DAVID SPEEDIE: Good evening, everyone, and welcome to the Carnegie Council. It's wonderful to see so many, an overflow audience, for such a special event.
I want to say at the outset that this is a very special event, in that it is a co-production between the Carnegie Council and the Hellenic-American Cultural Foundation, which has been involved in the planning and execution of this event from the very beginning. I want to thank, in particular, Mr. Nicholas Kourides, the chairman of the Foundation; Mr. Thanassis Mazarakis, also from the board; and also Mr. Robert Shaw, who is on the board of the Foundation and is also the chairman of our board here at the Council.
Because so many of you are new to the Council, and particularly our distinguished and welcome guests from the Hellenic-American Cultural Foundation, I want to just very briefly introduce you to the Carnegie Council and, I hope, a crisp account of our mission and what we do.
The mission of the Carnegie Council is to enlarge the global audience for the simple but powerful message that ethics matter, regardless of place, origin, or belief. Since our founding by Andrew Carnegie a century ago, we have been one of the world's foremost creators of nonpartisan educational resources on international ethics, used by professionals, journalists, educators, students, and the greater public. The Carnegie Council is a forum for the world's leading experts, thinkers, and decision-makers. Each year we convene more than 80 public events. Through lectures, workshops, panel discussions, conferences, interviews, articles, and, increasingly, a wealth of free multimedia online resources, the Council has earned a reputation as the honest, objective voice for ethics in international affairs.
So to our guest. Yannis Palaiologos is a features reporter for Kathimerini, a quality daily broadsheet in Athens, Greece. It is also published in an English version and, I believe, sold in the United States. Yannis was born and raised in Greece and lives in Athens, but also studied politics, philosophy, and economics and postgraduate philosophy studies at Oxford University in England.
We had invited Yannis to speak here originally in the context of a major program that we have ongoing here at U.S. Global Engagement at the Council, namely the ethical and policy challenges of the new extreme political movements across Europe, particularly those of the far right. That will be part of our discussion today.
But it is even more timely to welcome Yannis now, today, because, with the announcement of general elections to be held in Greece just 10 days from now—elections which, as of now, as I think Yannis will confirm, portend something of a sea change in political power in Greece.
But our discussion today will go beyond the narrowly political and will touch upon some critical, if not existential, questions for Greece, in which the elections are just another milestone. For example, will Greece stay in the Eurozone, or will there be, to use the term of current reference, a "Grexit?" What will be the consequential cost of either outcome, staying or going in the Eurozone, in terms of social welfare and well-being for Greece? What, for that matter, will be the consequences for Europe? Greece, in this sense, is a test case for a continent under some degree of stress.
These are not just political, but ethical and cultural, considerations that speak to the essence of democratic polity in Greece. Yannis has spoken himself of "a cultural climate rife with resentment and insecurity."
DAVID SPEEDIE: Yannis, before we get to the immediate context and the fascinating electoral scenario, let me refer to your book, The 13th Labour of Hercules, which is available through Amazon and through bookstores in the United States. For those of us, such as myself, whose classical mythology is a bit rusty—I went back online and was reminded that the 12 labors of Hercules made Hercules the perfect embodiment of pathos, the experience of virtuous struggle and suffering that may bring immortality.
YANNIS PALAIOLOGOS: Sounds familiar.
DAVID SPEEDIE: Yes.
The 13th labor that you refer to, Yannis, for Greece to emerge from a prolonged period of crisis is truly herculean. Indeed, you might say it is not "crisis" in the singular, but "crises," to quote your subtitle. How has Greece come to this pass today?
YANNIS PALAIOLOGOS: First of all, let me begin by thanking you very much, both the Carnegie Council and the Hellenic-American Cultural Foundation, for inviting me here, in this particularly critical juncture for Greece.
What I tried to do in the book is avoid the high politics—the cabinet meetings, the Eurogroup meetings, what happened between Papandreou and Merkel, between Samaras and Tsipras, all that stuff—and look at the micro-origins of the Greek crisis. This was a crisis which was—it has become a cliché to say, but it's true—not exclusively and, I would say, not even necessarily primarily, an economic crisis, but a crisis of culture, a crisis of politics, and a deep social crisis.
There has been, in the period of the last 30 years especially, a breakdown of trust, not only between the governed and the government, but also between Greeks, among themselves. This was papered over for many years, thanks to government borrowing, thanks to devaluations of the currency, which made us ignore our many and deep-seated problems of competitiveness. Especially during the Eurozone years, when interest rates became very low for Greece, we all sort of came under the collective illusion that we had finally arrived—you know, we had done all the difficult and necessary reforms, and all that remained was to just sit back and enjoy the prosperity at the core of Europe.
