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Analysis
Greeks must stop seeking scapegoats

Greeks must stop seeking scapegoats

Openness about crisis vital to recovery

by Danae Kyriakopoulou in Athens

Thu 1 Jun 2017

A letter bomb attack on Lucas Papademos, the former Greek prime minister, and the ruling of a council of appeals court on attempts to indict Andreas Georgiou, the former head of Greece’s statistics agency Elstat, seem at first sight not to have much in common. Taken together, the events at the end of last week highlight a familiar undercurrent of the Greek crisis: the tendency for scapegoating.

Papademos and Georgiou, who held their roles at different times, both come from a technocratic background. Papademos, who is stable in hospital after the attack, was vice president of the European Central Bank before being called in as caretaker prime minister at the height of the crisis in November 2011. It was during his leadership of the emergency government of unity that the second bail-out programme was agreed upon in February 2012. The bail-out involved €145bn, loaned to Greece on condition that it implemented numerous austerity measures.

While no one has yet claimed responsibility for last Thursday’s blast, it could be linked to the Greek anarchist group ‘Conspiracy of Fire Nuclei’. Earlier this year the group sent similar bombs to the International Monetary Fund’s Paris office and the office of Wolfgang Schäuble, the German finance minister, in protest at the austerity policies that they are perceived to have imposed on Greece.

Georgiou’s enemies have been more high-profile. Criminal charges were first brought against him in 2013, after Elstat directors accused him of artificially inflating Greece’s budget deficit in 2009 – when he was serving as head of the statistical authority – allegedly to force the country into its first bail-out. Georgiou denied the charges, which were dropped following an investigation. Friday’s ruling was against a subsequent motion by a Supreme Court prosecutor reopening the case.

Understanding what went wrong in the Greek crisis is important for figuring out the future. This is especially important now, as the country continues to struggle under onerous austerity policies. The prospects of debt relief or inclusion to the ECB’s quantitative easing programme are still remote following yet another inconclusive Eurogroup meeting of euro area finance ministers, in which the IMF and Germany failed to agree on a common approach for ensuring the sustainability of Greek debt. In a subsequent speech ECB President Mario Draghi noted that debt sustainability was an important prerequisite for Greece to be considered for inclusion in QE.

Athens is hoping for a better outcome on debt restructuring at the next Eurogroup meeting on 15 June. Research by the Bank of Greece highlights that extending the weighted average maturity of the interest on the loans from the European Financial Stability Facility by 8.5 years would be enough to achieve debt sustainability even if the primary surpluses of general government remain at 3.5% of GDP only until 2020 and are reduced to 2% afterwards. This is a considerably more modest proposal than the demands of the IMF that Germany is having trouble accepting.

Securing a sustainable solution to the debt path would set in motion a virtuous cycle for the Greek economy, which still has a long way to go. Greece’s economy and its society have been through some very rough times. Instead of looking for scapegoats, last week’s incidents should be used as a chance for the political leadership as well as the public to clarify the narrative over what has led the country to its present state. Only then can Greece take a clean break from the past and look to the future, united.

Danae Kyriakopoulou is Chief Economist and Head of Research at OMFIF.

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