Gerassimos Moschonas

"Without understanding the meaning of an action,

there is nothing to explain"

Moshe Czudnowski

“The problem of governance questions Greece's ability to remain part of the EU's core"

Featherstone and Papadimitriou (2008: 205)

"It is a thousand times easier to vanquish the

centralised big bourgeoisie than to

"vanquish" the millions upon

millions of petty proprietors”

V. Ι. Lenin

The paper is part of a more comprehensive project about the Left in Europe with the tentative title European Union, the New Shape of Politics and The Left: The Project of Social Transformation in the Long Durée.

I am interested in the story of PASOK from a more general perspective.

1. How did Greece get into this mess? What was the specific contribution of PASOK to the debt crisis?

2. What kind of party was it? There will be an evaluation of PASOK in the light of the European social-democratic model.

3. Can PASOK’s failure teach us something - and what - about the policies of contemporary European social democracy?

In October 1981 PASOK became par excellence the governmental party of the country (it remained in power forming single majority governments for twenty-one out of thirty-one years of the period 1981-2012).

1981 – 1985 s.m. government Andreas Papandreou

1985 – 1989 s.m. government Andreas Papandreou

1993 – 1996 s.m. government Andreas Papandreou

1996 – 2000 s.m. government Costas Simitis

2000 – 2004 s.m. government Costas Simitis

2009 – 2011 s.m. government George Papandreou

  1950-59 1960-69 1970-79 1980-89 1990-99 2000-09 2010-12

Spain     29,9 43,9 38,2 40,2 28,7

Portugal     33,4 26,4 39,0 39,928,1

Greece     19,5 43,4 42,3 41,6 12,75

Average     27,6 37,9 39,8 40,6 23,8

The familiar picture of declining strength of social-democratic parties changes considerably when one looks to the south.

The southern pole, before the debt crisis, is by far the strongest in European socialism --a major novelty in the electoral history of socialism.

PASOK and PSOE were, since the beginning of the 1980s, the most successful duo in the European socialist family.

PASOK obtained just 12% of the vote in the elections of June 2012.

A significant programmatic actor and an even more significant electoral entrepreneur is now struggling for survival. Why?

Data base: Moschonas. Averages calculated by the author

Data base: Moschonas. Averages calculated by the author

How did Greece get into this mess? PASOK’s fiscal policy (1981-1989 and 1993-2004)

L'opinion dominante selon laquelle l'Etat grec a toujours été "gaspilleux" est l'un des mythes les plus erronés qui circulent sur le marché international d'idées.

Dans la période de l'après-guerre, jusqu'en 1980, à l'exception de la relaxation légère de la première période démocratique (1974-1980), les gouvernements grecs ont poursuivi - avec une assiduité "allemande«  - des stratégies de discipline budgétaire

La faillite du pays: c’est une affaire récente , une affaire de gauche (avec l'aide discrète mais importante de la

droite).

In 1981, the year the Greek socialists first came to

power, PASOK, with a Keynesian programme

attempted to revitalize economic growth (which had

fallen to just 1 per cent of GDP in 1980, while inflation

reached 24.5 per cent), and to implement what it

called ‘the third way to socialism’. A central element

in PASOK’s economic and social policy, which

was also central to the party’s political image,

was a policy of redistribution in favour of lower

classes.

a) blue- and white-collar workers on the lowest rung of the pay scale would be granted 41.7% to 53.5% increases (on average there was a 46.4% increase in the basic wage, an increase approximately double than that of the previous year);

(b) automatic wage indexation: wage levels were to be adjusted automatically every four months so that wage and salary earners would be compensated for the intervening rise in the cost of living;

(c) collective bargaining would be empowered to yield higher increases but not lower.

It is worth noting the more than doubling of farmers’ pensions and the establishment of separate pensions for farmers’ wives

This policy carries an indirectly but clearly redistributive connotation, the ‘countryside’ being – according to dominant sentiment in Greece at the time – the poorest part of the country.

“The pay increases […] were unexpectedly large even for the recipients themselves. The objective was that they should be engraved in people’s memory for years” (my emphasis) (Iordanoglou).

In Greece, after PASOK’s first term of government (1981-85), people were often heard to remark: “even so, PASOK has given money to the poor”.

PASOK was a redoubtable political entrepreneur and it was aiming very high. Through its incomes policy It had just launched what was to be a more than thirty-year ascendancy.