In fact, behind that sort of façade of prosperity and growth, you had decaying institutions on a great number of fronts. When the world crisis hit in 2008 and the calculus of risk changed internationally, the markets started looking around for the next big problem after Lehmann, and they found it, unfortunately, in Greece. When the crisis hit in Greece, and when Greece was left out of the international markets, it became extremely difficult for it to extricate itself from its deep-seated crisis because these institutions had decayed so much in the previous years.
In that sense, that is the reason why we are still living through the Greek crisis today.
DAVID SPEEDIE: However, at this point, Europe, as I mentioned in the introduction, is in a continent-wide crisis—economic, political, social, and so on. I think it was Czar Nicholas I who first used the term "the sick man of Europe" of the Ottoman Empire. Now, in a sense, Europe is the sick man of Europe.
What is it that sets Greece apart, perhaps, from the continent-wide malaise? You make references in the book, obviously, to high unemployment rates, anger at immigrants, resentment on the part of have-nots toward haves; there is dangerous jingoism and ultra-nationalism at work. Is this just more acute in Greece, or is there a whole different level that fuels the crisis?
YANNIS PALAIOLOGOS: I think the main thing that sets us apart, in the worst possible way, and that has led people like Minister Schäuble and others to refer to us rather delightfully as "the special case of Europe," is that, first of all, the extent of the fiscal derailment in Greece was far bigger than anywhere else. We had a budget deficit that was close to 16 percent of GDP in 2009, and as late as October of 2009, we were telling Brussels that it was only going to be 6 percent. That is both too big and it created a real issue of trust there.
The second problem, which you haven't faced in any of the other program countries, is that we have so far failed, and we are still failing, to produce any kind of serious political consensus in favor of the necessary reforms. So it is always the government struggling to pass the very difficult measures through Parliament and the opposition railing against them and saying that as soon as they come in, they are going to change everything in a magical way.
It was particularly telling at the time when the first medium-term program of reforms was making its way, with great difficulty, through Parliament in June 2011, and PASOK [Panhellenic Socialist Movement] was trying to pass it and New Democracy was steadfastly against it. But New Democracy MPs [members of parliament] were calling journalists who were covering the government and asking, with a great deal of agony, "Are you sure they are going to pass it?" so as to not lead to a total disaster. So the lack of political consensus is the second thing.
The third thing is the fact that public administration and the institutions of governance, in a very wide sense, were broken. Therefore, when they had to take on the very difficult, herculean task of rebuilding on a number of fronts, they were simply not up to it.
That is the reason we have had a much rougher time than anyone else, I would say.
DAVID SPEEDIE: Just for the benefit of the audience who are no familiar with it, PASOK and New Democracy are the sort of centrist parties that have—
YANNIS PALAIOLOGOS: PASOK and New Democracy were the two parties that governed throughout the post-1974 republic. They exchanged power in single-party governments. It was almost always the case that whenever one was in power, the other party would be embracing the populist demands of every group in society which had a grievance. Of course, it's exactly the same thing which the official opposition now, SYRIZA [Coalition of the Radical Left], is doing, even though we are now deep into bankruptcy territory and people should not be believing that kind of thing anymore.
DAVID SPEEDIE: I have to say that the chapters of your book are so evocative. They speak in a very serious way to societal challenges beyond the issue that can be settled in any election now or in the near future: "The Torn Safety Net," "Pensions, Retired," "The Return of Class War," "Investment and the Deep Blue Sea," "Nightmares from Weimar"—this is almost an apocalyptic vision.
Let's turn to the elections for a minute. Obviously, the likely outcome is a movement to the left. What do you see as the consequences of that, both short- and longer-term?
YANNIS PALAIOLOGOS: I think in the short run we can't really escape a significant amount of turbulence. The sorts of things that SYRIZA, which is the party of the opposition that is about to almost certainly win power—the things it has been promising and that it is committed to are very much at odds with what the outgoing government has promised to do and are very unlikely to be accepted, most of them, by our European partners. These things include a write-off of the biggest part of Greece's debt, a significant loosening of fiscal targets, increases in wages and pensions, an end to all privatization, and other things which effectively would end any kind of surveillance of Greece's economy.
Now, there could be leeway, perhaps, on the fiscal side and some form of indirect debt relief. But the only way that SYRIZA could achieve that would be if it really committed to doing the sorts of supply-side structural reforms that the Europeans and the IMF [International Monetary Fund] are really keen on in the labor market, in the product markets. Of course, SYRIZA has stated at every opportunity that it has no time for these reforms; it is not interested in doing them. In a sense, they are asking for a lot without seeming to be willing to give anything back.
And if Mr. Tsipras, the leader of SYRIZA, suddenly made a U-turn and decided to commit to a great number of these reforms and to back down from pushing the increases in spending that he has been promising, I think it would be very, very hard for him to get that through his own party, which has a very strong and vocal radical element.
So the prospects of a deal between Greece's official creditors, the EU, the IMF, and the ECB [European Central Bank], and the SYRIZA-led government seem quite bleak.
