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Expert Analysis: Why Is Greece No Longer Making The Headlines?

Greece

The position of Greece in the EU has been consistently weakened since 2010, but this does not count for its place in the NATO and in the Balkans.

Greece remains the black sheep of Europe with regards to its economic features, having the highest rate of unemployment in the EU, after eight years of recession.

After the turbulent summer of 2015, Greece is no longer in the headlines of news, as Brexit and the rise of far-right movements in Europe posed the greater threat to the future of the EU.

The question that needs to be answered now is whether Greece remains a threat to the stability of the EU and the euro. My position is that, although Greece accounts for a small portion of the European economy, it still plays an important role in both symbolic and pragmatic terms in the future of the EU, while its position in the Balkan region and NATO has relatively maintained the same.

What lessons can be drawn from the relationship between Greece and the EU?

Greece’s position in the EU started to be problematic in 2009 when Papandreou’s government admitted that Greece’s fiscal deficit was 12.7% instead of 3.7%. The latter created not only fears for a possible snowball effect but also created a feeling of distrust for the Greek governments that would follow. Things got worse when Syriza government brought Greece on the verge of Grexit.

The position of the EU through all these years proved to be rather cohesive. The EU and the IMF had the first say in the negotiations of each program, as the risk of a debt default had always been a threat to the stability of each Greek government. Greece could do nothing else but to agree with the positions of its lenders. Even now, the completion of the review on the 2nd of May and the measures that were agreed between the three sides (Greece, IMF and EU institutions) will be the roadmap of the Greek policy until 2021. The lesson that can be drawn is that the EU behaves in a rather cohesive way, maintaining its positions, even though it might lead to Greece’s departure from the monetary union.

Conversely, Greece’s position in the EU has been decisively weakened all these years both in economic and political terms. Adding to this, the relatively resilient stance of the market on June of 2015, proves that fears for a Grexit have evaporated or are not as substantial as they were in 2010.

Although economic importance of Greece has weakened all these years, Greece can determine future political and economic policies in the EU. The problems that emerged between the EU and the IMF concerning their divergent forecasts about the Greek economy and the sustainability of Greece’s debt, is a thorn in the side of the EU and particularly the German government.

The latter faces a difficult dilemma between accepting a debt relief or continuing the program without IMF’s participation. In both cases, Merkel will be weakened in its race for the German elections. Moving forward, the creation of a European Monetary Fund, as Schaeuble announced in March could solve this problem. A solution like this, though, would be possible after the German elections. Consequently, the outcome of the negotiations and the future of Greek economy may result in more European integration.

Greek politics matter for another reason. Initially, the rise of an anti-systemic party coalition between Syriza and Anel spread fear for a spill-over in other countries, like Spain. Nevertheless, Tsipras’ failure to promote his agenda and his subsequent compromise with Greece’s lenders brought the first win of the EU against populism. This win is reflected in the polls that give small rates to anti-systemic parties, like the neo-nazi Golden Dawn and the communist party. All this boils down to the fact that a possible success story of Greece will be a symbolic win for Europe.

Greece and its role in the NATO and the Balkans

Greece and its role in the Balkan region and NATO remains relatively strong in comparison to its economic power.

Greece remains the second country in military spending as a percentage of GDP and its geostrategic position in South East Mediterranean is suitable for military exercises. The American base in the gulf of Suda remains of great importance for the whole region.

Greece is an important player in the Balkan region especially because of the strong presence of Greek banks and telecommunication firms. Although the footprint of the Greek enterprises has been reduced significantly post the financial crisis, Greek interests in the region remain important.

Furthermore, the destabilization of FYROM will probably bring the problem of the name of FYROM again into the spotlight. The EU and the USA will probably keep on putting pressure on the Greek government to resolve this matter.

Overall, Greece’s position has severely weakened in economic terms during those last years, nevertheless, the country has largely managed to stay in the core of Europe and maintain its position in the Balkans and NATO. While EU countries seem to be relatively secure from a possible Grexit, Merkel seems willing to maintain the EU’s cohesion by promoting more integration. A notion that Greece seems fully committed to so far.

 

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About the author

Vasilis Spyrakos Patronas

Vasilis Spyrakos Patronas

Vasilis Spyrakos Patronas is a political scientist and expert in European economy and politics. He is a Political Analyst at Greek think tank Synpraxis and is currently pursuing an MSc in Political Economy of Europe at London School of Economics and Political Science.

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