Greek crisis a distraction from EU's true economic problems

Greece's problems are nothing new and incompetent economic governance extends to other member states, writes Cora van Nieuwenhuizen.

By Cora van Nieuwenhuizen

23 Jun 2015

"Gentlemen. Regretfully, we are bankrupt", the Greek prime minister announced to parliament as Greece, following years of wasteful spending and corruption, finally defaulted on its debt. 

This, however, was not Alexis Tsipras - at least not yet - and the bankruptcy he referred to is not the one that is currently feared or expected. 

Those now-famous words were uttered by Charilaos Trikoupis - on 10 December 1893. Trikoupis' announcement stuck, as did the Greek habit of not repaying foreign debt creditors.


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In recent months, all eyes have been on Greece. Reports have exclusively focused on the here and now and on how to overcome Athens' problems. Through this fixation, we have lost sight of two vitally important truths. 

First, these problems are nothing new. The roots of Greece's current predicament - corruption, wasteful spending, a powerful oligarchy and a lack of economic modernity - also formed the basis for its 1893 default. Even the solutions remain unchanged: back in 1897, a European commission was tasked with restructuring the Greek debt.

Second, this historical pattern of economic stagnation, unsustainable public finances and incompetent governance is not limited to Greece. 

In France, the current Socialist government's U-turn on economic policy, culminating in the passing of the 'Macron' measures - authored by economy, industry and digital affairs minister Emmanuel Macron - are reminiscent of former French president François Mitterrand's 'tournant de la rigueur', a half-hearted attempt at restoring France's economic competiveness in the 1980s. 

Since then, however, France has never recorded a budget surplus and has slumped to 23rd on the global competiveness index, far behind Germany - fifth - the UK - ninth - and the US - third. 

Italy's competitiveness record is even more dramatic - the country is currently 49th in the world, just ahead of Kazakhstan. Good governance is also a major issue, with Italy consistently ranking as the most corrupt country in western Europe. As a result, Italy's GDP is the same now as it was in 1996. 

Despite all this, it is countries like Italy and France which have failed to reform their economies and implement EU country-specific recommendations, aimed at modernising the economy and government. 

Stepping back and examining how to reform the single currency and the rules of its economic and monetary union (EMU), we should look beyond the so-called 'Grexit'. 

Our fixation on the soap opera that the Greek crisis has become is distracting us from a bigger challenge: turning Europe as a whole into a competitive and modern continent, with competent governments and vibrant economies that attract investment from all over the world.

Ultimately, this requires a willingness to make the necessary reforms on the part of the member states. Final accountability for this must lie at the national level. 

Still, the EMU can do more to help achieve this; its rules should 'level up' instead of down: rules governing macroeconomic imbalances should stimulate external competitiveness, not punish countries with export-driven economies. 

Similarly, money dished out under the EU's agricultural or structural funds should only be granted to countries that implement economic reforms. 

The same is true of guarantees under commission president Jean-Claude Juncker's new investment plan - private investors will only invest in countries with economic potential and legal and political stability. 

In the words of Heraclitus, another Greek, "everything changes and nothing stands still". The world economy is changing, and Europe's economy must change with it. It is time EMU rules reflected this reality. 

Read the most recent articles written by Cora van Nieuwenhuizen - Why FinTech must be high on the EU agenda

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