DAVID SPEEDIE: What you are describing seems to be something of a zero-sum game within Greek politics, with SYRIZA and Mr. Tsipras articulating what you describe as a beguiling populist mantra, on the one hand, and on the other, the PASOK/New Democracy parties engaged in the term diaploki. Diaploki is very difficult to translate, you said, but it's sort of a business/government collusion. There seems to be a standoff.
On the other hand, one reads of SYRIZA perhaps being a little bit more conducive to negotiations with business. But from what you are saying, that does not seem to have much traction.
YANNIS PALAIOLOGOS: SYRIZA has been making a lot of its desire to take on the diaploki. Diaploki refers basically to very powerful business families that control important sectors of the economy, and the businesses that these families run have a great amount of control over the economy because of their very close connections to the politicians. They remain very powerful by preventing competition, by getting opposing companies stuck in the courts whenever they lose a bid, getting local government contracts, of course.
If SYRIZA were really determined to go after this kind of business-government collusion—which I'm not sure that it is and I'm not sure, even if it was, that it has the means to do, the administrative expertise—but if it were to do it in a serious way, that could be a point of contact with the Europeans, because they would also be very keen to see cartels breaking up and sectors of the economy opening up.
But, of course, it's not only big businesses that are keeping the economy closed. It is also, for example, public-sector unions, which have excessive demands in the context of monopoly-owned business sectors. There, SYRIZA has no desire to control the public-sector unions. So even if they deal with the big businessmen, they are probably not going to deal with another problematic element of the Greek economy that keeps it closed and troubled.
DAVID SPEEDIE: A fascinatingly complex situation.
I want to open this to the audience, but I have one last question for you, at the moment at least, Yannis. It may be a difficult one. I'm throwing one of your quotes again back at you.
I think it's towards the end of your book, towards the conclusion. You say, "Greece will not move forward and escape its great crisis unless it becomes a visibly more open place, keen to embrace the world rather than keep it out, comfortable with change and innovation rather than being terrified of it." To be, as you say elsewhere, "at the core of Europe."
But how does this happen with what seems to be a prevailing simultaneous view within Greece that, again to quote you, "policy is being made in the North of Europe and being inflicted on the South"?
YANNIS PALAIOLOGOS: Hmm, okay.
DAVID SPEEDIE: Easy question.
YANNIS PALAIOLOGOS: I will answer it with great facility.
Look, it's obviously the case that the Eurozone will not have a long and happy life unless the more powerful countries of the North become more willing to look beyond their narrow national interests and take a more European point of view.
So far what has happened is that they have imposed a great deal of pain on the South. The South has shown itself to be politically committed to doing very difficult reforms, to taking on a great deal of austerity—spending cuts, tax hikes. But the creditors, the Northern countries, think that they have done everything right, and therefore they need to do no adjustment. That's a huge problem. It creates the justified sense that the costs of adjustment are being decided not according to what is in the interest of Europe, but what is in the interest of Berlin and its satellite countries in the North.
But Greece—whether it stays in the Euro, which I very much hope, or it leaves, the only way for it to prosper, in my view, is for it to embrace openness, not only in the economy, but in wider society as well, and see globalization as an opportunity and not a threat, be able to open its borders to highly skilled immigrant workers who will come in and contribute not only to the economy, but also to the deeply troubled insurance funds, which are all basically bankrupt.
That has to happen whether we stay in the Euro or not. But, of course, I think it will be much easier if we stay in the Euro, because if we leave the Euro, my fear is that all the restraining influence of Europe will be gone and Greece will become a kingdom of the most ruthless and the most mediocre, almost a "gangsterocracy." So I very much hope that won't happen.
DAVID SPEEDIE: On that uplifting thought, let me just say, very briefly, that it's interesting in that much of what you say is being played out. In Britain, for example, there is the question of an aging population and the need for a vibrant immigrant community to do exactly as you are saying. So this is not absolutely confined to Greece.
YANNIS PALAIOLOGOS: Sure. It's a very wide European—in Germany they have a big problem with that. I just think in Greece, specifically, we are very bad at talking about these serious structural policy issues. We stay very much on the surface of the political discussion, call each other names, and fail to tackle the real—
I mean one of the things I talk about in the book, about pension reform, is that in 1997, when there was a serious report made about the medium-term future of the pension system—and the people who wrote it actually said that there is a narrow window of opportunity to make some reforms now, and if we don't do it, then by 2010 the system will be broken. One of the top union representatives of the country came out and said that that is manifestly nonsense because the pension system is subsidized by the State Budget—capital S, capital B—and, therefore, what these people are telling is that the pension system will go bankrupt because the state will go bankrupt, and we all know that's impossible.
Well, as it turns out, in 2010 the state went bankrupt, to a large extent, because of the huge accumulated pension obligations.
