Greece Under the Conservatives

Against the Current, No. 40, September/October 1992

James Petras and Chronis Polychroniou

SINCE COMING TO power in April 1990, the conservative government of New Democracy (ND) in Greece has proceeded, under the leadership of Constantine Mitsotakis, to implement a series of economic policies designed to stabilize the Greek economy and make it competitive in the European market.

In reality, the policies of ND have exacerbated the weaknesses of the Greek economy. Declining living standards, educational and health budgets, and mass unemployment are the principal results of the neoliberal policies. Foreign influence over the economy is growing rapidly and Greece is being reduced to a low-wage service economy for northern Europeans.

Increasingly Greece resembles a Caribbean tourist island. At the top a small number of private firms are gaining control over the essential sectors of the economy, while at the middle and bottom there is growing malaise, waves of strikes and protests, causing the regime to resort to authoritarian measures. Stability for international bankers is producing instability for the working population.

While it is abundantly clear that neoliberalism is failing to generate prosperity and growth, what remains unclear is whether new political and social movements can emerge, capable of breaking with the paternalistic capitalism of the previous social democratic regime and providing a popular political and economic prograM for promoting equity and growth.

Background to Austerity

The task of ND is not easy. After eight years of Panhellenic Socialist Movement (PASOK) rule, the conservatives inherited an economy plagued with the lowest productivity highest inflation and largest budget deficit (amounting to 15.4% of Gross Domestic Product) in the European Economic Community (EEC).

Initially PASOK made a series of efforts to improve the state of the economy, first through an aggressive left-populist campaign based on socialization of the means of production (koinonikopiisi), decentralization (apokentrosi) and self-management (aftodiahirisi). During their second term (1985-89), in the face of deepening economic crisis, they shifted toward neoliberal policies of gradual deregulation and budget austerity. (For some further background see Petras, “Greece: The Crisis of a Crumbling Populism,” ATC 4-5–ed.)

In both periods PASOK failed to tackle the underlying structural weaknesses of the Greek economy: a) dependence on exports of primary products, invisible earnings and overseas loans; b) technologically backward manufacturing; a) a patrimonial state linked to clientele politics; d) a large underground economy. In the last four years of PASOK government annual rates of growth oscillated from 4% to -0.5%, investment varied from -8% to 9% of GDP, inflation fluctuated between 22 and 14 percent and productivity increased by a mere 1.46%.

Overseas loans financed the expansion of an already bloated bureaucracy, providing jobs for the party faithful. In Greece, both socialists and the old Right have promoted a kind of paternalistic state capitalism that provided lifetime employment without promoting welfare or growth. As interest rates and taxes increased, employment opportunity in the public sector and formal economy declined, while the underground economy–multiple employment and unreported income, barter of goods and services and mass tax evasion–became endemic.

The welfare changes the socialists initially enacted were not linked to the modernization of the economy and political system. The socialist rhetoric of modernization through socialization/ decentralization conflicted with the realities of a clientelist party-state, undermining structural change and popular empowerment.

Neoliberal “Solutions”

The conservative New Democracy regime has broken with the paternalistic statist policies of the old Right. Its strategy is drawn straight out of neoliberal economic textbooks: Economic prosperity rests on a program of monetary stabilization, deregulation, austerity (cutbacks in public spending) and privatization. Unrestrained markets are seen as the cure for the structural weaknesses of the Greek economy and thus as the only real road to modernization and efficiency.

This new strategy of the Greek Right was never spelled out in the electoral campaign. For the most part the traditional voters of the Right expected ND to continue with the policies of state paternalistic capitalism<197>extending employment through the public sector and providing low cost public power, subsidies, cheap credit and state contracts to Greek capitalism.

The neoliberal policies were undertaken in light of the emerging reality of a single European market, and reflect a convergence of outlook between ND and the EEC. ND hopes that byu deepening Greece’s integration into the European economy, outside capital will flow into the country to compensate for the short comings of the Greek economy and the weaknesses of its capitalist class. Through EEC loans and foreign investments ND hopes to get the Greek economy moving<197>and is willing in the process to sacrifice sectors of the Greek capitalist class.

The EEC is in large part a creature of the wealthier countries of Europe–mainly Germany. As the major industrial and financial power Germany has set its goal in establishing a “division of labor:” Essentially the influential EEC countries seek to protect the European market from outside competitors (North America and Japan) while liberalizing trade within.

