Greece’s so-called recovery: a dangerous delusion

by Jerome Roos on April 5, 2014

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Government officials would have us believe that Greece is finally emerging from recession. Their unbridled sense of optimism is a dangerous delusion.

Last week, the Greek Finance Minister Yannis Stournaras wrote a delusional opinion piece for The Guardian in which he argued that his country’s heavily-indebted economy is finally beginning to emerge from the depths of a four-year depression. “Greece has come a long way since 2009,” he wrote. “After four years of fiscal consolidation and structural reforms, the Greek economy is beginning to show the first encouraging signs of rebalancing and recovery. Greece now faces the future with more optimism as it develops its new growth model.”

I’m not so sure if Mr Stournaras’ sense of optimism would be shared by the old lady begging for change on the local square every day. Or the poor man digging for food in the garbage container around the corner. Or the droves of drug addicts hanging around the neighborhood sinking needles into their veins in broad daylight. Or the 1 million uninsured people who don’t have access to healthcare anymore. Or the half-a-million children living in poverty. Or the thousands of migrants trapped in subhuman conditions in detention centers around the country. Or the young people, 60% of whom unemployed, who don’t see a future for themselves anymore.  Or the PhDs waiting tables for a minimum wage of an abysmal 500 euros. Or the 150.000 recent graduates who have understandably chosen to find employment abroad. Or my friends who stayed but who need to work two or three jobs just to make ends meet, and who often don’t even get paid, waiting for their salary for months, if they receive it at all.

As I read Mr Stournaras’ piece, I was reminded of another piece of text I had read that same very morning as part of my comparative-historical research on international debt crises — a passage I would like to share here because it seemed to directly speak to the neoliberal delusions of the Greek Finance Minister and the European financial establishment more generally:

“The great international debt crisis, which has made headlines over the last years, has receded back to the financial sections in recent months. If we are to believe financial editors and their sources, whether private bankers or government officials, the greatest threats to the existing international monetary network are now safely behind us. There were casualties and damages, of course, to bank earnings, to living standards in the debtor countries, and to the public treasuries of creditor countries, which have had to help directly with fresh loans and indirectly by adding to the resources of the International Monetary Fund (IMF)… But there were no major defaults and no collapse.

Given the dire warnings of impending disaster that were so much in vogue when the crisis first broke, it is understandable that a self-congratulatory mood had broken out in the world’s financial centers … But the rejoicing may be premature. The truth is that the debtor nations have been adding to their debt, not reducing it. Default has been staved off, but only by stratagems that have made conditions much worse in many countries. The [debtor] countries are being forced to increase their exports and borrow more in order to service their debts. Their citizens have had to tighten their belts; investment in domestic industries has suffered; and imports have been cut to the bone. The long-term prospects for real growth, then, have worsened. If conditions do not soon ameliorate, economic distress may give way to political turmoil.”

Now the most remarkable thing is that this text wasn’t written by a Greek leftist in response to Mr Stournaras — it was written some three decades ago by the American journalist M.J. Rossant, Director of the Twentieth Century Fund, a bourgeois think tank in New York, in his foreword to a book by Financial Times correspondent Anatole Kaletsky about the Latin American debt crisis of the 1980s. Hardly radical, in other words. The foreword was written in January 1985, three years after the outbreak of the crisis. After that, Latin America remained stuck in its debt trap for at least another five years until some of the debt was finally restructured. Throughout the continent, the 1980s rightly became known as la década perdida — the lost decade.

But how applicable do these words sound today, in the European context? A deceptive sense of calm may have returned to global financial markets in the wake of Mario Draghi’s pledge that he, as President of the European Central Bank, would “do whatever it takes” to save the euro. Immediate default may have been staved off. The bankers, once again, may have gotten away with it. But for the countries on the European periphery, the debt problem has merely been shoved onto the long-term. Sooner or later, there will have to be a moment of reckoning for creditors and debtors alike as the social, economic and political contradictions of the debt resurface anew.

In the past four years of crisis, Greece lost 30% of its GDP, undoubtedly constituting the single greatest collapse experienced by any developed capitalist country since WWII. This staggering fall was bound to come to an end sometime — after all, you can’t keep falling forever: sooner or later everything will slam into the ground. Greece has now hit rock bottom and is experiencing what Wall Street traders morbidly refer to as “the bounce of a dead cat.” What we are looking at, then, is not an economic recovery but a prolonged period of suffering and stagnation. Once again, we find ourselves in the middle of a lost decade. And, just as then, if conditions do not ameliorate, economic distress may soon give way to political turmoil.

Jerome Roos is a PhD candidate in International Political Economy at the European University Institute and founding editor of ROAR Magazine.