DAVID SPEEDIE: We are having a similar discussion in the state of New Jersey. [Laughter]
QUESTION: My name is Demetrios Argyriades. Congratulations to the speaker.
One of the things I would like to ask of the speaker is to what extent the right/left, if you like, dichotomy is applicable to the Greek conundrum. What is the difference, in fact, between the extremes? We have on both sides a degree of ethnocentrism that makes progress rather difficult. It seems to me—you touched upon it, and I wanted to ask you to comment on this—that much of the crisis was, at least on the surface, precipitated by the mass migration of unions from PASOK to the SYRIZA—namely, of course, the public-sector unions, which have a vested interest in not changing what the troika is asking Greece to change.
So what are the prospects for reform should SYRIZA come to power? Basically, right/left, are they relevant at all to the situation in Greece?
YANNIS PALAIOLOGOS: I think there is obviously a great deal that divides the far left from the far right in Greece. But it's interesting that, because both sides embrace, in a sense, the closed society and the idea of a closed economy, in many cases when reforms were passed which were going to open up the economy in Greece in the last few years, you got almost identical statements against, from either SYRIZA, the Greek Communist Party, or the right-wing Independent Greeks, or even Golden Dawn.
There are differences in emphasis here and there. The left will talk about the role of international capital. The right will talk about the precious Greek identity and how these nefarious foreigners are trying to undermine it. But the points they make very often are very similar.
As regards the unions, especially the public-sector unions, I think you're right. I tried to make the point that it's not only the oligarchs, so-called, that keep the Greek economy closed; the public-sector unions have a vested interest in that. In fact, in the book, in my chapter about the electricity sector, I talk about how the union of the electricity company went, in a sense, into an alliance with the private interests, generating electricity to prevent a very important investment which would have opened up the market and really helped it liberalize.
So I don't see anything positive coming on that front from SYRIZA.
QUESTION: Good evening. My name is Aris Christodoulou. Thank you, Mr. Palaiologis, for your talk.
My question is more broad. I notice that the reaction to the crisis in Europe, the extreme political parties, has been mostly weighted towards the right rather than the left, except in Greece. Greece had, of course, a reaction on both sides, but still tilted more to the left. Do you have a reason for this? Is it possible that the left is driven more by economic factors, by anti-globalization, anti-elite, anti-capitalism, if you will, and the right is driven more by culture, anti-immigrant?
Of course you know the thesis that a number of scholars give, that Greece never really ended the civil war; it was never resolved, as it was in other countries post-World War II. There was never really a catharsis because of a number of factors—that's a separate story—but because there was never a catharsis, there is this new driving force on the left which is popping up now.
I wonder what your comments are on the broader question in Europe, as well as in Greece. Thank you.
YANNIS PALAIOLOGOS: First of all, I would point out that, even though the story that most people are talking about now is the rise of SYRIZA from 4 or 5 percent to more than 30 percent and very likely a victory in the election, you have an explosion of support for the populist right as well, whether we are talking about the neo-Nazi right, which went from 0.3 percent, not even 20,000 votes, to 7 percent—and, in fact, more than 9 percent in the European elections—or the Independent Greeks, which splintered from New Democracy and, in May 2012, got as much a 11 percent of the vote, which is pretty crazy, given who these people are.
The reason why SYRIZA has done so well, I think, in Greece—and I think the only other case is Spain, where you have a similar party, Podemos, which is poised to do really well in their elections, which are coming soon—the only two countries where unemployment exceeded 25 percent were Spain and Greece. That plays to the left's emphasis on the depredations of capitalism and so on. That is the point I wanted to make about that.
On the unresolved civil war, the far right in Greece—Golden Dawn essentially—is keen to play that card. It's very, very unfortunate. But they are playing on this idea—it's not so much that it wasn't resolved ever. It is a sense among some people on the right in Greece that there has been a kind of left-wing ideological hegemony after 1974. The people on the left in Greece, who were badly oppressed until that time, from the 1930s all the way to the end of the junta, had the moral high ground after 1974. That was translated into power for the left after 1981.
I think it's very strange that everyone talks about SYRIZA as the first left-wing government. What about Andreas Papandreou? What was that?
But throughout that period, people on the right were sort of afraid to speak their names. They were afraid to describe themselves as being on the right, because of the legacy of the coups and the oppression of people of left-wing persuasion.
Something like Golden Dawn is a very twisted expression of a person on the right who wants to declare himself again. In that sense, there are echoes of the civil war there. Of course, the fascists want there to be as many echoes as possible, because they thrive on division and so on. But I don't think they will be successful in that.
QUESTION: Yannis Mamoulakis.