In the case of Greece, the EEC influentials have relegated it to the role of a “service” economy–catering to tourism, low level manufacturing, shipping–and a net importer of finished products from the North. ND’s stabilization policies and restrictions on wages and salaries are in line with EEC efforts to discipline the labor force and lower the overall “costs” of sustaining Greece as a subordinate periphery of the Common Market.

Neoliberal policies thus undermine indigenous industries and small agriculture, while favoring the northern European multinationals and the commercial farmers. Thus in effect the EEC’s policy toward Greece closely follows the line taken by the International Monetary Fund toward the Third World<197>opening markets, cheapening labor, selling off profitable public enterprises and providing low cost services in exchange for loans to cover current deficits.

The pact between ND and the European Community is based on the latter providing loans to Greece (2.2 billion ECUs in late January 1991), while the former will conform to iberalizing demands of the EEC: freeing fuel prices, balancing the budget, reducing public spending and imposing production quotas on agricultural goods.

The “stabilization” program adopted by the ND government is much more severe than that implemented by the socialists, and has been extended to a broader range of areas. It includes an end to automatic wage adjustment for inflation, tax on agricultural income and an excise tax on housing, stores, property etc.

“Stabilization” is regarded as necessary for creating the basis of competitiveness and for generating growth and development; deregulation of the price system as a means of allowing the market to determine the real value of goods; austerity as a way of reducing inflation and the public debt; privatization as promoting efficiency, generating extra funds for the state and increasing productivity.

Contrary to its promoters’ expectations, the policies have had catastrophic effects. In the course of twenty months the combined effects of monetary stabilization, deregulation, austerity measures and privatization have plunged the economy into a recession. eindustrialization and a growing number of bankruptcies are making the Greek economy dependent on imports, producing higher deficits and mass unemployment, without substantially reducing inflation.

Profit margins have increased but productivity has declined. The neoliberal policies of ND are rapidly transforming Greece into a Third World country. The beneficiaries are the large import and export entrepreneurs and the European multinationals.

Winners and Losers

“Stabilization” is turning out to be highly contradictory, causing instead of Competitiveness, higher dependence on foreign borrowing and spurring imports which increasingly dominate the local market. Tight credit policies, lowering of tariff barriers and the absence of an industrial development program are undermining the industrial sector.

Greek industry, whose contribution to GDP amounts to slightly over 24 percent and is by far the lowest among the twelve EEC member nations, has dropped to 1974 levels. Between January-August 1991 industrial productivity declined by three percent, against a 1.1% decline during the same period in 1990, while construction declined by over four percent in 1991. Overall productivity fell 2.6% in 1990 and four percent in 1991, while private capital investments fell from 9.2% of GDP in 1990 to three percent in 1991.

During the months from January to August 1991, unemployment increased by almost 30 percent. Perhaps most indicative of the devastating effects of the stabilization program is the rising rate of business bankruptcies, estimated by the Union of Greek Banks as approximately 480 per month during 1991.

Price deregulation has also failed to produce lower prices–because of the monopoly influence in the wholesale system. During ND’s first nine months the price of basic food products rose by 40%, the cost of electricity and telephone by 15-20% and that of water by over 200%. From April 1991 to January 1992 the cost of public utilities, food and consumer goods skyrocketed again. Pharmaceuticals experienced hikes of up to 15%, electricity over 15%, telephone 12%, bread 30%, fuels 20%, car insurance 40%. Fruits and vegetables increased by over 100%.

During the Christmas holidays, in response to the frustration of consumers over astronomically high prices, the Minister of Industry and Commerce insisted that if buyers searched hard enough, from dawn to dusk if necessary, they could indeed locate goods with lower prices!

Austerity measures have had little effect in lowering inflation but have significantly reduced the purchasing power of the people. Consumption declined by nearly eight percent in 1991; over 50 percent of the Greek labor force have been forced to take a second job. At the same time the margin of profit for big business increased by 25 percent in 1990 and by an equal percentage in 1991.

Contrary to government expectations, austerity measures not only failed to reduce the budget deficit but increased it: The deficits now run to 17.9% of GDP and public debt stands at 96% of GDP. More and more people are turning to the underground economy, now estimated to be around 50% of the official GDP, while tax evasion is more pervasive than ever.

