Department of Political Science, University of Copenhagen The Politics of the European Union-Cental Structuresand Processes of the EU Jean Monnet Programme Spring 2010 Henrik Larsen/Kim B. Olsen

Europeanization of Greece

PART 1

Table of Contents: Page PART 1 1. Abstract 1 2. Introduction; Elaboration of the problem, Theoretical debates, Methods 1-5 PART 2 Europeanization 6-7 PART 3 : Europeanization of Greece: analysis 8 1. Background 8-9 2. Changing state intervention 10

3. Changing modes of government 11-12 4. Greece and Economic and Monetary Union 12-14 PART 4: 1. Conclusion 15 2. Bibliography 16-

1

Abstract

The paper presents an examination of the process of Europeanization of Greece and the

impact of Greek integration to the European Union. The integration of Greece into the

European Union has some challenges, such as reorientation in the international system, new

focus to the economic development and modernization and administrative adaptation to the

EU norms. The difficulties in getting completely into the integration with the European Union

practices gave as a result the Greek financial crisis in 2010, unstable euro and a collapsed

Greek economy in combination with public disobedience and a panic in the Greek society.

Introduction

The paper examines the behaviour of Greek state as a Member state and its particular

accession to the European Community, and later European Union. It seeks to identify the

factors that affect the Europeanization of Greek state and it economic and political

development.

Greece is a small southern country which European orientation became concrete upon

the submission of the application for accession in June 1959. In 1961, the Association

Agreement between Greece and the EEC was signed. Although the Athens agreement did not

function properly, especially during the dictatorship that was established in 1967 and

continued until 1975, Greece opted in 12 July 1975 for full membership.

Greece acceded to the European Community in 1981, less than 10 years after the

dictatorship. Since then Greece was able to participate in the Union as a full member. The

Greek Government and political elite saw in this membership paramount factor for

achieving political stability, consolidating democracy, strengthening external security, as well

as securing the conditions (financial resources, large market, etc.) for the modernization of

the Greek socioeconomic system (Tsoukalis 1979)1.

The research question of this investigation is:

How can the Europeanization of Greece be explained?

1 Tsoukalis, L. (ed.) (1979): Greece in the European Community, London: Saxon House

2

As sub-questions can be taken in consideration:

What are the domestic implications of Europeanization? How does the Union affect the member states and respectively Greece? Was Greece enough prepared and with a sufficient solid economy to enter in the EU

and what are the consequences of it accession for the economic development of the

Union?

The paper consists of four parts:

1. The first part consists of introducing the main problem and the research question,

elaboration of the problem, the theoretical approaches and the method taken to make

this investigation.

2. The second part discusses the theoretical debate about what is Europeanization. Its

concentrates on the use of the concept in the literature on European integration and

what mean for the member states and their policies.

3. The third part assesses the application of the concept of Europeanization for Greece in

general and Greek monetary policies after the accession to the euro zone.

4. The forth part constitute the main conclusion of that investigation and possible answer

of the research question in general.

Elaboration of the problem This paper will explain the accession of Greece to the EC/EU and it process of

Europeanization, focusing on the Greek economic situation before the accession and it further

development, the problems of integration and the challenges for the Greek state. The case

study will be complemented with an investigation of the importance of Greek accession to the

Euro zone.

This topic has been chosen because in nowadays the state of Greece and the Union

pass though big financial crisis and this investigation is seeking an answer of why that

happened?, which are the main problems of the integration process and especially what

Greece has made wrong during this years as part of the European Union and the Euro zone.

The investigation has two dimensions: political and economic. The Europeanization

of the member states of the European Union always means huge political changes in the

public sphere. Greece has passed through different challenges during the European integration

3

process. As Beatrice Hibou states, some of these challenges are: a certain degree of

refocusing from previous international orientations and the processes of economic

modernization and administrative adaptation to the EU2.

Politically, the integration of the European member states had made more territorially

permeable politics and transformed the state system. The key point is that the changes of

governance are linked with the development of European Union (Simon Bulmer & Christian

Lequesne, 2005, 4).