I would like to say that I generally have to agree with everything you have said and how you have described the situation in Greece. But I wonder how you see Greece going forward, assuming, of course, that SYRIZA will win power in these elections and that they will have some sort of probably unsuccessful negotiation with the creditors of Greece and with the European Union. How do you see this being resolved? I mean is there anything that we can expect or hope for, other than a final complete defeat of this leftist tendency in Greece, so that we can go forward after this on some other basis? We have to have it. In other words, can we only hope for this thing to be played out as a disaster and hope that we can perhaps have a resolution that way and have Greece progress from that basis?
YANNIS PALAIOLOGOS: I think, in a sense, the hope, which is not really based on a lot of fact or evidence, is that Mr. Tsipras has decided that he wants to do a deal, is going to try to do a coalition with a party on the center, probably To Potami, which then he can use as an alibi to say to his more radical people, "I wanted to be more revolutionary, but we have to govern with these people, and they are imposing restraints on what we can do," and then, of course, when that fails to convince the more radical elements in his party, to be willing to lose some of them, to have them leave the party, and then to appeal to the responsible forces in Parliament, say, "I did the difficult compromises I had to make. I lost these people because, I realize now, they belong to a different camp, and I'm calling upon you"—New Democracy, for example—"to vote for the deal that I was able to strike, for the good of the country, so that we don't go to a new election," and so on.
The problem with that is that he has been attacking New Democracy so vehemently in the last couple of years, calling them "Merkelists" and stooges of our creditors, that they are unlikely to have much of an incentive to help him out, even if it's going to be for the good of the country. They are probably going to calculate, "We won't support him, let him fall, and try our best in a new election." Of course, that will be a disaster, I think, if it happens. But I think it's the likeliest outcome there.
Sorry that I can't be more optimistic.
DAVID SPEEDIE: Yannis, let me just ask you to elaborate a little bit on Golden Dawn, because you have written a great deal about this. There is a tendency — and we have tried to avoid it here—to speak of the rise of the new right across Europe. It's rights, plural, although it's an awkward term to use in that sense. But clearly, this is not a monolithic phenomenon. For example, UKIP [UK Independence Party] in Britain was the leading vote-getter in the European elections at almost 27 percent, and there is the Front National in France at 25 percent. Golden Dawn's numbers are much more modest in that sense, but, as you say, the rise has been all the more meteoric, from trace elements in the vote to almost 10 percent in some cases.
First of all, what's so special about that? And second of all, it's also true, isn't it, that they are, in the way that revolutionary movements on both left and right tend to do, providing social services that may not be available—there is this, perhaps warped, sense that they are filling a social void in Greece.
YANNIS PALAIOLOGOS: They have been quite clever in exploiting the holes of—my book is basically about how the Greek state and its institutions slowly collapsed in the period of prosperity, at the end. Golden Dawn has exploited that to the maximum in a very clever way. Both the fact that we lost control of our borders and of certain neighborhoods, especially of Athens—they were able to step in and present themselves as protectors of the citizenry, given the absence of the police and so on and so forth. But also, they have followed the examples of Hamas and Hezbollah and have provided soup kitchens and even a "Doctors With Borders" service, which offers medical assistance to needy people, so long as they can show a Greek identity card.
As regards the comparison between the Greek version of the far right and what is going on in the rest of Europe, it's very much the case that each country has its own very specific version of the far right. I would say that the only country which has as extreme a version as we do is Hungary. Of course, in Hungary they have even greater support.
DAVID SPEEDIE: The Jobbik.
YANNIS PALAIOLOGOS: Jobbik, exactly.
You can't really lump in under the same term Mrs. Le Pen, who has taken her party some way away from the more overtly racist party that it was under her father, or even Mr. Farage, with Golden Dawn, which is, as we have seen through the investigation of their activities, essentially people who believe in national socialism in the old, traditional sense.
DAVID SPEEDIE: Committing acts of violence against political opponents.
YANNIS PALAIOLOGOS: Exactly. They are overt about being racist. There is nothing concealed about that.
DAVID SPEEDIE: Yes, what you see is what you get.
QUESTION: My name is Marcantonio Antamoro.
I believe that there is no mechanism to leave the Euro. So to discuss anything about leaving the Euro is quite theoretical. I think it makes no sense. It ties in with your last points in the main part of your presentation, which talked about "gangsteropoly," or some sort of anarchic situation, if any country were to leave the Euro and have to go to the global markets and try to finance itself with its own older or newer currency.
I would love for you to comment on that, but I don't believe it's a possibility to leave the Euro. It's not within the framework of the European Union. There is no mechanism for it. And, as you know, it hasn't been done before.
My other point is that we talk about a Tsipras victory or a SYRIZA victory. He will not be able to have a majority victory, based on the polls that are coming out. So it will have to be a coalition government. The gentleman before in his question alluded to it, and you are finally addressing that.
