Greece Is To Blame, But The Eurozone Is The Problem
Athens must make some painful changes to survive and preserve its Eurozone membership. But the monetary pact needs to be fundamentally changed.
PARIS — It is important to distinguish between the situation in Greece, a country that must be saved from itself and its internal contradictions, and that of the Eurozone, which faces a crisis of its own after seven years of economic stagnation.
Greece is largely to blame for its dire economic situation, as the country's leaders have taken in 200 billion euros in structural funds since its entry into the European Union, and were still unable to build a competitive economy.
The Greek state is structurally weak and tax evasion is widespread. Since the 2009-2010 debt crisis, Athens obtained a reduction of its debt by 105 billion euros from the banks in 2012 and decreases in interest rates that brought total aid to around 175 billion euros. If we add the 200 billion euros from the structural funds to the pot, then Greece has already received 375 billion euros in aid from the EU, more than double its GDP!
We must stop saying that Greece is being crushed by Europe when it is actually buckling under the weight of its own oligarchic regime and a refusal to pay taxes. Greece's current debt burden of 320 billion euros would be 495 billion if not for the massive amounts of aid already received.
The key question is whether Greece has the capacity to establish a viable economy and maintain sound public finances. This rests on a host of structural reforms, from reducing the number of civil servants — who make up more than a third of the workforce, compared to an average of less than 20% in other developed countries — to fighting vested interests (shipping magnates, construction and telecom industries) and clientelism.
But independently of the situation in Greece, the Eurozone has its own crisis to contend with. Seven years of weak growth have kept unemployment from falling, even if some economies have fared comparatively better. The monetary alliance was never given the tools to succeed when it was founded in 1991 by then French President Francois Mitterand and then European Commission President Jacques Delors, and is now facing a long overdue institutional crisis. In a number of interviews between 2010 and 2012, Delors recognized this fundamental flaw.
"In 1991 we hoped that the political will to provide the euro with the necessary institutions would come within three years," he said.
Unfortunately, this would not turn out to be the case. The union of different countries in a single monetary zone stimulates, for reasons of efficiency, a process of economic specialization in each country, where specialization is meant to lead to maximum efficiency of productivity.
But for the good of the whole, a single "economic government" with an investment budget for infrastructure is needed to limit the effect of these forces and preserve the internal equilibrium of the Eurozone. There is also need for fiscal and social unity in the bloc to avoid internal fiscal and social conflict. In the United States, for example, the major fiscal and social institutions are federal, rather than at the state level.
In 35 centuries of monetary history, there has never been a case of enduring separation between monetary and political sovereignty.
France must play a leading role in the unavoidable evolution of the Eurozone's institutions. But the country's economic weakness and the crushing weight of the fiscal reforms of the last three years preclude Paris from taking the lead in the fundamental transformations the Eurozone needs. France must urgently adopt more ambitious policies and launch its economic recovery to return to its role as a beacon for Europe.
*Christian Saint-Etienne is the head of the economics department at the National Conservatory of Arts and Crafts, a doctoral university in Paris, France.