Economically, Greece has been on of swinging back and forth and a particularly

fragrant economic and financial dualism in the way it has handled international

integration(Hibou, 2005: 236). The two-side behaviour is a characteristic of the economy of

Greece, that on one hand is integrating it market and on other recommending protectionist

policies towards notional economy3(Ibid.).

Theoretical debates The aim of this paper is to deliver outgoing efforts in the Europeanization

process and the consequences of European integration for Greece. To understand how this

concept of Europeanization has been developed and used in the field of European integration

on Greek state as study case , it is necessary to show the theories developed about it.

The theoretical debates about the European integration started in the early 1950s . The

first debate was between the neo-functionalists and the intergovernmentalists.

The neo-functionalism put it attention toward the regional integration and attempting

to explain the process of European integration. It focus on the supranational level of EU and

the main argument is that states are not the only important actors on the international arena;

supranational institutions and the non-state actors are the main driving forces f the regional

integration. The European integration is political and economic elite-driven process. The main

focus is on the factors that drive integration: such as interest groups and both level (national

and European), political parties, the role of governments and supranational institutions

(Jensen, 2010: 72).

2 Hibou, Beatrice: Greece and Portugal: convergent or divergent Europeanization?, in Bulmer and Lequesne: The Member States of the European Union, Oxford University Press, pp 229

4

The main concept of neo-functionalist is the spill over effect. States are willing to

cooperative on specific issues in order to obtain certain goals (Jensen, 2010: 76). The main

weakness of this theory is: its assumption that national governments would readily give up

their authority to the EU (Bulmer & Lequesne, 2009: 5). The theory should be seen as a

counter argument to Andrew Moravcsiks state- centric liberal intergovernmentalism.

The intergovernmentalist approach to integration has the main focus on the national

level of the European Union, giving privileged role to the national sates within the European

integration (Cini, 2010: 87). As Hix states: European integration is driven by the interests

and actions of nation states (Hix, 1999: 15). This approach give more importance to the

nation states arguing that the EU integration involves a transfer of functions from state

executive and parliaments to the EU institutions to make the cooperation more effective.

The development of the intergovernmentalist approach has been dominated by the

liberal intergovernmentalism of Andrew Moravcsik. The approach was primarily an

alternative to neo-functionalist approaches, but after 1990 it developed as a fully-fledges

theory of it own (Moravcsik: 1994). Moravcsiks Liberal Intergovernmentalism seeks to

combine different theoretical approaches in one single framework and claims that European

integration strengthens executives better that it does to legislatures and other domestic actors.

Generally the main argument of Moravcsik is that European community strengthens the

nation state. This is a result of the way policy-making is conducted on the European level,

giving more influence to the executives (Moravcsik, 1994).

The intensity of the European integration influence is obvious in all member

states, but theoretically this has been reflected in recent years. There are different approaches

in the field of European integration that are used for the explanation of the problem:

1. Bottom-up approaches: attempting to explain the development at the

European level, analysing how Member states shape EU policies, politics

and policy (Brzel & Panke, 2010: 407)

2. Top-down approaches: analysing the European Union and it impact on

policies, politics and polities in the Member states. This kind of

Europeanization attempt to explain how European Union changes the

member states (Brzel & Panke, 2010: 407)

3. IR-inspired theories: trying to explain all variables at the systemic

level.

5

This paper will take a top-down perspective looking on how the European Union has

affected the member states, how it has changed their institutions, policies and political

processes, respectively in the case of Greece. Also, will look in a bottom-up perspective

trying to explain how Greece has upload it domestic preferences to the European level.

Both perspectives can help answering the main research question: how the

Europeanization of Greece can be explained?

Methods

The method that will be used to explain the Europeanization of Greece is an

examination of empirical data that is relevant for the main topic of the paper. The sources that

had been used are academically correct and relevant for this issues of interest.

The case study is Greece and it integration in the European Union. The empirical data

will be analyzed according to the theoretical approaches that are analyzing this problem. The

theoretical approaches that are used can show the different perspective of that research

question.

As a possible advantages can be taken the quality of the main literature: the academic

books and the journals are well known in the field of European Union studies.