You said there was no evidence for Tsipras to come to some sort of an agreement. I think that the evidence is simply looking back at what Mr. Tsipras was saying two or four years ago, which were extreme leftist views that have now mellowed as he has come into the mainstream of politics. And they will mellow further, as with anyone that goes from opposition into government. It's very different to manage a country than to criticize someone that is managing a country, as you know.
I would like you to comment on the fact that it's going to be a coalition. It's not going to be him by himself. I think there is a lot of room for compromise because of what you mentioned earlier, the fact that it could be blamed on his coalition partners that he has to compromise, or even the fact that Greece is on the rails. It's following the European Union locomotive. You may want to characterize that as a Berlin locomotive. I choose to think of it as a European Union locomotive. It's not easy for a train to leave the tracks. It will definitely roll over and crash.
Finally—my first point is about—
YANNIS PALAIOLOGOS: That's two so far.
QUESTIONER: That's two so far, right.
So the first point is that there is no exit from the Euro. The second point is that the government is a coalition. I don't think it made a difference when Samaras came to power, center-right or center-left. They are all following what the troika is saying, and they all kind of have to do what they are told. It's a tiny economy within the grand scheme of things.
My third and final point is really about the courts. The court system does not work in Greece. That's part of the problem, why the average Greek citizen doesn't feel safe and resorts to situations like Golden Dawn.
YANNIS PALAIOLOGOS: Businesses don't want to invest because they—
QUESTIONER: Businesses see that there is no recognition of the rule of law. They don't know if the plot of land that they bought is next to the olive tree that the thing says. The situation is very fluid with the courts. I think that is an important issue that needs to be resolved for any government.
YANNIS PALAIOLOGOS: The courts—you are absolutely right. There is a chapter in the book about the problem, from an investor perspective, of trying to get all the necessary licenses and things through. It's about the Costa Navarino investment in Messenia, which is one of the most glaring cases.
But I guess you saw recently there was some data coming out about how Greece takes the longest to enforce contracts in Europe and takes the second longest, I think, after Slovakia, to resolve insolvency.
The court system is a huge problem. I have seen it up close. I went to watch a restructuring case of a big Greek company. The guy was speaking, the CEO, and it was clear after a while that the judge didn't understand what he was saying. There is a problem with a lack of expertise.
There is a lack of logistical support for the people who work in the criminal justice system. There is a whole host of problems which will take a long time to be resolved. There are lots of suggestions on the table about what should happen, but no one seems willing to do it.
On the other two points, you may be conflating what can't happen because it would be so disastrous with what can't happen because it's not possible to happen.
On leaving the Euro, the lack of a formal mechanism I don't think would stop depositors who would be in a panic, for example, after Tsipras decided, in the context of his hard negotiation, to miss a payment to one of our creditors. I think that could be a real trigger for depositor panic. If they started taking money massively out of the Greek banking system and there was no point of contact between Athens and Frankfurt, I think the ECB would feel itself justified not to give liquidity support to the Greek banks and not even to allow the Greek central bank, through ELA, to offer the necessary supports, in which case they would very soon find themselves, the Greek government, in a situation where it would either have to beg for mercy or start printing a new currency, and there, without any mechanism, you just have suddenly a drachma.
Tsipras—first of all, he has been saying very different things outside the country versus inside the country. It's clear that he has been trying to keep a foot in both camps, which will obviously have to change the day after he gets into power. But for a number of reasons, I'm sure he would be very happy to do a deal, because, among other things, he would also get access to the ECB's quantitative easing [QE]. They would buy Greek bonds. The yields of Greek bonds would go down precipitously, which he could present as a triumph.
But (a) I don't think he can get the necessary compromises through his own party, and (b) I'm not necessarily sure he wants to. If you hear what he has been saying in the last few days, he has been saying, "I'm not going to go into coalition with Potami or PASOK because they are supporters of the bail-outs." He is been making repeated calls to the Communist Party to go into coalition with him.
Now, some people say that's only because he knows that is never going to happen and he is just trying to pull their voters to his camp. But at which point do we stop trying to find another interpretation and listen to the actual words?
QUESTION: You have convinced me to buy your book, by the way—I just want you to know that—immediately. My name is Jeff Siger.
You painted a rather bleak picture—a realistic one, but bleak. I wonder, with the cartels of business, the cartels of unions, the court system functioning as it does, the fact that one cannot believe their politicians, no matter what label they are wearing at that time to be elected, and the, I should say, widespread feeling among the Greek people that corruption is rampant and things will never change—I'm wondering, how do you see this emerging without falling into the concept of the ruthless gangsters and the oppressed?
YANNIS PALAIOLOGOS: So what is the good way out?
QUESTIONER: You got it.
YANNIS PALAIOLOGOS: Well, first of all, we have a country in which the people are extremely well-educated, very able. Even by European standards, it's really impressive. The number of Greek scientists and engineers who go abroad and do really well is really impressive. The percentage of Greeks among the most cited international scientists in the world is very high compared to the percentage of the Greek population. Of course, 85 percent of them don't actually live and work in Greece. So we have that going for us.
We have an amazing, very beautiful country that everyone wants to come back to, if the conditions somewhat improve. And you have some sectors which are beginning to look good.
You have to keep in mind that, in a situation of total economic collapse and the banking system broken and a threat of redenomination of the currency, even for people who are wanting to make the move away from the domestic market and towards exports and towards all the things we say we want for the Greek economy, there was no banking credit and there was no—I mean people heard "Greece" and ran away for many years. Hopefully, that won't happen again now. So there is a source of hope there.
Let's not kid ourselves. What is really necessary for the better conditions to be created is a significant overhaul of the political system, the people who are in it, and the way it works. On that front, I think, for the first time—I mean, the main things we had seen up until 2014 had been the rise of SYRIZA, the rise of Golden Dawn, the Independent Greeks—all these elements which reflected the anger, the indignation, and the unwillingness of the average Greek to stare reality in the face and to see how our own faults led us down the path to disaster.
But in 2014, I think the creation of Potami is a very positive development, because its people, with their amateurishness and their vagueness on a number of issues, have got the right idea. They are liberal on economics and on social policy. The only thing that they are not willing to put under negotiation is Greece's position in Europe in the Eurozone. Other than that, they are the only party that is saying, "We don't have all the answers. We need to work together and try to make things better."
So it is the first rational political response to what has happened, and I think it could be a harbinger of better things to come. But without the politics, it's not going to work.
DAVID SPEEDIE: The way out, and you heard it here first.
QUESTION: Susan Gitelson.
To follow on this train of thought, at the end of this discussion, can we look at it from a larger perspective? At the beginning, you were characterizing the European Union as a contest and a struggle between the North and the South. But that's really unfortunate, although it may reflect a certain reality. Can we think about ways to solidify the European Union, as, for example, the fact that Mr. Draghi, with the ECB, is talking now about stimulus for all the European countries, which not only Greece and Spain need, but also Italy and everybody else?
So what are the commonalities? What are the ways that Greece and the other members of the European Union can benefit by cooperating with each other?
YANNIS PALAIOLOGOS: The ECB has been from the beginning the only major European actor that has taken a pan-European perspective, and especially under Mr. Draghi, who has been much more creative in his thinking than Mr. Trichet. The main interventions that have helped attenuate the crisis have come from Frankfurt.
On the other hand, in every creative policy that he has wanted to push through, he has had to struggle mightily, especially with Mr. Weidmann, the head of the Bundesbank and member of the Governing Council. He is having to struggle very much now to get QE accepted. There is a consensus view that they are going to announce it now on the 22nd of January, but there are people who think that the conflict within the Governing Council is so great that they won't be able to do it.
Of course, one of the things that is discussed as a possible way to reach a compromise within the ECB in order to do it is that they won't do it centrally, but it will be each country's national central bank that will buy the bonds. Of course, if that happens, it is much less effective and it stays again within that idea that each country takes care of its own problems. So again, we don't have the kind of pan-European solidarity that would give a true united response to the questions that the markets are asking.
This has been the case ever since the beginning of the crisis back in 2008, after the fall of Lehmann. It has always been trying to limit the liability of the economically stronger countries and trying to get the weaker countries to solve their own problems on their own, however much pain this causes them.
So it is a mixed picture there.
QUESTION: Yannis, thank you very much for being here, and, David, thank you so much for your hospitality.
In your book you describe very eloquently the various vested interests of the government bureaucrats, the large families, the big business, the labor unions, and many other constituencies, both the vested interests and the extractive policies of those constituencies.
In a rather popular book, Why Nations Fail, the authors seem to suggest that those extractive policies are principally the reason why such nations do end up failing. They look back a number of centuries and identify such regimes. They posit that inclusive institutions are really the only salvation from that vicious cycle.
Obviously, these apply not only to Greece today, but to the entire southern flank of Europe and to other parts around the world. To what extent would you describe the southern flank of Europe, and Greece in particular, as a failed nation? To what extent do you think the dialogue exists to be able to create such a kind of inclusive set of institutions that might be able to extricate us from this mess? And to what extent do you think the media, which you describe in your book, quite tellingly, as being beholden to some of these very vested interests—to what extent are they positioned or are they likely to step in and support such inclusive institutions and the dialogue that is required?
YANNIS PALAIOLOGOS: I wouldn't describe us as a failed nation or a failed state. We have a great many deep systemic problems with our institutions. These problems have gotten worse in the last five years. But I don't think we are at the point of no return, and I don't think we are at the point where any vested interests can do basically anything they want.
By European standards, we are way below. The influence of the European Union remains very important and positive. Many things in the reviled stabilization programs have helped to begin the work of rebuilding some of the institutions, most crucially on tax administration, where, of course, there has been a major conflict between what they have been asking for and what the governments were willing to implement.
