A political and social analysis of the Greek financial crisis can shed new light on its causes and consequences, delegates at the NATO Parliamentary Assembly heard on Saturday. 
“My own understanding of the current crisis is that it is primarily a political one,” said Spyros Economides, senior lecturer in International Relations and European Politics at the London School of Economics.
The root causes go back to attitudes towards the state, and political weaknesses at the European level, he told the Economics and Security Committee at the Assembly’s Spring Session in Riga.  
Greece’s deficit currently stands at 14 per cent of gross domestic product (GDP), while its debt-to-GDP ratio is 115 per cent. The European Union (EU) has undertaken to provide 80 billion euros as part of a bailout plan, which also includes 30 billion euros from the International Monetary Fund (IMF). 

On a national level, Greek economic practices certainly contributed to the crisis, Economides said, with market inefficiencies, rigidly closed professional structures, and widespread clientelism.  
Economides noted that navigating through the State bureacracy was best done through personal contacts rather than official channels.  There are also persistent problems with tax collections. Civil servents take for granted perks that would be seen as profligate state spending in other EU Member States. 
This way of doing things, rooted has become deeply entrenched ad has led to a fragmentation of society, he said, which in turn has undermined  "civic consciousness". 
Athens is required by the conditions of the bailout to reduce its deficit by 10 percentage points over the next three years, and has announced it will strip 30 billion euros off public spending by 2013.  But there is a great degree of scepticism out there as to whether Greece can acheive this goal,” Economides said. 
"This is not simply a matter of economics, it’s a matter of a society which wants to maintain a system, because it’s not simply a system of support, it’s a system of provision," he said. "
Greece’s fiscal unsustainability went undetected for decades, Economides explained. “In the 1990s and the first decade of this century, growth in the Greek economy masked a whole series of underlying problems and underperformance.”
The EU bears its own portion of the blame for not waking up to the problem earlier, he said, as it has not established “any kind of centralized regulatory mechanism” to check that Member States’ treasuries were keeping to the guidelines laid down by Brussels.
Economides sees this as another political, rather than an economic, issue.  “The eurozone is a highly politicised mechanism,” he said. ”It is not guided by the market’s ‘invisible hand’, it is rooted in the politics of the EU. And yet it lacks a central authority to regulate it as would be expected within any of the national economies.”
As far as the consequences for the EU are concerned, the political aspects outweigh the economic ones, Economides said. With less than 3% of European GDP, „a Greek insolvency wouldn’t really matter for the European Union” in terms of trade and prosperity. But the EU’s international standing on the political stage may suffer as a result of Greece’s economic travails, he said. 
The underlying problems are not limited to Greece, he said. „Time has come to start clearing up financial irregularities across the European Union,” at both national and European levels. 
This does not mean a wholesale restructuring of EU economic cooperation, he said, as „it is not the right time to open Pandora’s box” in that area. „But I could envisage a two- or three-speed eurozone in which some countries decide to pool whatever they want to pool, and others are left in some kind of peripheral system,” he said. 
The debate surrounding the Greek crisis and aid package has had the positive effect of encourage a frank discussion of national interests within the EU, Economides said. „I say it is refreshing because we mustn’t forget that even though this is a European project, it has been created and maintained because there are state interests at stake.  Germany did not enter into these series of arrangemets out of some form of altruism.”
German Bundestag member Joachim Spatz (Free Democratic Party) suggested that "the problem will not be solved by kicking anyone out" of the eurozone. But Germany would like to see serious talks about the budget transparency between eurozone members, he said. “What we need to do is relaunch the old stability pact.” 
Economides agreed that Greece’s expulsion from the eurozone would benefit no one. “The implications for the other Member States and their financial institutions would be horrific,” he said. Dutch pension funds, German and French banks, have considerable euro-denominated investments in Greece, he reminded his audience.
British Member of Parliament John Sewel (Labour) blamed the EU policy of economic convergence, saying the tools to implement it “have been more part of the problem than the solution. “They have used money to support failing or weak institutions and practices” rather than much-needed reform, he said.
Looking ahead, balancing the political and economic priorities of the EU would be difficult, Economides said. “There will be no perfect synthesis as we still have a highly politicised but not centralized system.... And that is the problem.”
Around 340 delegates from allied and associated countries are attending the NATO Parliamentary Assembly’s spring session from May 28 to June 1. The full programme is available at http://www.nato-pa.int/default.asp?SHORTCUT=2014.

News and information on the Session is routinely placed on the NATO Parliamentary Assembly’s website

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The NATO Parliamentary Assembly brings together legislators from NATO member and non-member countries to consider security-related issues of common interest and concern. The Assembly is an inter-parliamentary organization and is independent from NATO.
 

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