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Greece’s failed state and Europe’s response

Far more dangerous than the present financial crisis threatening the euro, Greece looks like a failed EU state, which puts at risk the stability of the entire European project.
Takis S Pappas
13 October 2011

It is over two years now since Greece-as-a-problem made the news the world over. Amid countless – highly conflicting – views expressed by a miscellany of experts and public opinion-makers, and after several remedies proposed by politicians, at present the problem is only getting worse.

By now, it is clear that the EU-IMF programme for bailing out Greece has not been successful, whether as a result of its faulty conception or Greece’s poor performance under it. Accordingly, two schools of thought have emerged: for one of them, EU governments should cling onto their strategy of trying to rescue Greece, as a Greek default would cause contagion throughout the Eurozone. In the other school of thought, the EU governments should cut off Greece’s lifeline and, to the ultras within this school, let it fall out of the euro; however big the cost, it is said, the long-term benefits will be better for the Eurozone and, why not, for Greece, too.

Both schools of thought are wrong because they fail to face up to reality squarely. For, let it be admitted, the problem with Greece is much more profound than most politicians and analysts have so far calculated. In stark reality, and far more dangerously than its present financial crisis threatening the euro project, Greece looks like a failed EU state, which, as such, puts at risk the stability of the entire European project. This is why a European political, rather than simply economic, plan for rescuing Greece must become a most urgent priority.

To understand better the Greek predicament, try contrasting Greece with enduring states, by which one means any sovereign state with: control over its borders; an organized and efficient civil service, able above all to raise tax revenue in order to provide basic public goods; a legitimate political authority, able to maintain public order, and a society that respects the rule of law; the capacity to produce unassisted growth; and, finally, the ability to interact on a par with other states in the international arena. In contrast, failed states, according to the definition provided by the Crisis States Research Centre of the London School of Economics, can no longer reproduce the conditions of their own existence and, therefore, are under threat of imminent collapse. Is Greece, then, a failed state? Let’s look at the facts.

Greece’s national sovereignty, first of all, is by now severely limited by the massive outside intervention in its economy and policy-making decisions. Although tourists seem to avoid Athens these days, the place is swarming with teams of foreign experts monitoring ministries, checking books, setting deadlines for policy implementation, and pushing through state sale-offs.

A somewhat related issue is Greece’s increasing difficulty in coping with border security as tens of thousands of illegal immigrants and asylum seekers enter each year from Turkey. To stem this influx, Greece has invited Frontex, an EU agency tasked with reinforcing border security in member states, to patrol it with the Greek soldiers. More recently, it was requested of Frontex that they remain at the Greek-Turkish border on a permanent basis.

If borders remain porous, what they contain presents a more dispiriting picture. The civil service, notorious for its inefficiency and endemic corruption, has long ago lost all popular confidence in it. It is also unable to collect tax revenue. As the Greek finance minister has revealed, last June, out of the country’s 34 major tax offices, 28 managed an average of less than one audit on taxpayers per employee, while 12 had not performed a single check.

The failure of the state is clearly reflected in the fast deterioration of the services it provides in basic goods, such as education, health, sanitation, and transport. Diminished funds, frequent strikes, and low morale in public administration have combined to bring the state virtually to a halt.

Nor are authorities able to protect citizens, and their properties, from social disorder, widespread vandalism, and occasional bouts of violence, as has been painfully evident during the riots of December 2008 and the subsequent looting, burning, and destruction of property that has taken place in Athens and other Greek cities. The police, in particular, have been remarkably inadequate in maintaining public order.

Inevitably, this has caused a breakdown in the rule of law. A few months ago, to block works on a planned landfill site in a town near Athens, the local population clashed with the police for 126 days until the government decided to bow out of the project. Meanwhile, large numbers of Greeks have joined the ‘I Won’t Pay’ movement, refusing to cover bus fares or highway tolls. Even the university authorities have openly declared that they will not apply a new law that was overwhelmingly approved in Parliament. The number of public acts of disobedience against the law, can be listed, regrettably, at great length.

Turn to the political class and you will find that its authority has vanished into thin air. Prime minister George Papandreou may have shown political courage at times, but has no control over either his party or his government. Major opposition leader Antonis Samaras lacks ideas, a strong political team, and political capital among other EU heads of state. Squabbling over political and economic ruins, Greece’s leaders seem unable to build political trust and propose a realistic agenda for the future. No wonder, then, that, as repeated surveys show, their approval rates have collapsed.

Growth is out of the question. At present, the prospects for the Greek economy look depressing. According to recent IMF forecasts, Greece’s GDP will shrink by 5% this year and will be 2% smaller in 2012; the economy is expected to contract for four successive years. Greece is meanwhile faced with one of the greater human flights in her history. This includes three categories of individual, mostly young people, who should be the most valuable to Greece if Greece is to overcome its present crisis: academics and intellectuals; entrepreneurial middle-class professionals with technical skills and expertise; and long-term immigrants who, in the last two decades, were the backbone of Greece’s development and who became well integrated in Greek society.

As might be expected, such an accumulation of failure affects Greece’s role in the world. Negatively, of course, as the erstwhile proud country is now bossed around by the IMF, bullied by north Europeans, and insulted by just about anybody with an axe to grind. As a result, national resentment among Greeks only adds to their social angst and economic desperation.

Evidently, the problem with Greece is far deeper and much more serious than this country’s (already deep and serious) financial crisis. It involves nothing less than a complete and drastic overhaul of the Greek state system. It should however be equally obvious that, as Greece is an EU country, Europe cannot but face up to this problem and contribute to its solution, as any alternative route must inevitably lead to the collapse of the entire project of European integration.

Rebuilding a state is not easy. It will surely take a long time, and require huge initiative on a massive scale and at great cost; it will also involve a huge transfer of sovereignty from Athens to Brussels, which, however, depending on how it is done, need not necessarily provoke resentment among the Greek people. But this is an inexorable task if the EU wants to avoid a looming breakdown, not just of the euro, as many currently seem to fear, but of something much more important – the European project itself, which, for all its many deficiencies and enormous cost, has nevertheless defined Europe’s postwar stability and growth. 

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