In political terms, it sought to establish the image of a popular party of the Left.

PASOK always had a master narrative: left-

populist under Andreas Papandreou, modernizing under Costas Simitis.

The establishment of the National Health System in 1983 was the capstone of the process of constructing a genuine welfare state—and a further, highly symbolic move towards strengthening the party’s left-wing image. Health expenditure doubled, going from 3.4% of GDP in 1980 to 5% in 1984 and 7% in 1989.

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

10,2 12,3 14,5 15,1 15,4 16,0 15,8 15,8 14,6 15,5 16,5 15,9 16,1 17,0

OECD, (2011).

A qualitative leap in social expenditures

Steep overall rise in social expenditures from a modest 10.2 percent of GDP in 1980 to 16 percent in 1985 (the end of PASOK's first term in office), stabilizing at 15.5 percent in 1989 (the end of the party's second term).

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981

0,6 0,1 - - -1,2 -2,6 -1,5 -2,2 -2,6 -2,1 -2,3 -7,8

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

-6,5 -6,7 -7,6 -10,4 -8,6 -8,6 -10,3 -12,1 -14 -9,9 - 10,9 -11,9

Πηγή: OECD Factbook 2010: Economic, Environmental and Social Statistics

Until 1980, with the mild exception of the1974–80 period, postwar Greek governments had pursued—with “German” assiduity and success—policies of strict fiscal discipline

PASOK’s first period in government (1981–89) represented a decisive break with the totality of postwar fiscal policy.

The government deficit more than tripled in 1981, to almost 8 percent of GDP and climbed to 12 percent in the closing year of PASOK's second term.

A long post-war tradition of balanced (or approximately balanced) budgets was abandoned. From that time onward, Greece entered a high-risk zone from which it has never succeeded in extracting itself.

Overall, a generous wages policy (especially in 1981-83), the upgrading of the lowest pensions (and the rise in the number of beneficiaries), the indirect nationalisation of firms in difficulty, the increase in the number of civil servants, the traditionally high expenditure in the ‘defence’ sector and, last but not least, PASOK’s manifest failure to curb major tax fraud – these dramatically deepened the public deficit and national debt.

Source: OECD Economic Outlook No 89, May 2011

  1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Greece 94,5 94 103,4 103,7 101,7 97,4 98,9 100,3 106,1 105,4 110,7 127,1 142,8 152,5 154,7

Eurozone 72,7 71,9 69,3 68,1 67,9 69 69,5 70,1 68,4 66,2 70 79,4 85,5 88,4 89,3

Source: Eurostat, Ameco

1979-1980 1987-1988

Total 30,3 35,8

Income tax 5,2 5,9

Indirect taxes 14,3 17,4

Social securityContributions

9,1 11,1

Πηγή: OECD Greece 1990: 52

For a party proudly asserting its left-wing identity and pursuing an economic line against the grain of European economic policy in the 1980s, this is doubtless surprising.

PASOK was never a ‘tax and spend party’ – the traditional image of the British Labour Party. Instead, it was a ‘don’t tax – just spend party’.

The failure of ‘economic leftism’ dictated the turn to a policy that was more or less respectful of liberal orthodoxy (1993-2004).

The governments of C. Simitis (1996-2004), which initiated a vast programme of privatisation and market liberalisation, succeeded in reducing inflation and public deficits and – above all – in presiding over a period of strong growth, the strongest since 1981.

But not everything was rosy. The balance of trade underwent significant deterioration throughout the Simitis period. It became the second highest in the EU, after Cyprus, and in any case was much higher than in comparable countries such as Spain and Portugal.

The Greek economy appeared to be “strategically trapped” between the low-labor-cost economies and high-labor-cost high-innovation economies.

With debt fluctuating at levels of around 100% of GDP (101.1% in 1995, 103.4% in 2000, 98.9% in 2004) for all the high-growth rates, the country appeared—in terms of this indicator too—to be strategically trapped inside the high-risk zone in which the fiscal management of the 1980s landed it.

Moreover, during Costas Simitis’s second term (2000–2004) there was again an obvious relaxation of fiscal discipline.

