Crisis in the Eurozone: A Greek perspective

with Dr Tereza Capelos and Dr Theofanis Exadaktylos
Our in-house political psychology and behaviour expert, Dr Capelos, cross-examines our in-house Greek politics expert, Dr Exadaktylos, in an effort to make sense of current developments unfolding in the Euro-area and Greece itself. The exchange took place between 11.40 and 12.40 local time

Tereza Capelos: So, Theofanis, what is the current situation? Plenty of uncertainty and an increasing feeling of threat among Greek citizens: what can we say about the way the political situation is developing?

Theofanis Exadaktylos: So here’s where we are at the moment: The Greek government is in the middle of a vote of confidence procedure within the Parliament. The Greek PM seeks to secure the parliamentary majority that will allow him to ratify the rescue package agreement that was agreed in the Eurogroup summit in the morning of 27 October, and then proceed with calling an early election that will be bound by the implementation of the agreement. The governing party of PASOK currently has a majority of +2 in the parliament. According to the procedures the PM needs to secure the simple majority of the MPs present in the Parliament at the time of the vote. This means that even if a few of MPs rebel against the PM or opposition MPs do not participate in the vote, he still has chances of winning the vote given the stance that the independent MPs may choose to take as well.

TC: But how did we get to this point? What was the whole gamble about of holding a referendum for the Eurogroup agreement that brought the whole of Europe and the world to a standstill? Would you say it was a successful gamble?

TE: Although the Eurogroup agreement may look favourable for the Greek economy and the sustainability of the Greek debt, it is much more than this: it presupposes the strict implementation of austerity rules until 2020, in a country that has already suffered 3 years of extreme austerity for the middle and lower incomes and which is trying to raise taxes in a climate of recession which deepens every month. This [referendum proposal] was a personal gamble: George Papandreou, carrying a certain political heritage made this his personal bet in order to bring his opponents in confrontation with their responsibilities.

TC: And would you say that he succeeded in this risky tactic?

TE: This move was successful in many ways despite being handled badly by the media. Let me explain: In order to have successful implementation of an austerity plan, any given government needs to have a wider consensus within the parliament to ensure that reforms and measures will be carried forward. Papandreou is still facing stark opposition by the centre-right party of New Democracy who is promising a renegotiation of the terms of the memorandum of understanding signed between Greece and its lenders. Realistically this is not an option and that was quite obvious by the reaction of the Merkozy team in Cannes two days ago. Hence putting forward a call for a referendum served a purpose of bringing into accountability the opposition leader and his party to agree and guarantee the implementation of the Eurogroup agreement of 27 October. At the same time, it sought to appease those who criticized him for passivity and called him weak and a traitor. At the same time he demonstrated to the European counterparts that even if Greece is a small partner within the European Union and the Eurozone, it can still have a strong say in the decision-making procedures as an equal partner.

TC: Regarding political responsibility, you would agree that both parties have been responsible for the size of the Greek debt, promoting increased borrowing in the last 15 years.

TE: Absolutely. What we experienced in Greece since the restoration of democracy, was an environment of cronyism and favouritism which served short-term political gains and securing the re-election of governments. The public sector was basically used as a means to divert this favouritism and operated heavily in a clientelistic and inefficient way. This abuse is to blame for the mismanagement and the inflation of Greek debt. Both major parties have a share of responsibility towards this condition.

TC: From an analytical point of view it is interesting to examine how the public reacts emotionally to the strategic games of the political elites and the role of the media – you mentioned this briefly above… Let’s look at the international media – BBC for example has been quick to offer verdicts on the situation. Today Mark Erban notes that Papandreou is losing the euro-poker game. How does this affect interpretations of the strategic tactics of the Greek Prime minister abroad?

TE: The role of the media in general is in fact more than crucial. What national media have achieved within the borders of Greece is to infuse a certain panic and fear to the Greek population. For the past two years, the main news reports on television are dealing with nothing but when and how the Greek economy will collapse or the state will go into bankruptcy. What this has effectively achieved is postponing recovery, as the average Greek viewer was bombarded by news about the negative economic climate which did not allow the reforms to go forward and spurred extreme reaction in some cases.

TC: The Greek media to an extent reflect national sentiment fuelling, if you will, the public’s anxiety and fear. If the media interpret the news, and tell their audiences what to think about, it is important to look at the ‘interpretations’ the international audiences have been exposed to. What would you say about the role of international media in all this?

TE: The international media have their fair share of the fault. By taking up or exposing only stories that sell more in their national contexts, the international media have overly exaggerated certain aspects of the Greek state and economy, as well as the effect of demonstration and other forms of protesting. In fact, in certain cases, the international media are quick to predispose the markets but also the political reactions. Let’s take a look at the German press for example: Publications like Das Bild, which admittedly carries little clout in terms of its quality of journalism, has been crucial in shaping up political developments in Germany and within the German electorate, by blaming Greece for all evil within the European Union or the Eurozone or the state of the German economy. By fuelling the internal debate and by being a true opinion shaper for the average German voter they have managed to turn the German population to a Eurosceptic one.

