A Big Fat Greek Crisis

What is the Greek debt crisis?

Successive budget deficits accumulating over the past fifteen years have resulted in a national debt of 272.3 bn. Euros, 114.6% of Greece’s GDP. The previous government disgracefully stirred statistics attempting to hide the problem, claiming a 6% budget deficit where the actual figure had reached 14.1%. The new 2009 elected government of PASOK therefore had to borrow money to cover the deficit. However, the relative interest rate at which the international financial market, based on risk assessments, would lend the country had been increasing. As the rate of interest was increasing, so would the money needed to repay the debt. This would lead to an accelerating effect, plunging the country into an ever-multiplying debt and ultimate bankruptcy.

What caused the deficit in the first place?

A crucial detail, neglected by most commentators, is that the extravagance of the Greek debt is less the result of fundamental market problems and more the result of chronic fiscal mismanagement due to political corruption, bribery and incompetence. It is more about manipulation and responsibility evasion on the part of government spending rather tax evasion on the part of citizens. Granted, Greece has been suffering from poor competitiveness levels and resulting trade deficits. But equally true is that the complicated bureaucratic system, the constantly changing legislation, and the inflexible institutional mechanisms do not provide a fertile ground for businesses to flourish. Above all, what taxes the Greek economy the most is its political corruption, which international data estimates costs Greeks around 30 bn. a year.

What do we mean by corruption in Greece?

Corruption has been established as a sort of regime and mentality in politics and has become a structural problem in Greek society. Corruption has many faces, none of them pretty. The ugliest ones relate to the way public construction works are allocated, as the agents behind construction agencies are often the same found behind media companies. They therefore use their potential influence upon public opinion to manipulate the assignment of public works. Companies start by setting a ‘reasonable’ budget for each work, which is usually exceeded by several times its initial estimated value. The difference between the initial ‘reasonable’ estimate and the real final cost – which is financed by taxpayer’s money – is then shared between the companies’ executives and the government officials who secured the works for them. The most well-known example is the Olympic Games constructions, initially budgeted for 1.8 bn, but later shown to have cost the taxpayer 17.5bn.

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Why have people taken to the streets?

As even those least acquainted with Greek politics recognise, the protests are not simply about the economic crisis. The hundreds of thousands of citizens protesting with profound rage, furiously shouting slogans such as ‘Thieves, Get Out!’ and ‘Burn it down!’, represents a clear political indication that Greece faces a serious and deepening legitimation crisis. The political system’s effectiveness has been put under question for quite some time now: the December 2008 uprising marked the first major eruption of a delegitimation which was left to expand. In Lockean terms, these protests signified the free, direct and popular withdrawal of consent from the way politics works in Greece.

What are the causes of Greece’s legitimation crisis?


Firstly, the institution of Justice is seriously malfunctioning. How can we, ask the citizens, be held responsible for the injustices that governments themselves conducted against us? How is it that no one has been brought before the Court to be judged for their crimes? They are asked to pay the price for financing the robbery conducted against them. Secondly, there’s the chronic violation of equality before the law. Based on an obscure asylum policy, Greek politicians cannot be taken to court for criminal offences or embezzlements like any other citizen, even after their term in government ends. Thirdly: unaccountability. Greece lacks an institutional framework for ensuring some basic consistency between electoral manifestos and subsequent policies, so that people can actually hold politicians accountable for divergence from electoral promises. Finally, resorting to the IMF without a referendum widened the already existing democratic deficit. Many people talked about constitutional problems in passing the legislation while many citizens regard this as violation of the democratic principle of consent.

Is the cradle of democracy standing on the brink of an undemocratic abyss?

It is already quite deep inside this undemocratic abyss. To keep democracy, Greek politicians will have to realise that it is the people governing through them and not them governing through the people. This means assuming responsibility; the ability to respond to people’s concerns. To deny modifying the legislation regarding austerity measures at least as a kind of symbolic acknowledgement of the public reaction to it is certainly not the way to handle things. The democratic deficit will be closed by realising democracy is something dynamic and ongoing, and that giving ones’ vote in an election does not hand over to politicians an absolute power to do just anything without popular checks and balances.

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Despoina Potari is a DPhil Candidate in Politics at Lady Margaret Hall, Oxford.