Ex-PM Simitis: “Greece did not Cause the Euro Crisis” – Greek Recession at -18%?

Posted by in Economy

 “My country was the spark, but it merely exposed the inherent flaws within the eurozone. ” The Greek prime minister who took the country into the euro zone Costas Simitis published an article at the British The Guardian. He speaks about deficits and successful measures, but blames the the European Union for failing to achieve a thorough economic governance. But most important of all, what hits our eyes, is that he claims, that Greece’s recession “is estimated to have reached -18 percent”! – Or is it a typo?

Together with the chairman of the Foundation for Economic and Industrial Research (IOBE) Giannis Stournaras, Costas Simitis (PASOK) gives an answer to those EZ members claiming that Greece entry in the Euro area was a mistake.

“In the mid-1990s, Greece made a formidable effort to meet the convergence criteria. It employed all available means: budgetary policy, monetary policy, income policy and extensive privatisation of banks and public enterprises. By any measure of fiscal performance (cash or national accounts), the government deficit fell by 10 percentage points, from 12.5% of GDP in 1993 to 2.5% in 1999, the year whose economic statistics were used by the European Council at Santa Maria da Feira in June 2000 to endorse Greece’s eurozone participation.”

Simitis also notes, that Greece’s performance was also positive with regard to the other nominal convergence criteria (inflation rate, long-term interest rates, public debt and exchange rate) and that Greece euro admission was amde after exhaustive scrutiny of the Greek economy and respective reports by the European Commission, the European Central Bank and the Economic and Financial Committee.

The former prime minister speaks of implemented tight budgetary and monetary policies, of reduced government deficit and inflation rates and of GDP growth:

“From negative growth in 1993, it rose to 4% by the end of the 1990s and remained at that level until 2007.”

2007 was the year when socialist PASOK lost the elections and conservative Nea Dimokratia under Costas Karamanlis came into power.

BlamingNea Demokratia for the economic disaster because it  changed ” the method of recording defence equipment expenditure, so as to lighten the budgetary burden during its term of office” and European bodies, Simitis stresses:

“The responsibility for this certainly lies with the New Democracy government of Greece at that time. However, it also lies with AMECO [/Eurostat] and the European Commission, which simply adopted the (revised) budgetary data issued by the Greek government of the day.”

Speaking about the Goldman Sachs currency swap, he writes:

“On this subject, we also note that an attempt has been made recently to defame Greece in connection with a conventional currency swap between the Greek economy ministry and Goldman Sachs at the end of 2001 – one out of hundreds transacted at that time by all member states in straightforward acts of public debt management. Once again, it was said that Greece had cooked its books so as to enter the euro area: again this became a headline and was adopted by many politicians. Yet the fact that the swap took place two entire years after 1999, the year on whose economic data Greece’s entry to the eurozone was decided, and one year after the European Council of Santa Maria da Feira endorsed Greece’s entry, appears to have been forgotten.”

Costas Simitsi defends the “stabilisation measures in Greece since May 2010″  stressing that they have significantly improved fiscal performance and competitiveness” although they also pushed the country into a deep economic recession, unemployment rise and impoverishment of parts of the society.

“The recession, initially predicted by the IMF to be -7.5% between 2009 and 2012, is now estimated to have reached -18%, resulting in a failure to meet other targets and generating intense social unrest.”

Finally Costas Simitis blames the European Union for failing to have created an overall framework of economic governance and to have taken measures for economic growth in order to close the gap between the developed core of the EZ and the less developed countries.

Full Article in The Guardian