Rent seeking in the Greek economic drama.

AuthorEvangelopoulos, Panagiotis

The austerity measures of the Greek socialist government of George Papandreou (2009-11) did not succeed because his government, which had replaced the conservative government of Kostas Karamanlis (2004-2007, 2007-2009), did not rein in the inefficient Greek public sector. In essence, the Papandreou government's austerity measures were neither far reaching nor comprehensive enough to deal successfully with Greece's dire fiscal situation. According to Eurostat, in 2009 Greece's public debt was 115 percent of gross domestic product (GDP), and the public deficit was 13.6 percent of GDP. In 2011, the Greek authorities estimated the public debt at approximately 160 percent of GDP and the public deficit at approximately 9 percent of GDP.

An appropriate title for the Greek government's recent austerity measures would be "Economic Policy at Gunpoint," to paraphrase the title of Andreas Papandreou's book Democracy at Gunpoint, which he wrote when he was fighting the dictatorship in Greece in the late 1960s. Andreas Papandreou, the father of Prime Minister George Papandreou, was a radical socialist, both as an academic economist and as a politician. He ruled Greece as prime minister throughout the 1980s and for a few years in the 1990s.

Andreas Papandreou set in motion Greece's fiscal excesses in the post-World War II era. He escalated both the fiscal deficit and the public debt enormously while brutally socializing factories, shipyards, refineries, and utilities as well as expanding the public sector tremendously. In 1981, he took over a public debt amounting to 29.7 percent of GDP; in 1990, when he lost the elections, the debt amounted to 80.7 percent of GDP. Yet even this high percentage seriously understated the public debt because it did not include the unpaid state collateral awarded to numerous state companies, public corporations, and public utilities. This ruinous public debt ultimately caused the first modern Greek fiscal crisis in 1993.

In pursuing these policies, the socialist Andreas Papandreou was ironically only following, albeit in a more radical way, the broad program of nationalizations that the conservative Konstantinos Karamanlis had established before him. And there is perhaps a similar irony in the fact that Konstantinos Kaaramanlis, who ruled Greece in the 1970s, was the uncle of the more recent prime minister, Kostas Karamanlis, who ruled Greece from 2004 to 2009 and left the country in an unprecedented fiscal mess.

A third...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT