The gloomy fiscal environment notwithstanding, a sanguine view of Greece and European monetary integration dominated The Fletcher School of Law and Diplomacy’s international workshop titled “A World of Crisis and Shifting Geopolitics: Greece, the Eastern Mediterranean, and Europe.” The workshop was held on October 28, 2011 to mark the tenth anniversary of The Constantine G. Karamanlis Chair in Hellenic and European Studies at The Fletcher School.
Policymakers, central bankers, experts, and the academia from across Europe attended the workshop aimed at analyzing and recommending solutions to the current European economic crisis. The speakers were unanimous in advocating an approach that went beyond the economic dimensions of the crisis. According to many participants, a solution that factored in the geography, politics, and social issues in the European community was the need of the hour.
There were many options but the will to commit to them was lacking, agreed the experts. “When economic growth is not sustained, social and political problems occur,” stated Lucas Papademos, condensing the essence of the problem. Prof. Papademos is a visiting professor of public policy at Harvard University and a senior fellow at the Center for Financial Studies, Goethe University, in Frankfurt.
He applauded the agreement to expand Europe’s bailout fund and deal with Greece’s debt crisis, but added that details of the plan still had to be worked out. “The bottom line is that the credibility of the euro and European integration has to be supported,” said Prof. Papademos.
Other discussants had similar recommendations for Greece: enhance competitiveness, strengthen European economic governance, promote greater centralization and build stronger political institutions. Some also claimed Greece’s interests were best served by foregoing the euro. However, they were quick to clarify that leaving a monetary unit -- the euro -- does not in any way indicate disapproval for regional integration, i.e., the European Union. In their opinion, Greece’s exit from the euro would not and should not undermine the cause of European integration.
Dendrinou-Louri Eleni, deputy governor of the Bank of Greece, argued the problem in Greece could not be sourced to the private banking sector as it was successful, healthy, and efficient. “The crisis started from the sovereign that became ill, which then transferred to the banks,” she said. “This is the opposite of the crisis [that occurred] in Ireland.” Emphasizing this point, Max and Herta Neubauer Professor of Economics at Tufts University Yannis Ioannides called for reform in the “wasteful and inefficient” Greek public sector.
The current holder of The Constantine G. Karamanlis Chair Professor Michalis Psalidopoulos analyzed the development models prevailing in Greece since 1955 and underlined the political strength of the economic thought of Andreas Papandreou in the country from 1981 and up to the outbreak of the crisis. “Dr. Papandreous’ model with its emphasis on deficit spending and public borrowing is untenable now and has to be replaced by a new strategy that will focus on two things: Debt management and economic growth,” he said. This new model, according to Prof. Psalidopoulos, will have to account for “supply side factors and be export growth driven.” “Without the open admission that the former model failed, and that there is no way back, the prospects for an upswing in the Greek economy any time soon will be delayed.”
Yale University’s Arnold Wolfers Professor of Political Science, and director of the Program on Order, Conflict, and Violence, Stathis Kalyvas, broke down the “deeper” problem. “This is an economic crisis inside a socio-political crisis, expressed as a crisis of governance.” There is “deep suspicion among the Greek people vis-à-vis their government,” he said, which has been reflected in the collective and continuing street protests. Greece had witnessed positive macroeconomic indicators in the recent past. However, such growth was not sustained as a result of massive spending -- not in investment, but in consumption. The situation has been characterized by low production and a lack of competitiveness. “It’s not that the Greeks don’t work,” said Prof. Kalyvas, “but they do not produce enough, efficiently.” There are so many ways in which Greece can have a competitive advantage, but they were not being exploited, he added.
Some speakers, on the other hand, were not too optimistic about the future. Dimitris Keridis (F94, Ph.D’98), an associate professor of international politics at the University of Macedonia and a senior research associate at The Constantine G. Karamanlis Foundation, said the crisis is not only in Greece but also spreading to other parts of Europe, like Italy, which is the fourth largest economy in the region. “European leaders are procrastinating. This summit [held on October 27] will lead to more summits,” Dr. Keridis said, insinuating that a concrete solution is unlikely. “The whole integration process is at stake.”
The Fletcher School’s professor of International Finance and Banking, Laurent Jacque, was also not very hopeful. “We will be back at the negotiating table in six months,” he predicted. According to him, the package proposed is vague and the crisis is deepening. Things could move forward with fiscal union, he proposed, but that would also take many years to yield results. The way out, in his opinion, was through currency devaluation. Prof. Jacque pointed to the missteps being taken by the Greek authorities, such as austerity measures. He also highlighted the difference in the rates of inflation among EU countries, which has caused the value of the euro across countries to differ.
However, most participants expressed hope for a brighter future. Speaking with this correspondent, Prof. Papademos said that in Chinese, the word “crisis” has the same connotation as “opportunity” and hence, we should look at this crisis as an opportunity to improve the situation and take some difficult decisions. He recommended the strengthening of the EU Stability and Growth Pact, and a qualitative leap towards regional and monetary integration. The presence of credible, fiscal frameworks in individual countries should be the primary yardstick for integration, in his opinion, not the number of states. “We are at a crucial juncture, but leaders can and will strengthen the economic pillar of Europe.” He encouraged the single currency but insisted on low levels of inflation, and increased communication and coordination among countries.
About the workshop itself and the chair, Prof. Papademos observed that such events and lectures are extremely valuable. “They are interdisciplinary, and they bring together academics, experts, and policymakers to debate and discuss, and [such a process] fosters fruitful change.”
The Fletcher School Dean Stephen Bosworth described the event as very enriching and important for co-curricular events at the school. “This is an important event for The Fletcher School and our [and the country’s] Greek community.”
“Earlier, students rarely wanted to study Europe as there was little wrong with it,” quipped Peter Uvin, The Fletcher School’s academic dean. “And it is [forums like] the Constantine G. Karamanlis Chair that have allowed us to discuss and debate the vagaries of what is in focus today and look at the long-term issues and their solutions.”
The Constantine G. Karamanlis Chair in Hellenic and European Studies at The Fletcher School of Law and Diplomacy aims to promote Hellenic and European studies in the United States while honoring a towering figure of Greece’s recent past. The Chair was founded at the initiative of the Konstantinos G. Karamanlis Foundation in Athens, led by Ambassador Petros Molyviatis and Minister Ahilleas G. Karamanlis, and then Dean of The Fletcher School, General John Galvin, while its endowment has been supported by many friends of Constantine Karamanlis and the Fletcher and Tufts community.
The regular rotation of the holder of the Chair ensures its constant renewal, endows it with new perspectives and subject matters, and has a multiplying effect, as outgoing professors enrich their experience and provide permanent points of contact between their home institutions and Fletcher. Professor Michalis Psalidopoulos, as noted above, is the holder of the Chair for the academic year 2011 – 2012 and convened the tenth anniversary conference.
-- Neha Ansari, F13 MALD candidate