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It has much appeared in
the news and has caused a great concern to the International Community, the so
called “Greek Crisis”. But, how “Greek” can such a phenomenon be when both its
causes and its implications are not limited within the borders of a single
country? The truth lies on an answer that looks beyond any borders, at the
forces and faces of a complex process; that is globalization. The way it all
started and the measures taken to deal with the Crisis, reveal two different
but interconnected faces of globalization, the economic and the political one.
In order to explain and understand how a country can arrive at the point of
accumulating such a big debt as Greece’s, we need to draw from the explanations
and analysis that theories on economic globalization provide. Then, watching at
the effort of the country and the various international organizations to deal
with the Crisis we see globalization’s political processes that bring about questions
on accountability and democratic legitimacy regarding the decision making for
the country’s future. Looking first at how the global affects the local reality
and vice versa, we are then be confronted with the question: should the Greek
Crisis be seen as a preview of ‘Fiscal Colonialism’ or of a ‘Global Civil


Economic Globalization and the Greek Crisis

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Although the Greek state
made its own mistakes in managing its economy, the role that globalization
plays in creating such a Crisis cannot be disputed. The Greek Crisis is not
independent from the Global Crisis and the Eurozone Crisis. On the contrary,
making sense of it requires studying it alongside these two and within the
context of globalization. Economic globalization, meaning the evolution of
international markets and corporations led to an intensified form of global
interdependence (Steger 2005: 27). This interdependence then makes the risk of
Economic Crisis easier to spread and affect states that are far from each
other. This phenomenon of contagion is described by the World Bank as “the
cross-country transmission of economic shocks or the general cross-country
spillover effects” (as cited in Ari 2014: 16). In this understanding, although
the Greek Crisis is not a direct consequence of the US mortgage crisis in 2007,
it was indirectly affected by the loss of confidence in global financial
markets and the increasing borrowing costs. Since 2007, the costs of borrowing
for Greece had started to increase slowly but surely (Panizza and Philip, 2014:
162). Maybe Greece would have ended up with a Crisis anyway but the Global
financial crisis that started with the US mortgage crisis, triggered the collapse
of an economy that had not strong foundations.

More specifically what
happened is that in 2007 in the US we have a typical banking crisis of the
mortgage credit market. Then through a series of domino effects in 2008 the US investments
bank Lehman Brothers went bankrupt and panic spread worldwide. Governments and
Central Banks in the US and the EU responded with expansionary fiscal policies
and liquidity provisions to the financial markets. The government policies to
help increase aggregate demand and help the private sector resist illiquidity,
decreased the governments’ budgets and even led them to an increase of their
debt  (Ari 2014: 3-4). The European banks
that had invested in the American mortgage market were hit badly and the
governments in order to rescue the banks started bailing them out, and the cost
of doing this was very high leading even to bankruptcy like in Ireland’s case.
Europe entered recession in 2009, a problem that started with the banks was now
more a problem for governments’ budgets. In this environment Greece didn’t have
to fear as it was not a country whose banks were linked through investments to
the US mortgage markets. However, this atmosphere made investors to look more
closely at the governments’ finances and Greece’s economy was spotted as a very
weak one due to the big debts that its government had accumulated in order to balance
its deficits. Markets became less willing to keep lending to governments that
were accustomed to borrowing large amounts to finance their budgets and that
had accumulated massive debts in this way. Greece is such a government and investors
became more reluctant to buying Greek bonds, meaning that they were not willing
to lend money to the country (EUROPA). This high risk which investors
associated with the Greek bonds after the collapse of the Lehman Brothers, can
be seen in the change of the Greek bonds yield spreads1 that increased from 60 to
250 basis points at the beginning of 2009 (Ari 2014: 43). Of course the global
crisis was not the direct cause of the Greek Crisis but it triggered it by
leaving the Greek state without creditors to keep its economy moving.

Economic globalization
not only fired the Greek Crisis but it has also laid the conditions for a
country to arrive at a point of owing approximately 362,883,506,260 € (
The accumulation of such a huge debt could only have been possible with the interdependence
that economic globalization brings. Maria Vassalou and John Donaldson describe
economic globalization as “a form of economic liberalization characterized by
risk sharing, free capital flows, labor mobility, and free trade. The increased
risk sharing across the world allowed leverage in the world economic system to
increase, leading to high debt levels at public, corporate and household
levels” (2015: 1). They argue that globalization encourages debt accumulation
because in a globalized world governments can borrow both from domestic and
foreign agents and this keeps interests rates low, something that gives an
incentive to governments to borrow more than they would otherwise (4). Apart
from this reason, Greece had another reason for liking borrowing before the
Crisis. The country entered the Eurozone in 2001 and as all the Eurozone members
it had the opportunity to borrow at a low interest rate as the investors had
been viewing the reliability of the euro currency with confidence (Ari 2014:

