REVIEW: Article

The United States has a Stake in the Outcome of Greece’s Six-Year Crisis

There is a monument across the street from my residence in Athens dedicated to the Americans who supported, and fought in, the Greek War of Independence against the Ottoman Empire from 1821-1832. The Greek struggle caught the imagination of our young Republic, and President Monroe accorded the Greek rebels a mention in his State of the Union address of 1822. The first US consul took up residence in Athens in 1839, and in 1868 Charles Tuckerman of Boston became our first ambassador. (I am number 41.)

Fast forward to the 20th century. Greece and the United States fought on the same side during World War I. A generation later, Greece experienced another trauma in World War II and the bitter 1946-1949 civil war between communist and non-communist forces.[1] One effect of both the 19th- and 20th-century upheavals was to trigger successive waves of Greek immigration to the United States; now some three million Americans trace their ancestry to Greece.

Through the postwar Marshall Plan, the United States gave $376 million in aid— or $3.7 billion in today’s dollars—to the impoverished country on the front lines of the new Cold War. US Liberty ships, built quickly and cheaply during wartime, became the backbone of a Greek merchant fleet led by legends such as Onassis, Livanos, and Niarchos. The money from the Marshall Plan paid for new schools, immunization cam­paigns, and staff training for Greek government and military officials. Greece slowly began to recover from its decades of turmoil, and the tourism industry began to take off.[2]

The Junta

In 1967, right-wing military officers mounted a coup that resulted in seven years of military dictatorship. Many Greeks saw US support for, and engagement with, the regime as a betrayal of the democratic principles the United States embodied. In his 1999 visit to Athens, President Clinton spoke about this period: “When the junta took over in 1967 here, the United States allowed its interests in prosecuting the Cold War to prevail over its interests—I should say its obligation—to support democracy, which was, after all, the cause for which we fought the Cold War.”[3]

The junta fell in 1974. Democratic government was restored and the monarchy, established by the Great European Powers in 1831, was abolished via referendum. With tensions high between Greece and Turkey over Cyprus, Prime Minister Constantine Karamanlis withdrew Greece from the military arm of NATO, an estrangement that lasted six years.

The fall of the regime in 1974 also unleashed a tide of pent-up leftist, anti-US sentiment. Riding that wave in the early 1980s was Andreas Papandreou—former US Navy sailor and economics professor at UC Berkeley. His populist campaigns drew on the postwar suppression of the left and US association with the military dictatorship to boost support for PASOK, his socialist party. Meanwhile, the leftwing terrorist group 17 November, formed after the fall of the junta in 1974, began a quarter century of methodical killings that claimed over 20 Greek lives and five members of the United States Mission to Greece.

By the late 1980s, the bloom was off the Soviet model, and the Greek economy, though hobbled by inefficiency and corruption, was miles ahead of that in any Eastern bloc nation. With the end of the Cold War many US bases in Europe closed, including three in Greece. The number of active duty US military personnel went from approximately 7,000 to 300. But even with the reductions, Greece continued to be a vital ally, hosting NATO facilities at Souda Bay, Crete that remain an important transit point for US and NATO military vessels and aircraft in the Eastern Mediterranean. The early 1990s also saw the arrival of hundreds of thousands of immigrants in Greece, the first time Greece had been a destination rather than a source country for migrants.

Relations with Turkey remained difficult through the 1980s and 1990s, not only over Cyprus, but ongoing Aegean disputes. In 1999, both Turkey and Greece experienced deadly earthquakes. Under the “earthquake diplomacy” led by foreign ministers George Papandreou (Andreas’ son) and Turkish Foreign Minister Ismail Cem, relations began to thaw. While major policy differences remained, a thriving cross border flow developed of film-makers, educators, artists, musicians, and business people. Turkish tourists proved a boon for the hotel industry in the Aegean islands.  

Benefits of European Union

By the late 1980s, the European Union had displaced the United States as the principal donor, pouring hundreds of millions of dollars’ worth of structural funds into Greece. The late 1990s and early 2000s saw big public works projects—the Athens Metro, a new Athens airport, and massive highway projects such as the Egnatia highway from the Adriatic to the Turkish border in Thrace. The construction sector was also powered by the new projects for the 2004 Olympic Games, which cost $11 billion. The new Acropolis Museum opened, showcasing archaic and classical sculpture and architecture for over a million visitors a year in a magnificent setting at the foot of the Acropolis.

On the counterterrorism front in the 1990s and early 2000s, the United States partnered with Greek law enforcement, and Greek police made significant inroads against members of domestic terrorist groups, including 17 November. This culminated in the arrest of the ringleaders and gunmen who killed our five Mission members.

Notwithstanding a successful Olympics and the terrorist arrests, there were increas­ingly worrying signs in the economy. Greece’s rank on the indices of ease of doing business and perception of global corruption remained low. Merchants took advantage of the shift to the euro to raise prices, though inflation numbers did not reflect this, a move that increased the public’s suspicion of official numbers. Shoppers flocked to no-money-down purchases, and banks from across Europe offered loans to people to pay for their vacations.

In late 2008, Bear Stearns and Lehman Brothers went under, the harbingers of a Wall Street meltdown and global financial crisis. In Greece pundits said the country would be spared because there wasn’t a subprime mortgage market. But the government of Costas Karamanlis lost the 2009 election, and former Foreign Minister George Papandreou, on coming to power, announced that the deficit was far higher than had been understood. In April 2010, in a dramatic statement, Prime Minister Papandreou announced that the country needed an international bailout.

Financial Crisis

Thus began six years of wrenching financial crisis. The Greek economy contracted 25 percent between 2008 and 2012. Unemployment soared to roughly 28 percent. Greece got its own version of a Structural Adjustment Plan, coordinated with the European Commission, the European Central Bank, and the International Monetary Fund.

