MODERN GREECE: A History since 1821 - Amazon Web Services

RETURN TO DEMOCRACY (1974–2009) 165
money right, left, and center to finance consumer spending and a
bloated, inefficient public sector, as well as a welfare system soon to be
driven itself to the brink of bankruptcy with premiums kept artificially
low while payouts became more and more generous. The public sector
borrowing requirement (PSBR) jumped from 8.1 percent in 1980 to
17 percent in 1985. This was not a Robin Hood Socialist policy of robbing
the rich to give to the poor but a policy of burdening all with debt. What
has been described as “party clientelism,” to distinguish it from the
individual variety practiced until then by ministers of non-Socialist
parties, resulted in an interdependence of party and the state machinery
that led to a continuing expansion of the latter to satisfy the insatiable
hunger of the former.
Rushing into “Socialism,” the PASOK government raised real weekly
earnings in manufacturing by a hefty 7.8% in 1982. Since there was also
a reduction of hours of work, the real hourly remuneration increase
reached 10.3%. At the same time, output per person declined by 3%.
This hit exports by making Greek goods more expensive. As always in
such circumstances, the time-honored, easy – and very short-term –
way out was once again chosen as the drachma was devalued by 15%
in January 1983. However, far from improving competitiveness, this
measure failed dismally because the government had introduced indexing
for wages. Any short-term gain in competitiveness due to the fact
that Greek goods were made artificially cheaper was, however, quickly
eroded because the rise in import prices due to the devaluation was
immediately transmitted to wages and thence to costs and prices. This
led in turn to new wage rises until the vicious circle totally annihilated
any gains in competitiveness due to the devaluation. Within 18 months,
the Greek economy was back to square one. This prompted Papandreou
to warn his compatriots that “we consume more than we produce.” He
did not specify who this “we” referred to.
Firms managed to survive by keeping investment at a minimum and
profits low. Others continued borrowing from state banks until they
faced bankruptcy, at which point the state-owned Industrial Reconstruction
Organization (OAE), created by PASOK, took them over and
continued to run them at a loss. 10 As difficulties accumulated, Andreas
did not change his policies but rushed forward to award himself the
greatest possible room for maneuver. On March 29, 1985, PASOK
declined to support Karamanlis for a second term as president of the
republic and Christos Sartzetakis, a judge, was elected president by