{ 9 comments… read them below or add one }

Jan van der Putten April 6, 2014 at 11:37

A well-written, clear piece, Jerome. Some twenty years ago, when Greece’s financial crisis just had started, Yannis Stournaras was a bright, young, fast rising star in the financial bureaucracy. I had a long interview with him, in which he developed quite radical ideas…


Haroun Kola April 6, 2014 at 12:50

Oh, for a future with real prospects for all the people of the world, not just those eating at the trough.


Michael Kenny April 6, 2014 at 16:28

Never in history has economic distress given way to political turmoil in a European country. Political turmoil is born of war, long, bloody and lost wars, not economic distress. The great depression of the 1930s didn’t set off any revolutions. From 1917 to 1991 the peoples of the Soviet Union lived in serious economic misery and yet they never revolted. The people of modern Russia continue to live in much the same misery today as they did under the communists but there is no revolt. If Putin is fool enough to get himself into a war, of course, the situation might be different. Economic misery makes people knuckle down and try to survive as best they can. Where there’s life, there’s hope, so to speak. War, where you’re in danger of being killed by the direct act of another person, is psychologically very different. There, you blame the government for not protecting you and want a government that will protect you, even if it means more or less surrendering to the enemy.


jkelvynrichards April 8, 2014 at 16:47

Greece is a country in which many people want work; who know many people who have jobs to do; but know that they will not get paid. They have to decide to work for nothing; or stay at home doing nothing!
Greece is a country in which the schools are open; but where the schools have no heating. One of my grand children has to sit in cold classrooms in his wet clothes during the winter.
Greece is an agricultural country which is supported by the European Economic Community; and depends upon their provision of basic grants in order to compete with Germany/France/Italy/Spain.
Greece is caught in a trap set by the industrial corporations of the EU and the USA whereby it is believed that corporations create money. Greece has to insist that the EU accepts that money is created by banks, by loans : the process of quantitative easing. Central Banks should be authorised to create as much money as necessary, and not to penalise the debtor countries by exorbitant interest charges. Greece, along with other countries such as UK, are still in difficulties because of the interest charges. If the interest was forgiven, most EU countries would generate enough income to repay the loan. We should ask the EU to develop a system of interest free loans!
[for further ideas on these issues go to Comments/]


Andreas April 11, 2014 at 08:42

Easy financing is not the answer. Indeed it is the very reason why Greece is in trouble.


jkelvynrichards April 14, 2014 at 15:51

One of the reasons that Greece, [and many other countries like the UK, Italy, Spain, Lithuania, Latvia, Russia] are in financial trouble is that they all wanted to spend more than they earn; their costs are far greater than their incomes. They operate their economies in deficit.
In Greece, the governments of the day, led by PASOK, tried to set up a National Health service and a national education system that cost more than the income from National Insurance Schemes. Every year the government costs exceeded income. The contributions by citizens did not cover the costs of the services. It would inevitably go bankrupt. The Treasury was deluded into thinking that it could borrow itself out of default. It was wrong! The deficit got bigger.
The basic problem is faulty planning by the MPs and the civil servants!


jkelvynrichards April 10, 2014 at 13:06

In the light of the recent post by Graeber , I wish to add that people can choose to work for nothing! stay at home doing nothing! or develop groups to take part in local government! organise protests! against local corruption! and civil inequality! But these actions will only survive if they lead to social change. The significant differences between working for nothing and marching/walking/ cycling/demonstrating/protesting /organising food banks/managing discussion forums for nothing, is that some have social/civil purposes and others have personal purpose.
The recent acts of protest in Bosnia; in Ukraine; in Crimea; in Greece, in Egypt; in Libya; have all had political purposes, designed to get the attention of the ruling elites, and persuade them to rule democratically. In Syria, where the Alawite minority rule, the ruling families have had no intention to be democratic, only determined to kill all protesters!
At some point protesters have to consider the ‘risks’. Are their protests worth the risks? is it worth risking their lives ?


sixhonestservingmen April 10, 2014 at 14:31

Tyranny naturally arises out of democracy ~ Plato

It appears Yannis Stournaras is not the only delusional Greek when it comes to understanding the lie of economy, and ‘where’ democracy really takes place as a means to tyranny -



agirlfromGreece November 4, 2014 at 21:13

In my opinion Greece has not recover and i can tell that from personal experience. I live in Greece and the situation is not as it is described to other countries or even in our country you can easily understand this if you go for a walk in Athenes. There are many problems that need to be solved and there are some priorities from them too such as the education and the health system. The prime minister Antonis Samaras and many others just make fake promises or “steal” the poor people s money. It is not a coincidence that their salaries remain the same and that unemployment just keeps increasing.


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