As possible disadvantage can be taken the lack of information or ambiguous one

regarding the Greek internal policies. The concern about clearness regarding the statistical

data about the Greek deficit will be take in consideration.

PART 2

6

Europeanization

The phenomenon of Europeanization is related to every single Member state of the

European Union and has a big impact upon the member states and their integration. In this

paper the concept of Europeanization will be taken as not fully synonym of European

integration, because: where European integration is concerned with political and policy

development at the supranational level, Europeanization is concerned with the consequences

of this process for the member states and politics within them(Simon & Lequesne, 2009:11).

This study is not going to enter in a theoretical debate about that distinction because in terms

of chronological development research the impact of integration has bigger tradition than that

of Europeanization.

The European integration of the member states is characterized by the process of

Europeanization as a impact of the EU membership upon all levels of state: political system,

economy and society.

There are a number of possible definition of Europeanization. Landrech (1994:17)

sees Europeanization as an incremental process reorienting the direction and shape of

politics to the degree that EC political and economic dynamics become part of the

organizational logic of national politics and policy-making. This process is redefining the

functions, relationships, values, regulatory patterns and internal dynamics of the political

system of member states.

Brzel define Europeanization as a process by which domestic policy areas become

increasingly subject to European policy-making (Brzel, 1999). Brzel download & upload

approach explain the debate between bottom-up integration and top-down Europeanization.

This two level game between the European Union and the Member states explain the

relationship between them and the function of the system. The bottom-up integration, as states

in the part of theoretical debates, examine how the Member states shape the European Union

policies, politics and polity.

Some theoretical problems 1. Problems of causality: how a certain change in a member state can be explained as caused by European policies? 2. Problems of measurement: is needed comparative methods. 3. Problems of area: where are the changes? In the policy content, the policy style, the polity, the politics or? 4. Problems of actors: there is not always a clearly defined top and bottom .

7

Olsen (2002: 923-4) analyze the process of Europeanization in the perspective of

what is changing, how relating the changes involved and why assessing the factors behind

such changes. He gives five different uses of the concept:

1. changes in external boundaries

2. development of institutions at the European level

3. central penetration of national system of governance

4. exporting forms of political organization

5. political unification project

There are three different perspectives of Europeanization:

1. the dimension of domestic change: where does the EU affect the MS?

2. the mechanism of domestic change: how does EU affect them?

3. outcome of domestic change: what is the effect of the MS?

The Europeanization and it impacts within the member states is different and

depending on the specific, historically constructed perceptions they have on European

issues (Hibou, 2009: 230). Every nation states has it own characteristics and it institutional

adaptations and reorientation of the economy can not follow a general course. The

Europeanization is experienced differently depending on factors such as political culture,

balance of power between state and society, policy- making process, expectations and role

according to the European integration process and EU in particular.

Generally, Europeanization can be taken as equal of modernization. Small states like

Greece and other Southern countries and Eastern European ones see in the Union a stimulus

of change and modernization. Is normal that the political elites of these countries copy the

political model of European Union, trying to transfer into their political system the logic,

dynamics, organization and regulations of the Union.

PART 3

8

Europeanization of Greece: analysis

a) Background Greece acceded the Union in 1981, and became the tenth Member state of the

European Community (later European Union). The process of Europeanization started 20

years earlier when the first associative agreement was signed between Greece and EC. The

Copenhagen criteria for accession gave a well-prepared program for Europeanization of the

Greek state, imposing the model of governance with the values, norms and principles

reflected in the European Union system.

Greece is a special case of European integration because it represent a unique set of

characteristics: a peripheral country , situated in a turbulent region under continues threat

because of Turkey with a different historic and political development and a Christian

Orthodox religion and culture. Greece is having a big historic heritage of the Ancient Greece

and being European is part of everyone in the country.

Hibou characterized Greece as a small peripheral state, with lower economic

development and low industrialization, lower standard of living than the EU average, recent

democratization (Hibou, 2009: 230). This statement give a short overview of the situation in

Greece as a point of departure.