TC: One would argue however, that the news media have an interest to fuel debates which they publish – after all this generates sales…

TE: That’s true, look at the BBC: while the Prime Minister was preparing for the vote of confidence the BBC was broadcasting ‘safe’ information that he has resigned or that he was about to offer his resignation… That spurred a lot of confusion not only among the international audiences (see for example the reaction of the markets) but also within European leaders.

TC: Would you attribute this to “impatient sources” or something more serious?

TE: I think it’s simply irresponsible behaviour on the BBC side of things or a certain over-reliance to unreliable sources (who they also never mentioned)…

TC: Someone then was quick to talk without weighing the facts… Precisely what should be avoided, given the current fast-pace changing political developments! Let’s talk a little about the new ‘Confidence Government’. Do you think it will manage to induce confidence in the electorate, and the political audiences abroad? We know that political trust is the essential ingredient for any reform moving forward – but will this new government, that is a transitional solution, be able to inspire trust and reliability?

TE: I am in full agreement with you, Tereza. Therefore the new scheme that will emerge following the vote of confidence has two roles to play: first, ratify the agreement for the rescue plan on offer, and second, ensure that any subsequent government will respect this agreement and will carry forward implementation of reforms and other measures that guarantee fiscal discipline and the jumpstart of the Greek economy. In my opinion, should the PM win the vote of confidence shortly after midnight tonight, he should start working immediately for the formulation of this transitional government entrusted with the two tasks above, will actually appease the Greek population for the time being, but also appease the markets and the European partners that Greece is still serious about carrying reforms and is still considering itself as a full member of the Union and the Eurozone taking seriously all rights and obligations that this membership implies.

TC: The substantive question is: does institutional confidence translate in citizen confidence? I refer to confidence among publics at home and abroad. Are we assuming that the Greek voters trust a transitional government? After all, citizens have been expressing their discontent with the political elites for some time now! What seems to be an institutional solution, might not bare the fruit of social cohesion in practice. So here we have a contrast between the institutional plan and the social realities at work.

TE: Ah ha! That’s an interesting observation since what the new transitional scheme promises to do, is to work in a cooperative fashion with the main opposition party to lead, eventually, to general elections. Now this is tricky business, since Greece has a poor history of interparty cooperation inside and outside the parliament.

TC: Speaking of elections, and drawing from theories of political psychology, we expect that the uncertainty and increased perception of threat colours the way citizens perceive what has been happening, and the country’s prospects. We would expect citizens to rely less on party identification and more on information on the crisis when they reach their judgements: how will this influence the results? What are your projections about how parties will fare in these future elections?

TE: This is a truly important question and I think there are two scenarios here: either the politics of fear kick in and the electorate will concentrate to a single party in a way that offers it parliamentary majority and a stable government, or because of political mistrust, the opinion polls will be verified and then we are looking at the biggest fragmentation of the Greek parliament in its history. Current opinion poll surveys show the lowest recorded combined percentage for the two major parties (PASOK and ND) and the presence of at least another six smaller parties. That means that if we take scenario number two, the first party in votes will have to form some sort of coalition with smaller partners (possibly two). Historically, there is little precedence of coalition governments in Greece and, all of those have failed.

TC: Looking at studies that examine the processes citizens follow when they cast their ballot under different affective states we see a clear pattern in US electoral contests: Anger promotes polarization and voting on the basis of partisan heuristics, that is, the old party attachments that we political scientists measure as party identification. On the other hand, fear promotes alternative vote tactics at the individual level – weaker reliance on party bonds and stronger reliance on policy considerations and new information. In this particular case, new information would be the state of the economy and the parties’ ability to resolve the crisis. Effectively, the party that is more successful in proposing a safe way out of the mess has the potential to capture voters’ support regardless of their party identification. And this brings me to my next question: which party is more capable to offer such a solution? Do we have evidence of a solid plan put forward by any of the political parties, big or small?

TE: That’s the interesting thing in Greece. It seems that there is no party at the moment that can guarantee a safe way out of the mess. The Greek electorate has now become even keener on the idea of political cooperation across parties, and I think that will be the message that will come out of the next election. There are no concrete party platforms out there and any plans that exist do not seem to be pragmatic or taking the current situation into serious consideration. In any case, we need to be extremely careful in assessing a situation that is still in flux, and we need to be assessing the state of play after political actors have made their final moves.

TC: We have to wait and see then, which brings our conversation now to more international concerns. What does this effectively mean for the Euro?

TE: In my opinion, the reaction of the Merkozy team reveals a certain degree of nervousness (and at times, of panic). The change of heart in Cannes shows that well. It is highly unlikely that Europe put together a plan B that excludes Greece from the Eurozone, and ensures that the crisis does not spread to other countries. In fact, this stance has led to the merciless targeting of the Italian government bonds and raised questions about the sustainability of the Italian debt and Berlusconi’s structural reforms.

TC: The suggestion definitely provided some comfort to the markets though…

TE: True, but the point was different. What we have experienced in the last few months is that the Euro may not be in danger only because of the markets, but also because of national electorates (as The Economist suggests today) which have been entangled into domestic deliberation in a biased way that serves national governments’ short-term political gains more than the long-term future of Europe.