How do we explain rising deficits in the face of announced austerity programs? While ND has broken with paternalistic policies in the public sphere, it remains deeply committed to the political clientelist practices of the traditional Greek Right. To accommodate its political clientele it continues to inflate the public sector; thus nearly 200,000 public employees–full time, part-time, seasonal employees etc.–have been hired.

Greece Under Europe’s Overlords

Most of the anti-working class measures introduced by the ND neoliberal regime have taken place under the watchful eye of the EEC. Accompanying the first loan payment of the 2.2 billion European Community Units (ECUs), EEC representatives demanded additional social cuts. Shortly thereafter the government announced new measures, including an end of pension payments to thousands of elderly who had fought during the period of anti-fascist resistance and over 70 percent of pensions to the handicapped.

Prospects for 1992 are equally bleak as far as wage and salaried workers are concerned. To general an additional $4.5 billion to pay international bankers, the government is increasing public utilities rates by seven percent. The increase in prices of goods and services produced by state-owned enterprises will average 16 percent, while increases in wages and pensions will be less than half of this. The government has announced in fact that the economy will be under constant austerity until 1997.

The Maastricht treaty (for European economic unification, negotiated earlier this year–ed.), which the conservative regime of ND embraced wholeheartedly, introduced a whole new set of five tough criteria for countries to meet before they can attach themselves to a single currency. Price stability entails an inflation rate no more than 1.5% above the average of the three EEC countries with the lowest rates. National budget deficits must be less than three percent of GDP. Public debt ratio must not exceed 60 percent of GDP. Interest rates must be within two percentage points of the average of the three EEC members with the lowest rates. Currency stability requires that a national currency should not have been devalued in the last two years before entry, and must have remained within the 2.25% fluctuation margins of the exchange-rate mechanisms.

Privatization, the last major policy area of the neoliberal ND economic package, has been by far the most controversial. Scores of “problematical” enterprises–passed onto the state by their private owners who were unable or unwilling to pay loans–banks, all the enterprises of “Public Utility” and state-owned industries of strategic significance such as the arms industry, metallurgical industries, shipyards etc. are slated to be sold off to the private sector.

The regime also plans to proceed eventually with privatization of all social services (garbage collection, schools and health), the strategic objective according to the free market ideologues being to introduce “peoples capitalism” to Greek society. The regime has introduced a so-called “denationalization” law that empowers two cabinet Ministers above the parliament, the government and even the Prime Minister itself, with authority to determine in any form and shape which areas of the economy in the public sector should be privatized.

Public Pain for Private Gain

Thus far privatization of the “problematical” enterprises has been a blatant failure–both economically and socially. Only 14 among the scores of “problematical” enterprises have passed to private hands; less that $4.5 million has been deposited in a special account of the National Bank of Greece from these privatizations.

The regime is finding it difficult to locate borrowers, and as a result has opted to shut down a number of the enterprises. it is thus intensifying mass unemployment. Approximately 8000 people lost their jobs in 1991, and 7500 additional layoffs in each of the years 1992 and 1993 are predicted, as a result of the “clearing” of the “problematical enterprises.”

Current privatization legislation provides ample opportunities for past owners of “problematical” enterprises–the very ones who led their firms into bankruptcy–to regain ownership, now refurbished as the smart competitive “entrepreneurs.”

As of September 26, 1991 the government adopted a policy allowing private purchase of 49 percent of the stocks of the Telecommunications Company, the Electric Company and Olympic Airlines, while for the other enterprises of “Public Utility” it could exceed 51 percent. Olympic Airlines has already sold 49 percent of the stocks of Olympic Catering to the Dutch company Rosehill Investment Services and is looking to sell as much as 66 percent of its stocks.

What is being sold off are not unprofitable and inefficient firms; rather the regime is offering its investor clients an opportunity to skim profits from the successful Telecommunications Company and Olympic Airlines. The cement industry in Greece has also fallen victim. On March 15, 1992 ownership of Cement Halkidas transferred to multinational Calcestruzzi while Cement Hercules–the largest European cement exporter–is expected to fall soon under the ownership of Calcestruzzi and Italcementi. Both are successful profit-generating firms.

Neoliberals frequently critize state-run firms for their “inefficiencies,” but overlook public enterprises that are profitable, or which sustain losses by providing subsidized prices to the private sector. In reality privatization occurs, as the Greek case illustrates, because public forms are lucrative sources of immediate profiteering–or can become so, once the firms are free to raise prices to consumers. Privatization has less to do with abstract arguments for “efficiency” than with shifting revenues and profits from public to private accumulation.