The pattern of Greek membership to the EU is more complex that it seems to be

because of the changing attitude towards the EU policies. In the beginning (first ten years)

Greece was an awkward partner and seen as a black sheep, due to a buy Greek policy4

and the atypical positions5 on various international issues of Major European importance

(Dimitrakopoulos & Passas, 2004: 3).

This negative characterization of Greece can be explain with the central aim of the

Community authorities: unflagging support for the first democracies of the third wave, by

not taking into account, in the very terms of accession, their respective economic and social

situations( Hibou, 2009: 230-1). In 1976/7 the Commission report stated that Greece was

absolutely not prepared economically to enter the Community, but the integration was

purely political decision based on the perception on Greece as a Western country with liberal

societies and market economies ( Hibou, 2009: 231).

Later, in the 90s, there is a gradual change. Greece pass the final stage of Economic

and Monetary Union and adopt the euro as single currency. This shows the Union the big

4 This policy covered both private and public sector in a time of increasing attempts on part of EEC to liberalize public sector purchasing. 5 Positions such as the refusal of denounce the Soviet Union in the South Korean Boeing affair.

9

desire of implementing the EU policies and a need of time to obtain the required level of

development. The Europeanization process not always had a big support of the political elite

in the country. As Hibou states: in Greece, accession occurred without a broad consensus

within political parties and population (Hibou, 2009: 231).

That perception has changed and in the 90s all political parties had emerged as a keen

supporters of Greeces membership of the EU and ardent advocated of deeper integration

(Tsalicoglou 1995, Ioakimidis 1998).

Greece has been always dependent of great powers. It dependency can be three types:

financial, economical and technological. The European integration is seen as a new source

of external windfalls , that will prevent massive debt (Hibou, 2009:238). The membership in

the EC/EU has given an opportunity for the rise in foreign direct investments and the conquest

of new markets, but the big problem is that traditionally Greeces trade balances are in

deficit(Hibou, 2009:238) and the state apparatus is huge with the number of public sector

employees amounted in 1981 to 351,028 people, rising to 615,956 people in 1992, or 17 per

cent of the total Greek population. This meant that one in six Greeks or one in three employed

in the tertiary sector were working in the public sector (Ioakimidis: 1995).

Greece had extensive regulatory role over the economy, especially in the areas of

production and labour market. The banking system was in the hands of the state too. But the

big state apparatus do not mean an efficient one.

The process of Europeanization means both strengthening of the state and a change in

the methods of intervention. The political background shows the problem areas of Greece and

the challenges for the Europeanization process after the accession.

The investigation will continue with analysis of the transformation of intervention of

the state (its spending, and the problems of administrative adaptation) and changing modes of

government.

b) Changing state intervention

10

According to European integration theories, EU membership involves a transfer of

competences and functions from the state level to the EU level.

Hibou states that at the time of it accession, Greece had a lack of tradition in public act

in fields as: social polity (health care, education, retirement, child labour), social dialogue, in

the areas of regulation of economic incentives(Hibou, 2009:241).

The impact of the EU membership can be seen in two big changes in the economic

role of the state: first, the reduction in the state economic activities and the huge size of the

Greek state; second , the altered regulatory pattern of the Greek economy, that changes from a

tightly controlled into a European one, conformed with the Europeans regulation practices.

The most important EU intervention in the Greek economy is the adoption of the

Maastricht Treaty. The adopted convergence criteria is used to subject the economies of the

EU member state to a systemic macroeconomic discipline, supervised by the European

Commission. The presented convergence program in the 1993 has an aim to reduce the public

deficit, public debt, interest rates and achieving monetary and fiscal activities (Ioakimidis,

2001).

The reduction of the size of the state was imposed by the European Union. The size

was so huge that it was necessary to reduce the public expenditure as a measure against the

high budget deficit. The main task was to reduce that enormous deficit cutting public

expenditure, reduction of state employees and a termination of state financial support to

public firms and enterprises. Applying European norms and having in consideration the

requirements of the Union, Greece reduce the budget deficit and privatizing or closing down

state companies.

