“We Started Off in Firefighter Mode”: Greek Finance Minister Recounts Forestalling Catastrophe

By David Stevens


[dropcap]T[/dropcap]he Hellenic Studies Program and The MacMillan Center on Tuesday, October 11, 2016 hosted an event with George Papaconstantinou, the former Minister for the Environment, Energy, and Climate Change and former Minister of Finance for Greece from 2007 to 2011, when the country first became embroiled in a debt solvency crisis.


[dropcap]P[/dropcap]apaconstantinou, formerly an economic adviser to Greek president George Papandreou, is now an active private sector consultant and promotes his new book about his experience in the thick of the institutional meltdown of 2010, Game Over: The Inside Story of the Greek Crisis. His presentation was met with rapt attention and a lively question and answer session from the audience.


Coincidentally, Papaconstantinou last appeared on Yale’s campus as the feature guest in a panel discussion on the Greek debt crisis almost four years ago. The event on Tuesday thus gave him an opportunity to reflect on the developments of the ongoing crisis in the intermediate years and to speculate on the future trajectory of Greece’s political system, financial institutions, and fiscal policy.


Minister Papaconstantinou began by acknowledging that many of the endemic problems that precipitated the 2010 Greek crisis have not been solved, as illustrated by present-day economic indicators, including an economy 25% smaller than it was in 2009 and a youth unemployment rate of 50%. Greece remains perpetually on the brink of insolvency while other countries that underwent similar default crises, such as Ireland, Portugal and Cyprus, have long since recovered. “Behind these data and metrics lies a broken country,” he noted somberly.


The crisis unfolded in two different contexts: the politically ignorant, fiscally irresponsible atmosphere within Greece in the pre-bailout years, and the broader context of a Eurozone that chose to ignore the signs of an accident waiting to happen with the instability of the Euro in a debt-saturated continent. Casting doubt on the efficacy of the EU’s regulation, Papaconstantinou averred “the signs were there.”


The story of the Greek debt crisis is not a monolith of failed policy and politics, however. After receiving three eleventh-hour bailouts — including a $100 billion restructuring in 2013 that was the largest in history — Greece now earns more revenue than it expends, excluding interest. Progressive reconstruction of the fiscal system and certain economic industries have been met with limited success, including opening up the labor market and modernizing tourism and subsidiary industries. “The ledger is very mixed,” conceded Papaconstantinou on Tuesday.


“I don’t want to limit this to some basic economic data,” he said. With a new brand of parliamentary politics, characterized by the rise of populism in the Hellenic Parliament, exemplified by new parties such as Syriza, and rapid cycles of elections and power transfers, Greece has also changed structurally and culturally in the past six years. Papaconstantinou termed this “the complete implosion of the old political system.” The rise of unstable populism can be in part attributed to a fundamental misconception among the Greek electorate about their recent history. The majority viewpoint among Greeks is that the International Monetary Fund (IMF) acted to inflate debt concerns and precipitated the crisis that way, while in actuality, a failed system was allowed to fester for years, and the drastic measures of the “Troika” — the IMF, the European Central Bank, and the European Commission — forestalled total catastrophe. Minister Papaconstantinou stressed that the Greek polity must agree about its past before being able to move forward and enact reform.


The experience of Greece since 2010 suggests the need for greater integration across the European economy and financial system, yet this imperative is directly contradicted by the direction of the political currents in Greece and elsewhere internationally, which have reflected isolationist fervor, from German emphasis on austerity to this summer’s “Brexit” by the U.K. Papaconstantinou later addressed the similarity with Brexit, dispelling the suggestion of a cause-and-effect relationship but arguing instead that there are “common undercurrents at work that we have for too long chosen to ignore.” As he saw it, vigorous campaigners for Brexit were able to caricature the E.U. as a “dysfunctional animal” to bolster their argument for an independent Britain. The speaker flatly rejected any potential for a positive outcome from a Greek negotiated exit from the E.U., or “Grexit,” avowing it would be a “total, unmitigated disaster.”


In a similar fashion to this Sunday’s presidential debate, the last question of the day asked Papaconstantinou to give the audience something positive about the ongoing crisis that has shaken Greece for six years. The former Finance Minister and economic adviser pointed to a more realistic, solvent public pension fund; piecemeal improvements in the structure, collection practices, and ethos of the tax code; and a country wary of making the same risky accounts as positive collateral from the crisis.


George Papaconstantinou served his country during an intense and ongoing financial crisis, uniquely modern and defined by the complex interaction of multiple international organizations, domestic political upheaval, and the tremendous accumulation of sovereign debt by Western democracies — exacerbated in Greece due to poor taxation, historically high social expenditures made untenable by an aging population, an inept civil service, and low labor force participation as a result of cultural preferences for leisure over work ethic. His visit to speak at Yale this Tuesday came at a time when Greece was still not out of the woods, as parliamentary instability, stalled debt negotiations, and lukewarm reform efforts have left an entire nation, including its youngest and most enterprising citizens, in financial and economic purgatory.


David Stevens is a sophomore in Berkeley who blogs for World at Yale.  You contact him at