Greece and Ireland: Two Divergent Modernization Paths

In less than four decades, Ireland, unlike Greece, has gone from one of the poorest countries in the EU to one of the richest. On the contrary, Greece not only went bankrupt but was left behind, far behind.

By George K. Bitros and Steve Bakalis

Greece’s transition towards an era of “modernization”, almost 20 years after the end of the eight-year term of former socialist prime minister Costas Simitis, was revived recently in the Antigone Hall of the Hellenic Cosmos Cultural Center, at an event held in his honor.

The event was organized by Anna Diamantopoulou’s Network for Reform in Greece and Europe, Jacques Delors’ Notre Europe and the magazine Reform, with the support of the Delphi Economic Forum, and it was attended by President Katerina Sakellaropoulou, Prime Minister Kyriakos Mitsotakis, PASOK President Nikos Androulakis, and other prominent figures and academics.

The occasion was also marred by the revisiting of controversy as the reputable newspaper Hestia published an article based on a prophetic letter by Professor Gerasimos Arsenis to the then Prime Minister alerting him of following the wrong path.

In the letter addressed to the then Prime Minister and dated July 31, 2003, Gerasimos Arsenis mentions (among other things) in a harsh tone: “In your days entanglement and corruption flourished. Your stock market manipulations have led to the most violent redistribution of wealth the country has ever seen. You created a closed circuit with people who were only interested in benefits and income. You opened the door to the crisis, which the underprivileged will pay for.”

So, has Greece gone down a path of modernization in the aftermath of the Simitis years? These arguments can usually be resolved by resorting to evidence and data, and not in a vacuum.

The Statistical Office of the European Union (EU) published the table below with the breakdown of the 27 EU countries by Gross Domestic Product (GDP) per capita. We attempt to provide such an answer here through a comparison of Ireland and Greece for reasons that will become contextually clear shortly.

This table shows that Ireland is at the top of the ranking and that Greece has fallen to a penultimate position. This image shocked my friend and colleague Dr. Bakalis in distant Australia. Greece’s astonishing backsliding reminded him of some essays I had written in 2000 about the Irish miracle that had been published in Sunday’s BHMA.

So he contacted me and we decided to come back and take stock in the hope that it will help the Greeks to find the way to a meritocratic political and social reorganization of Greece, which will justify our ambitions and love for this country/ homeland.

A few words about the background. The three essays entitled “The example of Ireland” were published in the Sunday BHMA on the dates 10-12-2000 , 24-12-2000 , 7-1-2001. Afterwards, Stefanos Manos, Ioannis Marinos, and many others returned to the same topic with their interventions, whose texts are available on the internet.

Many of these texts were written with the aim of generally commenting critically on a statement made by the then Prime Minister Mr. Konstantinos Simitis at a conference of the Panhellenic Socialist Movement (PASOK). In particular, he had declared “Oh no, let’s not become an Ireland.”

And his statement was extremely provocative because Ireland from the mid-1980s was no longer the Ireland of poverty and immigration. Here, as we said, we are interested in an account and what we can learn, so that we can as a country deal with the long-term consequences of underdevelopment, over-indebtedness, and the national risks that have arisen in the meantime in our region.

From the mid-1980s began the period of the “Celtic Tiger”, also known as the period of the “Irish Economic Miracle”. For a more precise miracle it is now clearly visible in the image above. In less than four decades, Ireland has gone from one of the poorest countries in the EU to one of the richest.

On the contrary, Greece not only went bankrupt, but was left behind, far behind, with a terrible over-indebtedness and at the same time great national risks for the coming decades.

Reasons why the paths of Ireland and Greece diverged

How did this unprecedented change happen? From the extensive relevant literature, we are led to the conclusion that three fundamental reforms contributed to it.

The first was “Reconciliation between the social partners”. This was made possible by the government’s commitment and the acceptance by the workers’ unions so that the increase in available real incomes is primarily through the reduction of taxation.

The second was the reduction of the taxation of business profits to 10%, with a simultaneous improvement of the business climate.

And the third was the liberalization of labor and commodity markets, and the full integration of Ireland into the global economy. In other words, they did exactly the opposite of what we did. To confirm this claim we will end with an example.

In conclusion, Greece’s transition towards an era of “modernization” is definitely questionable, and if Gerasimos Arsenis had been listened to, like others, the course of the country may have been different.

Major reforms are still pending. International indicators for the functioning of democracy, justice, public services, etc., are problematically low. The unemployment index is high, the tax burden and the outstanding public debt discourage domestic and foreign investment, and the brain drain is very high.

On all these fronts we do not need to reinvent the wheel. Common sense is needed. We know what Ireland did, Australia, Estonia, etc. Something needs to change fundamentally and change fast.

George C. Bitros is Emeritus Professor of Political Economy at the Athens University of Economics and Business. 

Dr Steve Bakalis is an expert on international business economics and management, he has held adjunct appointments with the Australian National University and the University of Adelaide, and appointments in universities of the Asia Pacific and the Gulf regions.