The Europeanization of the Greek economy gave a new regime of private economy

and a liberalization of the Greek banking system. Traditionally, these two sectors were

strongly centralized and tightly controlled by the state. The new European regulation gave

more space for competition and economic activity.

c) Changing modes of government

11

Problems of administrative adaptation

According to the top-down approach, the impact of European integration can be

demonstrated in the development of the national administrations with the new regulation

coming from Brussels. As Hibou argues the national administrations have played and

continue overwhelmingly to play a fundamental role in the adaptation process (Hibou,2009:

242). This adaptation process depends of the nature, history and role of the national civil

services, which main characteristic is the lack of technocratic tradition that increases the

role of Europe in transforming this apparatus (Ibid.). The civil service is accepted as a good

income job, but still without prestige. The public function is characterized by a lack of

professionalism. Giving all these characteristics, the main conclusion is that adaptation is a

problematic period because of historically developed traditions of working process.

Another area of problematic adaptation is the management of European funds by the

Greek administration. Brussels used huge amount of resources to train and develop good

personnel, by transferring an experience and technical knowledge. The main problem was that

this consultants (people trained in European programs and with an experience in the European

institutions), no always had been incorporated in the civil service and they normally are

spread in another areas of public action (Hibou, 2009: 243).

The analysis of the public administration of Greece reveal the transforming role of the

EU. Although there are many changes, Hibou argues that the administrative machine is

highly inefficient, incapable of controlling, even less of sanctioning, and totally lacking

authority among private actors and the political class. But conversely, not vehicle for

conveying political decisions and demands from private sector (Hibou:2009:244).

Politicized centralization

Greece is a strongly centralized state. The European pressure for decentralization

didnt succeed because of the so could overdose of reform6 (Ibid.).

Political culture

6 The civil services are against the reforms and the obligatory knowledge of European regulations and standards.

12

Almost all the time the state and the administration of Greece are characterized as:

weak state, inefficient administration, widespread clientelism and corruption (Hibou,2009:

248). The Europeanization is a long process and the case of Greece can be seen as a special

one, because of the permeably difficult society, the historical background and the situation of

irregular practices.

d) Greece and Economic and Monetary Union

General overview

The Economic and Monetary Union (EMU), especially after the initiation of its third

stage and the circulation of the euro on January 1, 2002, is expected to play a balancing role

in the global economy, promoting a new monetary pole, which is characterized to a large

extent by elements of stability. Certainly, the circulation of the euro coincided with a very

negative environment for both the European and the Global economy, which was the result of

a cyclical economic recession during the first six months of 2001 and, mainly, the political

and economic consequences of the events of September 11, 2001.

The efficiency of the EMU within the new international environment will be judged

mainly by its capacity to extend the economic, social and political content of the Union. This

presupposes the formulation of a more complete economic union, with the full

implementation of an internal market and a single taxation system, with enhanced

development and employment policies as well as a strong community budget to support these.

It further presupposes a democratic foundation and a monitoring of the European Central

Bank, as a hyper-national monetary authority, within the framework of the general

reinforcement of the political union of the development of ESPD.

The EMU has it critics, especially the inability to improve the power of participating

states in the Euro Area on global arena and protect them from external challenges. The

question is why the EMU did not succeed in that area? Benjamin Cohen has the answer:

based on an agreement among sovereign states the Euro Area lacks the clean lines of

13

authority traditionally associated with the management of money by individual states

(Cohen, 2008:52).

The investigation will focus on the impact of the EMU and the Euro Area on Greece.

This further analysis seeks to establish a number of themes by examining the impact of EMU

on the policy and politics of Greece in terms of the Europeanization. The experience of

Greece has had a top-down character, downloading rather than uploading policies.

The Greek system before EMU

At the time Delors Report was published in April 1989, Greece was experiencing

political instability and deep economic failure causing serious concern for EU. The situation

in Greece was characterized as a serious concern7 This problematic period posed threat to

the general success of the economic integration of EU, by being an obstacle on the way of

major common objectives such as single market and EMU. In addition to that, drachma was

not the part of EMS and was not seen to be ready either.