What globalization meant
for the Greek Crisis can be also well seen if we focus on the role of the common
currency.  The common currency is itself
a celebration of economic globalization, as states abandoned their own currencies
to share the Euro and the same monetary policies. Some have attributed to the
common currency the country’s failure to deal with the crisis on the ground
that the Monetary Union “took two crucial economic policy instruments, interest
rate policy and devaluation, out of the hands of the states, without putting
anything in their place” (Patomaki 2012: 60). The Union has a monetary policy
at a supranational level but member states have separate fiscal policies such
as tax rates. So, while the Union had the monetary policy in its hands Greece
had authority over its fiscal policies. But, if Greece had its own currency,
some argue, it would have devaluated it in order to reduce the value of its
debt (Ari 2014: 47). Also, the different fiscal policies led to different
inflation rates among the countries, which in turn led to a decrease in trade
competitiveness of high inflation countries like Greece. And again the option
of exchange rate depreciation was not available for the country to improve its
competitiveness as monetary policy making was not in its hands (5).


Political Globalization and the Greek Crisis

This last idea on
economic globalization and the Greek Crisis moves us to the next phase of
considering the Crisis within the context of political globalization. The
question now moves from how the Crisis was inflamed by globalization to how
globalization has blurred the role of the state as a decision maker. Greece
membership in the Eurozone took from the country the power of monetary policy
making. This realization leads us to the thought that economic globalization has
shifted the power of the nation state to a supranational body. Kenichi Ohmae among
many others have talked about this trend saying that “since the working of
genuinely global capital markets dwarf their ability to control exchange rates
or protect their currency, nation states have become vulnerable to the
discipline imposed by economic choices made elsewhere over which states have no
practical control” (as cited in Steger 2005: 33). For Greece, the Crisis meant
that the country could not be left to decide on its own about its economy and
that it would have to follow Troika’s (European Commission, European Central
Bank, and International Monetary Fund) austerity measures if it wanted to
survive. The Greek government tried in the beginning of the crisis to respond
by coming up with a Stability and Growth Program which submitted to the
European Commission on January 15, 2010. However, these measures were
inefficient and the Greek government was then forced to enter in negotiations
with the European Commission and other Economic and Monetary Union members. On
25 March 2010 the parties reached an agreement on a rescue plan for Greece,
involving bilateral
loans to the country from other EU countries and loans from IMF at lower
interest rates than the market ones, and on 2 May 2010 the initial plan was
revised to include more austerity measures imposed by the Commission and IMF (Kouretas
and Vlamis, 2010: 397-398). From this point on until today Greece has been
entering numerous rescue plans and its creditors have been imposing many
austerity measures to the state, living it little space to decide about
economic policies at home, as not accepting the terms of the bail-out would
leave the country without sources for financing its activities.

All these austerity measures
imposed to the Greek government by the international organizations led some to
viewing the case as a preview of Fiscal Colonialism. Greece owes money to many
parties like the IMF, the ECB, and Eurozone members. Amongst the Eurozone
members Greece owes the biggest amount to Germany. All these parties have set
their own terms for lending to Greece because they need to make sure that they
get their money back. However, the perception in Greece is that all of them are
imposing rules to the country in order to control it and render it a puppet in
the hands of technocrats. All along the crisis the Greek people would organize
protests or go on strike to show their dissatisfaction with the austerity
measures. However, it was not until the elections of 25 January 2015 when the
left party Syriza came to power and Alexis Tsipras became prime minister that
the Greek population’s resentment against Troika and the other creditors was
embodied in a legitimate leader. “After Syriza’s election victory, there was a
palpable sense of relief. People spoke of being able to breathe again”
(Margaronis 2015).

This idea of ‘fiscal colonialism’
is not at all unreasonable. What has made it popular is the democratic deficit
in the process of austerity measures’ application (Glasman and Cruddas, 2015).
Kenichi Ohmae argues that “as territorial divisions are becoming extremely
irrelevant to human society, states are less able to determine the direction of
social life within their borders” (as cited in Steger 2005: 33). Globalization
has diminished the role of the state as a sovereign entity and has thwarted its
peoples’ right of self-determination. The actions for confronting the Greek
Crisis have revealed this face of globalization and have shown how the public’s
opinion is not the driving force for policy making but the economic incentives
and the markets’ health are now the priority in the policy agenda.
International organizations and economically strong countries are more powerful
decision makers than the democratically elected representatives of a country. “Rule
by technocrats has replaced rule by the people” and now international bodies
like the European Commission and the IMF force governments to implement
austerity measures that have never received public backing (as cited in Laursen
2013: 51). This force that we are talking about is a combination of threats
that the creditors unleashed like the “Grexit” (Greece’s exit from the
Eurozone) scenario and the closure of the banks, both terrorizing the Greek
citizens. Wolfgang Schaeuble, Germany’s Federal Minister of Finance has been
often referring to and sometimes even supporting the Grexit scenario because he
viewed it is as an “important bargaining tool for Germany and the rest of the
Eurozone” (Bird 2015). Then the fear that was spread to the Greek citizens that
they would be left alone and go bankrupt was maximized when the banks of Greece
closed in June 2015, leaving little hope that the population’s lifetime savings
would survive the event. This pressure put on the Greek government to agree
with the terms made Tsipras decide to give the choice for the Greek citizens to
decide whether they wanted to accept the package of the measures or not. 61% of
the population voted “No” for the acceptance of this package but the end result
was that Tsipras signed a package of austerity measures anyways. Tsipras said
“we couldn’t overcome the bankers and northern European elite who have absolute
power in this continent” (Lowen 2015).

