Dimitris Rapidis

Greece’s Debt Paradox

There is a well-founded “leitmotif” in Greek politics since 1980: when a party governs it tends to address national interest when declaring privatization of public-led institutions. On the other hand, opposition is vaguely talking about depreciating national goods. When terms alter, the latter mimicks the first and the same rthetoric is reproduced vice versa.

This “leitmotif” is alive in two myths entailing Greek growth. The first wants Greek private economy as a boosting horse ready to flight in the sky of creative entrepreneurship, but yet it gets bound by a huge bureacratic system that has to decrease. The second myth sees Greece chained in Caucasus and being destroyed by the vulture of neoliberalism -which by the way is consistenly supported by all governments since 1991 and on. Myths are resilient in time and in reality.

The fact that public spending as percentage of national GDP is not declining from the average European one should convince that the problem of the Greek state is not a problem of size. In the contrary, it should put all parts involved into second thoughts that Greek entrepreneurship is not finally the boosting horse that everyone is dreaming of. It should also concern all those who have seen that during the 2002 and 2009 period (i.e. having one of the lowest ever fiscal rate for investing), investment rate remained standstill despite higher growth rates due to the Olympics in 2004. By the same token, job creation remained relatively low comparing to the well-qualified and skilled people entering the job market.

In addition to that, it is also paradoxal the fact that after almost 20 years of neoliberal politics in Greece the size of the public sector remains unchanged and that public spending increased by 50%. The Bank of International Settlements comes to prove these facts about the overall debt of the Greek state by pointing out the following: that while in all countries of the developed world family debt and debt of non-banking entreprises is double of triple of the public debt, in Greece public debt is higher, much higher from the overall debt of families and entreprises (i.e. 160% instead of 100% of the GDP).

How this Greek decline is explained? Why during the years of the global bubble of cheap money and inflated lending this bubble got established in the private sector all around the developed world and only in Greece it became public?

The answer is very simple: Greece was borrowing and distributing lending money baptizing it as public spending to salaries, special grants, recruitments, public contracts to its cliency whatsoever. This vicious circle finally proved that Greek capitalism is neither state-centric nor neoliberal but it is simply parasitic. This is a deep, structural feature of Greece’s public system that has to be changed. Otherwise paradoxes and myths will continue plunging Greek economy and society into a deadlock with no return.

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