In the 1999 the economic situation of Greece was improved and successfully the state

joined the Euro Area on 1 January 2000.

As a Europeanization process, the EMU was more imposed choice than one in which

Greece could able to input into it content.

The impact on the Greek polity The institutional impact of EMU on Greek polity can be characterized by the disputes

over accuracy of official data and the enhancement of the position of the Ministry of

Economy and Finance and the Bank of Greece.

Eurostat, the European agency for statistical information, had always raised concerns

about the basis of the Greek data. As Featherstone states: the rights and wrongs oh how

the Greek data had been calculated became somewhat obscured beneath the technicalities of

accountancy rules (Featherstone, 2008: 167).

The context in which the Ministry of Economy and Finance and the Bank of Greece

acted has changed, due to a more need for administrative personnel in the EU-level process

with new skills and methods of working. The contrast was with the long-term tradition of

7 Jacques Delors had written a letter to Xenophon Zolotas, warning the bad economic situation in Greece as a serious concern for all of us (Featherstone, 2008: 165).

14

public bureaucracy in Greece, marked by low-paid, low skilled staff with low morale (Ibid.:

169).

The impact on Greek politics

The impact of EMU on Greek politics can be seen in the context of Greece within the

Union and related with the integration process and the importance of Greece in the foreign

policy arena. EU brought economic benefits, more stabile democracy within the state, notable

development aid.

EU is seen as a opportunity for modernization and through EMU the creation of

more stabile culture in monetary and fiscal policy (Ibid.: 170).

Conclusion

The most important effect of the EMU membership on Greece, is the increase in the

credibility of Greece which had decreased the expectations of long term inflation as the risk

diminished and the expected fluctuations smoothened. These lead to an increase in the volume

of trade and foreign direct investment.

15

PART 4

Conclusion The Europeanization of Greece is a remarkable process that has been a powerful force

for redefining the role, functions and powers of the state. The Greek state and society has

improved it development in the past decades as a member of the Union.

The political elite saw in the European membership a new better future for the

country. This papers asked the question how the Europeanization of Greece can be explained.

For the answer of the question the analysis was focused on the Europeanization process and it

impact on the polity and politics of the Greek state; the factors that affect the Europeanization,

the main challenges and the benefits of the integration.

The analysis shows that the Europeanization can be seen as a synonym of

modernization in all kind of areas. Firstly, the Union shows it capabilities to achieve political

stability and to consolidate democracy, changing the relation state-society and generating a

modern civil society. The role of state and it intervention has been changed.

Secondly, in the economic field, the implementation of the European politics gave

more democratic economic relation, a stabile modernized socioeconomic system, generated

private sector and independent bank system. The EU as a guarantee gave Greece stabile

foreign image and more foreign direct investment.

In third place, the European norms and criteria have been implemented in the state

administration, seeking more efficient, motivated, better prepared and less corrupted civil

apparatus.

Consecutively, the investigation represent an overview of the theoretical debates in the

field of Europeanization. According to the investigation can be concluded that the top-down

approach is more obvious in the Europeanization of Greek states because all the changes in

the state had been imposed from the European level, as measures that guarantee the stability,

modernization and growth of Greece. The liberal intergovernmentalism of Moravcsik states

that the European community strengthens the nation state. In the Greek case this statement

can be seen on practice.

This conclusion remarks show the huge role of the integration process for the building

of state-society of new kind. Although, Greek state has made huge changes in society and

state functions, Greece still has it own problems: inefficient administration, widespread

corruption, not motivated civil employees and continuous fight with the public deficit.

16

The investigation revue the changes of the Greek state and society that are made by

the Europeanization process. The impact of this integration process is a positive one for the

Greeks. There is very clear answer of the question about the economic preparation of Greece

before the accession. The investigation shows that the Greece state and economy has not been

enough prepared to enter the Union, but the decision was a political one.

Greece has passed big road of changes and development in the past 20-30 years, but

is that development good enough for the Union?..There are a lot of possible answers but

the future will show them. What is sure is the recent Economic crisis in Greece and

respectively in the Union.

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