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Institutional Capacities and Crisis Management in Greece and Ireland

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Trust and Crisis Management in the European Union

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Abstract

The chapter applies the theoretical framework about trust and crisis management to the contrasting cases of Ireland and Greece. It recounts the role of the state in the two countries showing the difference between an outward-oriented economy with high-quality governance, and an inward-oriented country with poor governance. After both needed a financial bailout, these differences proved to be crucial in the management of the crisis. The two cases illustrate how trust at all levels of crisis management—bailout negotiations, public reaction, and market reception—resulted in a successful recovery from the crisis in Ireland, while persistent distrust in all of these relations led to a vicious spiral of austerity in Greece.

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Notes

  1. 1.

    An earlier version of this chapter was published in Győrffy (2014): 489–501.

  2. 2.

    Data : European Commission (2017), 169.

  3. 3.

    Data: European Commission (2017), 164.

  4. 4.

    Data: Powell (2003) 435 and European Commission (2017), 158.

  5. 5.

    Data: Eurostat GDP per capita in purchasing power standard (PPS).

  6. 6.

    Data: European Commission (2017), 164.

  7. 7.

    While other countries also used creative accounting techniques to enter the euro-zone, Loizides (2013) shows that Greece have reported the least reliable deficit figures and have had the largest dispersion of revisions within the EU between 1991 and 2012.

  8. 8.

    Data: European Commission (2017), 106.

  9. 9.

    Data: European Commission (2017), 140.

  10. 10.

    This was particularly excessive from 2005—monetary social transfers increased from 13.6 to 17.5 percent of GDP, while compensation of employees grew from 11.4 to 13.1 by 2009 (European Commission 2017: 136, 156).

  11. 11.

    In 2010 Greek GDP was €226 billion (European Commission 2017: 16).

  12. 12.

    Data: European Commission (2017), 28.

  13. 13.

    Data: European Commission (2017), 34.

  14. 14.

    Data: European Commission (2017), 80.

  15. 15.

    According to OECD (2010: 9), the efficiency of value-added tax (VAT) collection is by far the lowest in Greece within the euro-zone.

  16. 16.

    The overheating of the Irish economy did not go unnoticed. In 2001 the European Commission publicly reprimanded Ireland for lack of budgetary discipline, while the IMF also noted the dangers associated with labor shortages and easy monetary policy (IMF 2000).

  17. 17.

    Honohan (2010) attributes lack of intervention to the regulatory philosophy of the Irish financial supervisory authorities as well as the separation of banking supervision from the central bank.

  18. 18.

    Data : European Commission (2017), 96.

  19. 19.

    Data: European Commission (2017), 28, 14.

  20. 20.

    Data: European Commission (2017), 160, 164.

  21. 21.

    Areas of misreporting involved the incomplete coverage of public pension funds, state-owned enterprises as well as military outlays (Kopits 2017: 225).

  22. 22.

    As reported by Economic Policy Journal on 28 February 2010. Article available: http://www.economicpolicyjournal.com/2010/02/merkel-no-greek-bailout.html. Accessed: 2 July 2017.

  23. 23.

    See European Commission (2010: 13–25) for more details on conditionality.

  24. 24.

    Some of the measures included increases in VAT and excise tax, cuts in public investments, capping 13th and 14th month salaries, freezing recruitment in the central government sector, and raising of the retirement age and penalties for early retirement in the pension system. See Monastiriotis (2013): 5–6.

  25. 25.

    The media coverage of the first program in the two countries was summarized in The Guardian, 21 June 2011. Article available: http://www.guardian.co.uk/world/2011/jun/21/german-media-bild-greece-bailout-resentment. Accessed: 2 July 2017.

  26. 26.

    Grexit was first used by Buiter and Rahbari (2012). After their analysis the term spread fast in the financial media.

  27. 27.

    For the details of the program, see IMF (2012c): 45. A detailed, critical analysis of the restructuring is presented by Zettelmeyer et al. (2013), who note the substantial costs the delay caused in the effectiveness of this measure.

  28. 28.

    The sheer volume of conditions is staggering—while the documentation of the first package was 90 pages (European Commission 2010), the second document was 185 pages long (European Commission 2012b).

  29. 29.

    See the report by the BBC, http://www.bbc.co.uk/news/world-europe-18564266. Accessed: 2 July 2017.

  30. 30.

    On the specific details of the package, see the Eurogroup statement on 27 November available at: http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ecofin/133857.pdf. Accessed 2 July, 2017.

  31. 31.

    The Memorandum of Understanding for the program is available: https://ec.europa.eu/info/sites/info/files/01_mou_20150811_en1.pdf. Accessed: 2 July 2017.

  32. 32.

    The number of quantitative performance criteria in Irish case was very low not only in comparison to Greece, but also compared to most other financial assistance programs since 2002 (IMF 2015: 11).

  33. 33.

    According to press sources, pressure to increase the corporate tax came from many corners, which include Germany , France , and the European Commission . See reports at http://www.spiegel.de/international/germany/merkel-s-dilemma-chancellor-faces-tough-sell-on-irish-bailout-a-730578.html or http://www.bloomberg.com/news/2010-11-20/irish-corporate-tax-rate-increase-isn-t-a-condition-for-aid-sarkozy-says.html. Accessed: 2 July 2017.

  34. 34.

    See report at http://www.independent.ie/irish-news/germans-name-kenny-as-european-of-the-year-28823213.html. Accessed: 2 July 2017.

  35. 35.

    Election results are available at: http://www.electionresources.org.

  36. 36.

    Fiscal deficit was 2 percent in 2015 (European Commission 2017: 160).

  37. 37.

    Data: European Commission (2017): 170.

  38. 38.

    Rankings are available at http://www.doingbusiness.org.

  39. 39.

    The unemployment rate in Greece reached its peak in 2013 with 27.5 percent unemployed. In Ireland the unemployment rate peaked at 16.7 percent in 2010 then fell under 8 percent by 2014 (European Commission 2017: 14). According to the Eurostat’s at-risk-of-poverty rate after social transfers, which has a cut-off point at 60 percent of the median income, 48 percent of the Greek population was at risk in 2015, while in Ireland 19.9 percent was at risk.

  40. 40.

    I will return to populism more in depth in Chap. 7.

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  1. Péter Pázmány Catholic University Corvinus University of Budapest, Budapest, Hungary

    Dóra Győrffy

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Győrffy, D. (2018). Institutional Capacities and Crisis Management in Greece and Ireland. In: Trust and Crisis Management in the European Union. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-69212-8_4

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  • DOI: https://doi.org/10.1007/978-3-319-69212-8_4

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