“The agreement between the EMU and Greece over policies which must be implemented by Greece in order for it to be granted the last installment of the agreed loan, known as the memorandum, was drafted without adequate preparation and functioned in a way that exacerbated the situation. The authors of the Memorandum failed to attach goals to actual developments, i.e. predicting that if there is a recession, the timing of goals will automatically be extended. It was a politically fatal mistake. The omission resulted in a continuation of the initial harsh austerity program, despite the recession that occurred, and thus greatly enhanced recession”.
These matters will be highlighted by former PM Mr. Kostas Simitis during his speech on January 23rd in Berlin, in a conference entitlted: "Greece in crisis. Prospects for the European path, " at the Heinrich Böll Foundation and Freïe Universität.
According to Mr. Simitis the Greek problem was not a misfortune in the state of the Union, a diversion which overthrew a well-designed project. It was the catalyst that revealed the shortcomings of past economic governance, as well as the need for a new determination of it”.
For the first time, Mr. Simitis criticizes with so much clarity the authors of the loan agreement and all those who contributed in the Memorandum, for childish mistakes. Because it is almost obvious, at least in the assumptions made even by first-year students, that the objectives of a program are linked with actual economic developments. It seems outrageous that neither the Troika nor the Greek government predicted a prolonging of the economic targets in the event of recession.
What are the consequences of this “politically fatal error”? According to Mr. Simitis, the omission has led not only to the original harsh austerity plan, despite the recession that occurred, but also to its own growth due to the non-adjustment of targets depending on the consequences of the economic crisis..
“Greece, quo vadis?”, is the title of the speech which the former PM will give in Berlin. Mr. Simitis will indicate that “solidarity is a term that is not liked in some EU countries. They suggest that a commitment on support from others who do not meet their obligations, implies a unilateral commitment. But things require collaboration and mutual support. In the dominant view of the EMU’s practice, the solution of problems concerning the levels of competitiveness between the north and the south requires mainly the promotion of changes in labor markets and structural reforms”.
The former PM states that “this is not sufficient”. As Mr. Simitis will argue, the support of the economies of the South is needed, with investments and an expansion of exports to the North. Furthermore, it is necessary to have an overall policy relating to the Eurozone’s growth; an economic governance which will not be limited like today to current problems, but will take care of a balanced distribution of the EMU’s benefits and will be better able to handle the broader issue of development”.
Defending the EMU, he will state that the EU leaders must incorporate into their design “the most potent with their potential and the weaker with their weaknesses. To be mindful of inequalities and to assess the fact that developed countries are not just charged, but they also earn lofty profits thanks to their financial services and exports”.