GREECE

In Greece, obstacles to reform are posed both from within and outside state institutions. There are also problems of unreliable information and a lack of skills among political and administrative personnel; misinformation of the public, which is subjected to the influence of sensationalist media; and an asymmetry of political representation. The strategy and tactics needed to improve policy results and strategic management traditions require initiatives at a variety of levels. They also require reform projects to be implemented successively, over the short, medium and long term.
In the short run, it is clearly necessary to contain public expenditure and increase state revenue in order to face the Greek state’s ongoing fiscal crisis. It is equally necessary to take measures to alleviate the social cost of these measures for those most severely hit by the crisis, and to offer a vision for the future to the population as a whole.
In the medium run, it will be necessary to establish a set of preconditions for substantive reform in critical sectors of the economy, society and state. Such preconditions for reform in developed economies were laid out in a recent OECD study (2009), and include the following: an electoral mandate for reform; effective communication in favor of reform; solid, data-based preparation of any changes; a long gestation time allowed for reform projects; government cohesion; firmness of leadership; preceding erosion of status quo; and persistence of reformers in their task even in the face of initial failure.
Past international fiscal crises suggest that adjustment is most lasting if relatively deep public sector and structural reforms are made, and if emphasis is placed more heavily on cuts than on tax increases. In such circumstances, the contractionary impact of cuts is lower when debt and deficit levels are dire (see Citigroup report, April 24, 2010). In 2010, Greece embarked on long-delayed reforms. Difficult issues were confronted (notably pensions and labor conditions), though the initial stress was more on tax increases than on cuts to state spending. These latter will involve confronting strong political pressures.
In the long run, in order to reform governance and state-society relations, and enhance the strategic management capacities of the Greek state, reformers will have to overcome the three following historical legacies. First, at the level of the political system, there is a long legacy of polarized party competition and conflict-prone political culture. Second, at the level of the administrative system, there is a legacy of weak state capacities. Finally, at the level of state-society relations, there is a legacy of exclusionary state intervention in society, in which certain powerful interests are systematically favored at the expense of others, and these favored interests are allowed to obstruct reforms; at the same time, the system of corporatism, being both conflict-prone and fragmented, has undermined the capacity for social pacts. Each of these factors undermines reform capacity.
The fact that a will to adjust was evident from both government and public, and that a reform process was underway with international support (from EU governments, the IMF and the financial markets), means that there are grounds for optimism. But the task is Herculean, and the stakes high: either systemic failure or a paradigmatic shift.