Currently the government is concentrating its efforts in the state shipyards–a strategic area for economic and industrial development. The EEC is insisting that the state shipyards be either privatized or liquidated. An October 24, 1991 report by the EC’s Committee for Industrial Policy projects a very prosperous future for a privatized industry.

State shipyards are now under public supervision through banks that belong to the National Bank of Industrial Development (ETBA). Under pressure from both domestic and foreign conglomerates, because of the enormous debts accumulated over the years by the state shipyards, the government is determined to transfer all property–land, buildings and machinery–to EBTA, which in turn will decide to close or privatize.

The administrative council of the state shipyards was replaced in late December 1991, because of its opposition to government policy, and conservative loyalists took over. The proposed privatization of the state shipyards will lead to two-thirds reduction of the work force. Those who remain will be subjected to more stringent employer-dictated work relations.

The state shipyards are among the most potentially lucrative enterprises up for sale. The Greek Shipyards Skaramanga repair on average 180 ships yearly and those of Elefsina Shipyards S.A. about 160. They are both among the largest shipyards in the Mediterranean basin: The Greek Shipyards Skaramanga earned $110 million in 1991. But they will obviously be offered at a bargain basement price, as is Elefsina Shipyards S.A., offered for sale for $33.5 million when their value has been estimated at $222 million.

Cheap buyouts of public firms and the rechannelling of profits deprive the state of revenues, and divert private investment capital from creating new enterprises. The government is also planning now, in accordance with EEC demands, to privatize the country’s insurance-pension system. Under the conservatives Greece has become a “nation for sale.” The regime has even gone to the extreme of putting up–for sale to private individuals–35 Mediterranean islands!

The Comeback of Torture

The introduction of free markets and the implementation of austerity measures has been accompanied by strengthening the repressive apparatuses of the state. The government of Mitsotakis has demonstrated that the politics of the traditional Greek Right (relying on the use of force and intimidation to secure its goals and objectives) remain very much a part of the strategy of the economic neoliberals.

The government has introduced anti-labor legislation seeking to legalize the right to “counter-strike,” i.e. emloyer lockout, which strengthens the authority of employers to fire striking workers, hire replacements and impose harsh penalties on those unions that infringe on management prerogatives.

It has enforced “anti-terrorist: laws that violate basic essential civil rights by prohibiting newspapers from printing announcements stemming from “terrorist organizations.” Numbers of newspaper editors and journalists have received stiff prison sentences for having the “audacity” to inform the public of the demands of “terrorist” organizations. It has passed legislation prohibiting citizens from placing political posters in public places, and has prohibited by executive fiat political gatherings in public workplaces.

The neoliberal regime has also demonstrted no hesittion about employing brutal force in dispersing demonstrators and strikers. Under the conservative regime police brutality is widely practiced once again inside police stations, a practice that recently prompted Amnesty International to charge the ND government with the use of torture.

Municipal workers, health employees, bank and metal workers have engaged in militant strikes and have been countered by the heavy hand of the state. Thousands of workers in each case have taken their turn marching through the streets of Athens and Salonica during the first six months of 1992–and a hot fall is predicted by most trade union activists.

The current political situation in Greece as regards the forces of the Left, however, is not very promising. PASOK has long ago ceased being an explicitly modernizing socialist party and thus, while good at criticizing the policies of the neoliberal ND regime, would do very little to reverse these. PASOK is also dependent on EEC loans.

The Communist Left, for its part, is not only too fragmented these days to play any major role in political developments, but seems to have lost the capacity to provide real alternatives. The Greek Communist Party (KKE) in the last two years has lost thousands of members and supporters because of its long-standing Stalinist refusal to accept internal dialogue (it continues to expel people at the drop of a hat), while the Communist Youth Organization (KNE)–considered not long ago as the most active, best organized and highly disciplined communist youth organization in Western Europe–has split into three factions.

On the other hand, the Coalition of the Left (Synaspismos) remains a very loosely organized multitendencied movement and lacks a coherent program. New political movements that are more open to internal dialogue and capable of elaborating programs that build on promoting new models of economic development, and a new civic consciousness that respects the distinctness and autonomy of social organizations in civil society, are therefore a must for effectively challenging the irrational and humane project of neoliberal capitalism.

September-October 1992, ATC 40