware of the right-wing nationalist views in his party, the general strong feelings of the Greek public on the issue and his party’s strong position in northern Greece, Mitsotakis was unwilling to put any of this at risk as he strived to get elected.
He allowed members of the party to call the deal a betrayal and implicitly endorsed the various protests that took place in Thessaloniki and Athens, some of which were attended by New Democracy officials.
Although one can argue about certain aspects of the agreement that relate to nationality and language, and accept that work is still needed regarding the branding of products, labelling the agreement a betrayal is clearly irresponsible. The deal removes a diplomatic thorn, which had taken up disproportionate time and effort for decades, from Greece’s side.
Just as in the case of the refugees crisis, this populist stance came back to bite Mitsotakis when, contrary to expectations, France led a group of EU countries in blocking North Macedonia from receiving a starting date for its EU accession talks, one of the key incentives in Skopje and across the EU to reach an agreement.
He now finds his government officials publicly supporting the deal, admitting it resolves various open issues and encourages trade relations between the two countries. Under a New Democracy government, Greece is now committed to supporting Skopje’s aspirations of joining the EU and is engaging in diplomatic initiatives to help this happen.
The populist approach served its purpose in opposition but quickly led to embarrassing moments in government, just as it did for Mitsotakis’s predecessors.
The difference now is that the New Democracy leader has inherited an economy that is in far better shape than when the decade began, although there is still a long way to go in the recovery process. Public finances, meanwhile, are probably in the best condition that Greece has ever known, with the new government inheriting a cash buffer of more than 30 billion euros.
This gives Mitsotakis a great platform from which to turn the country around and heal the gaping wounds that have been left by the mistakes and opportunism of his predecessors.
The concern, though, is that not only has his party shown it is susceptible to repeating the mistakes of the past, such as engaging in cheap stunts while in opposition only to be forced to perform summersaults in power, but there are indications that some Greeks have learnt little from the pain of the last decade. The willingness of some to reward Karamanlis, the man who oversaw the spectacular crash that wrecked the last decade for Greece, with the presidency is a stark indication of this disregard for learning and improving.
During every single significant event that defined this decade, from the economic collapse to major diplomatic and social issues, Greece’s leaders preferred to release poison into society to help their short-term political goals. It appears that Greeks have yet to flush these toxins out of their system. It is one of the main reasons that we should approach the new decade, which carries more promise for Greece than the last 10 years, with caution.
*You can follow Yiannis on Twitter: @YiannisMouzakis