But I wouldn't put us in the category of—because we know failed states elsewhere in the world, and we are not there, yet at least.
QUESTIONER: Only thanks to the European Union.
YANNIS PALAIOLOGOS: To a large extent.
The dialogue, unfortunately, about the need for inclusive institutions, the need to look at the deep policy and structural problems and try to fix them, has not been happening. It couldn't happen before the crisis, because it just got papered over by the prevailing consensus that "we are doing everything right; look, we're in the Eurozone and the interest rates are low and everything is great." And it hasn't been happening since because, instead of sitting down rationally and talking, we have been just yelling at each other. And that's both camps, both the so-called pro-bail-out camp and the anti-bail-out co-camp, have just been refusing to take on issues and have just been calling the other side either traitors or crazies or whatever. So there hasn't really been a discussion.
I think that is a major failure, and it is a major failure to which the media has contributed by being unwilling or unable to do the necessary reporting work, the necessary writing in terms of opinion.
It is often the case that when two people disagree in the Greek media, each has his own set of facts. When you have that, when you disagree even about the numbers, you can't really have a reasoned discussion.
I am not just saying this because I work there, but I think Kathimerini is a special case because it is much more open to the world than your average Greek media and has managed to retain its integrity through the horror and the financial pain that Greek media companies have been facing.
But overall, unfortunately, from top to bottom, I would say, from the owners all the way down to many of the lowly reporters, there are many things wrong with the Greek media. They are still part of the problem.
QUESTION: Nicholas Kourides.
Let me start by thanking both Yannis and David for this opportunity. This really has been an enlightening discussion.
The question I have is sort of bringing it back a little bit to the culture. We have this political dysfunction. It's not something new to Greece. It has been going on for a while. But since the crisis, it has really heightened. What has been the effect on the best and the brightest, the 20-year-olds, the 30-year-olds? Are they exiting? Have we lost, in a sense, a generation as a result of the financial crisis tied to this political dysfunction?
YANNIS PALAIOLOGOS: The culture, I think, remains problematic. I think we still try to find that people outside Greece were at fault for what has happened, be it international bankers or immigrants or the Germans or whoever.
That's not to say that there isn't a part of Greece's problem that didn't start elsewhere, but it is to acknowledge that our problems started at home and it is at home where we have to fix them.
There has been a lot of discussion about brain drain, but there hasn't been a study of the period. The last year study went all the way up to 2010 only. There is a lot of anecdotal evidence that a lot of people have been leaving, scientists going to Germany. The difference from previous emigration waves is that this time it's not working-class people; it's really the scientists, the doctors, the engineers, who are leaving.
My hope there, which again may be more faith than reason, is that if things begin to stabilize back home and they can see a way to make a decent living and be back in Greece, they will do it. But the pay in Greek universities, in Greek public hospitals, even among high-ranking military officers, is ridiculous. You can't really build a strong public sector and a strong public administration by paying your top professors and doctors and generals peanuts. You just can't do it.
DAVID SPEEDIE: Just a couple of thoughts in closing and before we thank Yannis so much for this.
Back to Mr. Kourides' timely reminder that these are issues that go way beyond the political into the cultural and ethical values underpinning that society—this is anecdotal, but the very, very first mention in Yannis's book, the very first reference, is to the theft of a Picasso oil painting from the national gallery in Athens.
YANNIS PALAIOLOGOS: It was given to us as a gift because of the Greeks' valiant resistance against the Nazis.
DAVID SPEEDIE: Yes, exactly. So immense symbolic value.
But what he writes about so brilliantly is both the outrage at the theft and what he describes as—a wonderful term—"the little ball of blame" that went around from one bureaucracy to another as to whose fault this was. There are values that endure, in other words.
The second thing is, getting back to the program at the Council that looks at these issues of the rise of political extremism in Europe, and just to sort of rethink a couple of thoughts here, why does this matter to the United States, an audience in the United States?
The first is that, I think, regardless of pivots to other parts of the world, Europe remains our densest cluster of allies. This is our closest set of allies. In fact, our good friend Ian Bremmer, the global risk specialist, made exactly this point just a couple of nights ago on this podium, that we are, to some extent, neglecting Europe, at our ethical and strategic peril.
The second thing is that, from a purely pragmatic point of view, if you think back to the last century, there were two major world wars that began in Europe where we perforce had to become engaged. So we cannot simply say that what happens in Europe stays in Europe as far as we are concerned.
But the third thing is—and this may sound a little romantic—Greece gave us the very word "democracy," and as we promote and celebrate the spread of democracy around the world, clearly the Greek connection in this regard is absolutely fundamental, and indeed unique.
Yannis, you have given us a masterful journey through some real undergrowth—political, social, economic—and we thank you so very much.
YANNIS PALAIOLOGOS: Thank you.