If the picture presented
above seems rather pessimistic and dark for democracy and people’s voice, some
could say that whatever the results of the Greek Crisis and Tsipras’ effort to
go against the creditors, the people’s awakening during the Crisis could be
seen as a preview of a global civil society. Richard Falk argues that “political
globalization might facilitate the emergence of democratic transnational social
forces anchored in a thriving sphere of global civil society” (as cited in
Steger 2005: 36). What the Greek Crisis had to add to this argument was the
provision of evidence that something like this is not completely utopic but it
might get real sometime in the future. Specifically, the whole story about the
Greek Crisis went global through the media and many citizens in different parts
of the world organized solidarity movements for the Greek population and
expressed their indignation towards the international institutions. One such
example is the ‘Australia-Greece Solidarity Campaign’. Membership in this
campaign is open to individuals resident in Australia and part of the
movement’s statement is the following: “We recognize the democratic will of the
Greek people who have elected to reject the politics of punishment. The
politics of harsh austerity and a treadmill of never ending debt repayments
have seen Greek people pushed to the extremes of poverty… we
do not recognize the claim of any external government or bank or other
authority to persist in imposing their policies onto the Greek people- let
alone policies that have brought such misery” (australiagreecesolidarity). This
is just a small idea about how much the voice for democracy has been raised due
to the Greek Crisis implications.

Given the failure of the
Greek government to ‘win the case’ against the creditors, one could not easily
dispute the argument that the role of the nation state is being undermined by
globalization. However, in the Greek Crisis the idea of the nation state played
a role in the ‘fight’ against globalization because it worked as the glue for
the people’s movement and resistance. We actually saw the rise of Greek
nationalism with political leaders playing with the discourse of ‘Hellenism’,
‘national sovereignty’, ‘the Greek’s history in resistance’ and many other similar
propaganda. Tsipras and the other members of his party had appealed innumerable
times to nationalist feelings in order to mobilize the public and unite them
under his leadership. In his own words: “we want to make clear in every
direction what we are not negotiating. We are not negotiating our national
sovereignty”, and had been always repeating that his government is one of
“national salvation” (Beams 2015). In his book “Nations Matter: Culture,
History, and the Cosmopolitan Dream” (2007), Craig Calhoun argues that
nationalism is unlikely to disappear any time soon because it provides
something more than the mere identification of individuals, it encourages solidarity
and investment in public institutions, investment in democracy, of course when
talking about healthy nationalism expressed as a love for one’s nationality and
not the extremist nationalism expressed as hatred towards other nationalities.
We saw this awakening of the nation-state as a wheel of solidarity among the
Greek citizens who went out to the streets to protest for all those who
suffered the consequences of the austerity measures, united under slogans that ‘carried’
Greek history. Slogans that implied the population’s adhesion to their own
distinct identity like this one: “Bread, Education, Liberty: The junta2 did not end in 1973”,
which emphasized the historical continuity of the Greek nation’s united
struggle against any hardship (Simiti 2014: 21-22).

In conclusion, trying to
see the Greek Crisis in relation to the globalization forces, we could indeed
argue that the Crisis was intensified by the workings of economic globalization
like the parameter of interdependence and debt accumulation. When it comes to
dealing with the Crisis, the Greek case has offered a picture of how political
globalization undermines the role of the nation-state, since international
organizations cannot leave the country to decide and perform on its own due to
the risk of Crisis contagiousness. Understanding the Greek Crisis within the
context of globalization it is difficult to consider it as purely ‘Greek’
anymore. Also, although the role of the nation state has been limited because
of globalization, the Greek Crisis showed how essential the nationality ‘glue’
is in uniting citizens towards a particular goal; in this instance protesting
against austerity measures. 

Yield Spreads show the risk of a bond. The higher the risk of a bond the higher
the yield spread, so market participants will demand higher compensation for
buying this bond.

(Kenny, T. (2014). What Every Investor Should Know
About Yield Spread. online Money. Available at:
Accessed 18 Jan. 2016.)

A slogan linking the current uprisings with the students’ uprising against the
junta (dictatorship) at the National Technical University of Athens
(Polytechneio) in 1973.