The Albright Institute for Global Affairs hosted a lecture on Tuesday, Oct. 18 with George Papaconstantinou, the former finance minister of Greece from 2009-2011 and center-left Panhellenic Socialist Movement (PASOK) party member. Papaconstantinou discussed his May 2016 book Game Over: The Inside Story of the Greek Crisis, which recounts the period before and after his tenure in the midst of the Greek fiscal and debt crisis that shook the country, Europe and the world. The lecture was held at 4:15 p.m. in the Pendleton Atrium and was attended by about 50 Albright Institute Fellows, students, faculty and the greater Wellesley community.
Albright Institute Director Joanne Murray first addressed the audience, urging observers not to hesitate in asking questions in the true spirit of “a dialogue about decisions that we make.”
Takis Metaxas, a Wellesley computer science professor and faculty director of the Albright Institute, introduced Papaconstantinou to the audience. Metaxas discussed how his home country entered economic chaos rivaling the U.S. Great Depression. The conservative New Democracy (ND) government of Prime Minister Kostas Karamanlis estimated Greece’s 2009 Gross Domestic Product (GDP) deficit was reported to be 6 percent. When Papaconstantinou became finance minister under Prime Minister George Papandreou’s PASOK government, he discovered in his first week that the predecessor government had omitted debts in its calculations. The 2009 GDP deficit eventually was revised to 15.4 percent, plunging Greek credibility and sending markets reeling.
Papaconstantinou characterized the crisis as a “disaster waiting to happen.” In Europe, the markets had lent to Greece at the same interest rate as less risky countries like Germany. Agencies also gave Greece high credit ratings until right before the crisis began, not recognizing the country’s underlying risk.
Careening on the edge of an economic abyss, Greece had to accept a $110 billion bailout from the Troika—the European Central Bank, Eurogroup and International Monetary Fund (IMF). That bailout came at a heavy cost: Greek social services and pensions had to be slashed during a period of high employment and economic distress when austerity measures were imposed under the deal. Papaconstantinou, who penned the deal that was at the time the largest economic bailout of any country in history, saw his popularity plummet.
“Before elections he was quoted as being the most popular man in Greece. A few days later, a British journalist asked what it was like to be the most hated man in Greece,” Metaxas said.
On that somber note, Papaconstantinou initiated a 30-minute lecture before answering questions from Metaxas and the audience. He described his book as “a story about Greece and Europe, but also about getting into politics and paying a heavy price for it” and an attempt to inject more self-awareness for Greece, the Eurozone and European Union (EU) about their systemic economic and political problems.
A common theme the former finance minister raised was his need to make “the least bad decisions over a set of very bad alternatives.” His argument is based on his belief that “the standard of living that people were used to was based on a rather fragile foundation” that threatened Greece’s economic and political future. Papaconstantinou’s political unpopularity for moving his country on a more sustainable economic course made him shunned, ostracized and even on a political show trial regarding the Lagarde list, a spreadsheet of about 2,000 people under suspicion of tax evasion and having overseas holdings in Switzerland. Papaconstantinou faced a lifetime charge in court but was ultimately cleared of all but one charge of a misdemeanor.
As austerity measures continued to bite, Papaconstantinou noted “the old political system completely imploded” from a two-party to multiparty coalition system with strong populist elements. He juxtaposed typical policymaker’s technocratic language with that of populists relying on emotion to advance their arguments and drew parallels between Greek and American populism. Last year, current Prime Minister Alexis Tsipras and his populist Coalition of the Radical Left (SYRIZA) and right-wing populist Independent Greeks (ANEL) parties gained power in the parliament. The rise of populism in Greece is intuitive since unemployment is 50 percent overall and 25 percent for youths and the country has been in a recession for seven years. Under these new political dynamics, “moderation, dialogue and trying to find a consensus is no longer the name of the game. It is now an exception rather than the rule.” Yet there are flickers of hope: the country finally runs an annual surplus, is more internationally competitive, has made taxation reforms and can gauge the movements of its domestic economy thanks to an independent statistical agency Papaconstantinou started in his tenure.
Papaconstantinou has hope for Greece’s future but urges caution. Anger stemming from populism “can lead to outright rejection” of the difficult but necessary economic reforms Greece must continue to take to be viable in the long term. Furthermore, he called a political discourse “rooted in facts is increasingly grounded in emotions and perceptions” a prime threat to making policy in Greece. Papaconstantinou also discussed the future of the EU, which he believes can work better if it is monetarily and fiscally integrated. He praised its movement to a banking union but argues it needs a common deposit guarantee to give equal insurance to those investing in Athens and Berlin.
Metaxas continued the theme of populism by asking Papaconstantinou about rekindled nationalism in Europe and how advanced democracies like the United States and Europe cannot seem to adequately defend themselves from populist arguments, touching on voters’ tendency to gravitate toward “outrageous promises” and “simplistic solutions.” The former finance minister replied that globalization often yields few winners and many losers and global power interests influencing political systems leads to popular backlash, especially as these economic and political inequalities make people impatient for change. The audience asked about Germany’s decision-making role in the EU, reasons for Greece to retain the euro, political justification for Brexit and whether the Eurozone should better coordinate its fiscal policies.
Rachel Besancon ’19, a political science major taking Professor Joel Krieger’s course on The Politics of Europe and the European Union, found her studies applicable to the lecture and “thoroughly enjoyed it.”
“What especially stuck out to me was his explanation about the relationship between rising austerity measures and a declining sense of democratic integrity. The rise of nationalistic populist movements appealing to the emotions of voters, as opposed to relying on actual facts, has been a trend seen across Europe—and Greece has been a noticeable example—and now in America as well with Donald Trump,” Besancon said, also thanking the Albright Institute for hosting the event and expressing a desire to attend future ones.
Heather Orta ’17 thought the lecturing was interesting, although she disagreed with some of Papaconstantinou’s arguments.
“I personally hold the opinion that the euro is a flawed idea and should have never been implemented,” Orta argued.
That being said, she enjoyed being able to hear the former finance minister’s account of the Greek crisis.
“It was an amazing opportunity to be able to ask and pick the brain of a person who had a hand in the handling of the crisis and was at the nucleus of the problem,” she said.
Note: The Wellesley News conducted an interview with Minister Papaconstantinou before the lecture. If you would like to read the interview transcript, please click here.