Many Greeks felt frightened and angry, no longer on terra firma. Banks froze lending and bond yields soared based on the belief that Greece was about to be forced out of the Eurozone. The private sector shed jobs, even as most US companies maintained operations and employment in the country. But as in the United States, consumers stopped buying, which caused more firms to go under. Abandoned storefronts haunted previously middle class neighborhoods. The global financial crisis also meant that tourism numbers declined, and the street riots and anti-austerity protests shown on world news drove tourism numbers down even further. For the first time since the 1940s, there was—and there still is—a Greek homeless population on the streets of Athens.

This year at long last, there have been signs that things are finally starting to look up. Banks have been recapitalized. Tourism numbers have jumped. Two recent bond sales were oversubscribed. Even unemployment numbers, although still high, have started to turn around.

But the economic crisis has been Greece’s most severe test since its civil war, and will have profound, long-term effects on politics, economics, and society:

  • There is deep disenchantment with the political establishment and a feeling that change is needed. This has weakened traditional center parties (PASOK and New Democracy) and strengthened parties on the far left (in mid-2014, the radical left coalition Syriza won the most seats in European parliament voting) and right (including the neo-Nazi, anti-immigrant Golden Dawn party, now Greece’s third largest party).
  • Important economic reforms have been initiated, but more are required to put the country on a stable path. The challenge for the government is how to do that with an electorate that has lost 40 percent of its disposable income and is unwilling to swallow further austerity. Even as it must proceed with reforms, it also must not only create growth and jobs, but restore hope in the future for ordinary people. Meanwhile, many of the country’s brightest children leave in search of opportunity.
  • Economic stresses are intensified by concomitant social pressures like illegal immigration. Greece is the doorstep of Europe for those fleeing conflict in the Middle East, South Asia and North Africa. A country of 11 million, it hosts over an estimated million migrants, legal and illegal, and there is no sign the flow will abate anytime soon. Prime Minister Antonis Samaras has repeatedly reminded his EU partners that this will have far-reaching repercussions for the economic growth and social cohesion of the European Union as a whole. 

Transition to What?

Greece is in transition, but to what? The next few years will tell.

The outcome matters for the United States, because it matters for the stability of not just Greece, but the Eastern Mediterranean region, and our largest trading partner, the European Union. Our military priorities in Europe have been shifting north to south and west to east. Our defense and security relationship is more important than ever. And Greece is an essential counterterrorism and law enforcement partner. We have a stake.

So what are we doing?

In the first place, we are doing the very traditional diplomatic job of affirming the value we place on the relationship via high-level visits and contacts. In the past year, Prime Minister Samaras has been to Washington twice, meeting with the President, Vice President, and Secretary Kerry. The Greek Foreign and Defense ministers have also visited, and met with Secretaries Kerry and Hagel. Treasury Secretary Lew and Commerce Sec­re­tary Pritzker have both visited Athens, as did General Dempsey, Chairman of the Joint Chiefs of Staff. These high-level visits demonstrate our respect for the Greek leadership, which is working to create political space to make some of the necessary, but hard choices it has had to make. We also are encouraging Greece to continue taking the decisions for reform that will put the economy back on the path to sustainable recovery. They’re halfway across the river; as friends and partners we want to see them continue to the other side, not go back where they started from.

When the Secretary of Commerce came to Greece in November 2013, it was the first such visit in 22 years. She met with US firms, heard their issues, and then reviewed them with Prime Minister Samaras. Together, they worked out a plan for addressing many of the practical matters that have hampered the business and investment climate. As a result, issues that had been blocked for years have started to come unblocked. Arrears are being paid. And there’s new interest from US firms working in defense, IT, health, agriculture, and tourism. In short, Prime Minister Samaras has begun to create a positive buzz. These efforts—in just the past year—have not only benefited Greece by helping to spur new business and investment when Greece most needs it, but have also led, we estimate, to over $1.4 billion in value for US firms.

New challenges sometimes require new tools. To promote entrepreneurship in a way relevant to Greece, the Embassy teamed with an Athens business school to customize Greek modules for a massive, open, on-line course (MOOC) on Coursera called “Entre­preneurship in Transitioning Economies.” Out of 23,000 course participants worldwide, fully 15 percent of the students, some 3,500, signed up from within Greece. The concluding session of the course, broadcast worldwide, was held in the Athenian Agora. We leapfrogged all the bureaucracy, rules and red tape to take entrepreneurial know-how directly to those thirsting for it.

In the same way, to showcase what Greek entrepreneurs can do, we did a series of short videos on Greek emigrants to the United States and what they have accomplished in the worlds of medicine, journalism, technology, business, art, fashion, sports, and law. The series, Greeks Gone West, which ran on-line in cooperation with leading Greek daily Kathimerini, featured the stories of 23 Greeks and Greek-Americans, was widely viewed, and projected the tremendous benefits of our strong people-to-people ties.

If some of the tools of diplomacy are new, the ties between our two countries are old and strong. Greece, and all that it stands for, still captures the imagination of Americans. It is an important partner for us in an important region, and what happens there matters. The United States thus has a national interest in Greece emerging from its extended economic crisis stronger, stable, and playing a stabilizing role in its region. That is the current job of US diplomacy.

[1] This conflict, which sharpened a left-right divide in Greek society, was memorialized in the book and film, Eleni.

[2] You can see the Greece of this period in the vintage movies, Zorba the Greek and Never on Sunday.

[3] The junta period is depicted in the Costa-Gavras film, Z.

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Ambassador of the United States to the Hellenic Republic