Έτος

Nominal GDP

growth

Tax revenues change

Tax revenues elasticity

VAT revenues change

VAT revenues elasticity

(%) (%) (%)

(Ι) (ΙΙ) (ΙΙ)/(Ι) (ΙΙΙ) (ΙΙΙ)/(Ι)

1997 10,70% 14,90% 1,39 13,70% 1,28

1998 8,80% 16,30% 1,86 11,20% 1,28

1999 6,50% 12,00% 1,83 9,70% 1,48

2000 20,90% 11,20% 0,54 14,90% 0,71

2001 7,40% 2,40% 0,32 6,60% 0,88

2002 7,00% 8,20% 1,18 11,70% 1,68

2003 10,10% 3,00% 0,3 2,90% 0,29

2004 7,80% 7,10% 0,91 11,40% 1,47

2005 5,10% 6,60% 1,29 2,80% 0,55

2006 8,20% 6,90% 0,84 12,00% 1,47

2007 7,50% 7,60% 1,01 9,80% 1,31

2008 4,30% 5,50% 1,28 5,00% 1,15

2009 -0,80% -2,70% 3,32 -9,10% 11,35

Πηγή: Έκθεση Κυβερνητικού Προϋπολογισμού, Υπουργείο Οικονομικών, 2010

For all its great successes at the level of European politics, improvement in the macro-economic indicators, and shaping of a more modern and culturally more liberal Greece, the PASOK of Costas Simitis failed to carry out a radical fiscal adjustment in the favorable conditions of economic growth and low interest rates.

The countdown towards bankruptcy had just begun

1960 1980 2004 2005 2006 2007 2008 2009 2010

Greece 20,6 29,0 45,5 44,6 45,2 47,6 50,6 53,8 50,2

Eurozone 30,4 45,0 47,5 47,3 46,7 46 47,1 51,1 50,9

Πηγή: Για τα έτη 1960 & 1980, Χαρδουβέλης 2008:103. Για τα έτη 2004-2010, Eurostat, 2011, http://epp.eurostat.ec.europa.eu,

1998 1999 2004 2008

Greece 34,3 35,4 33,3 35,1

Eurozone 42,3 42,8 40,7 40,9

Πηγή: Eurostat, Statistics in focus — 23/2010. Economy and finance, Author: Alessandro LUPI

The logic of numbers does not allow any hesitation in diagnosis. The Greek debt is the product of thirty years of deficit budgets driven by the low level of tax receipts. This is the “fatal deficit.”

Despite neoliberal affirmations, Greece’s fiscal catastrophe cannot be attributed to the size of the state, which nevertheless ceased being small a long time ago.

For a political system with a stable electoral dominance by the broader Left and with governmental dominance by the Socialists, the prevalence of tax evasion constitutes a major political and economic scandal.

The term “scandal” is not a matter of

polemics. What kind of social-democratic party was this that based its taxation policy primarily on the tax-paying capacity of wage-earners?

1960-69 1970-79 1980-89 1990-99 2000-08

8,51 5,53 0,77 2,12 3,97

Source: Eurostat

Source: European Commission

Source: European Commission, Autumn Forecast 2013.

Source: General Accounting Office, European Commission

Source: Eurostat, EU-SILC

Between 2009- 2012:

• Gini index of inequality rose by 10% (despite reletively well-targeted measures)• Average disposable income declined by over 25% (due to sharp decline in economic activity and part reliance on tax increase in fiscal consolidation)• Relative poverty rate rose from 19.7% to 22.4%• «Anchored» poverty rate rose from 19.7% to 42.1%• Share of population in «severe material deprivation» rose from 11% to20%• Share of population at risk of poverty or social exclusion rose from28% to 34%

The debt crisis in Greece indicates the importance of “five plus one” factors for the European Left. These are:

a. an effective tax system; b. a well-targeted policy of wealth

redistribution; c. an effective policy for the state; d. a productive modernization strategy for

the economy; e) the difficulty to “sell” austerity.

The base as well as the common denominator of all the previous is a set of collective values that would provide all four factors with meaningful left consistency. This set of collective values is called “social-democratic ethos”.

This “ethos” serves a regulatory function: it establishes an atmosphere of ideas, defines mentalities, sets internal limits that a party should not overstep. PASOK, for reasons to do with its history, is a precursor: it has already arrived where the other social-democratic parties are headed.

The Greek debt crisis has a strong domestic dimension to it.

Given the brevity and peculiarity of PASOK’s history it would be easy to conclude that PASOK expresses Greek exceptionalism. To a great extent it in fact does. But it is an extreme case which makes it possible to see, as if from a privileged observatory, tendencies that embrace less extreme and more 'normal' cases.