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The Former Greek Finance Minister Who Tried to Warn His Country About the Crisis

An interview with Alekos Papadopoulos, who believes the country's economy might see the first glimpses of hope in about five years.

Alekos Papadopoulos. Photo by Christos Bonnis/ Eurokinissi

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The Greek financial crisis is a complicated story. Are Greeks to blame or is it Merkel's greed? Is it the euro's fault or a fault within the system? Maybe it's all the previous Greek governments that led the country to this point. But what exactly were all the previous finance ministers up to when they saw their country's economy going from bad to worse?


Alekos Papadopoulos, a former PASOK MP and Minister of Finance between 1994 and 1996—the crucial period when the country was preparing to enter the eurozone—had predicted that Greece would end up bankrupt sooner or later. I got in touch with him to find out which steps he took to try to prevent it. It was through this interview that VICE Greece was able to confirm that he's about to form his own political party.

VICE: You've previously stated that you thought disaster was imminent for the Greek economy. What began to worry you and when?
Alekos Papadopoulos: My concerns began in 1996, when I was the Minister of Finance. I saw that the rapid rise in public debt was out of control—mainly due to the banks' high rate of lending, but also the size of the public sector. Particularly after 1998, when Greece entered the exchange-rate system and there was a sharp decline in interest rates. The fact that since we entered the eurozone in 2001 all attempts at strengthening the Greek economy were abandoned didn't help.

Unfortunately, after 2002, most attempts at reform were stopped by Kostas Simitis's government, of which I was a part. Then, New Democracy took over the government of the country in 2004 and there was actually an acceleration in public debt. Now, combine that with the extremely high deficit of the current account—which eventually became the largest in the world. Things were destined to end up like this.


Was there a milestone in the Greek economy's downward spiral?
The Greek economy stopped attracting foreign investment in the 1990s. Secondly, there was deindustrialization, production slowed down, and the number of imports (which were paid with loans) increased, thus steadily increasing the deficit in the current account.

And of course there was a rapid increase in public debt. There wasn't one single danger point—the risk was constant and the overall economic, political, and social system in Greece did not want to hear it. Those who raised their voices got a violent reaction and were even attacked verbally.

Who were these reactions coming from?
Initially, I raised the issue in 1994, when I was Minister of Finance, but on the eve of the 1996 elections, I openly said that the country was heading toward bankruptcy. I never stopped saying it in my interviews, articles, or speeches. I kept saying it until I was forced to resign my post as Minister of Health by Kostas Simitis's PASOK government because I disagreed with our economic policy and the abandonment of reforms.

The reaction came from within the system, particularly through trade unions and politicians associated with PASOK. At the end of 2004, I submitted a detailed report on the state of the economy to then opposition leader George Papandreou. It was a highly detailed report, in which I had highlighted what was coming. I continued right up to 2009, when I was asked to no longer put myself forward as an MP.


Do you remember any particular conversations in which you raised the issue?
I experienced strong reactions every time I raised the issue, but also a lot of indifference. There weren't many of us speaking out back then. Particular conversations don't really matter, what matters now is how we face the situation at hand.

What could have been done differently and when?
From the moment we entered the EMU, we should have made grassroots reforms in all sectors of Greek public life—in issues of public administration, economy, energy, and the banking system. Only a few things were changed in terms of social security, health, education. But whatever reforms were started, were in the end taken apart by strong reactions. The reigning ideology was populism, which, in my opinion, is the main reason our country is where it is today.

What does the July 13 agreement mean for Greece?
That deal was to be expected. A difficult and complicated program was formed, which I think requires strong policies and skills. Greece's overall political system doesn't have the skills to address or implement this new set of measures. We need to develop political skills, but this requires the transformation of a people who were never taught to be self-critical. On the contrary, they are encouraged to cultivate exaggerated expectations, which never materialize.

Aside from the political cooperation that this program requires in order to succeed, we need social cooperation. Namely, the acceptance of the measures by society itself. Without the support and acceptance of the people, this program cannot succeed. It requires enormous effort and I'm not sure this is possible. I hope it is.


The measures contained in the new agreement however are very tough. Did we have no other choice?
In my view, no. There's no other choice now. We had better options back in January (when Syriza was elected) and there were even better options one year ago. In January 2015, the conditions were better for this new government and I cannot understand why they didn't see that they had to take painful measures. I don't know what they were waiting for. Why did they only see the truth at the very last minute? This cost the Greek economy a lot.

This year marks Greece's 14th year in the eurozone. Maybe it was that adjustment that proved problematic?
The euro is not responsible for the Greek economy's predicament. The responsibility is ours—no one else's.

If you had to predict, how long will the country be in this painful situation?
I think if there is an enormous effort, the first glimpses of hope could start to appear in five years time.

What can the current finance minister do to change things?
It isn't a matter of laws—it depends solely on the Greeks' way of thinking and self-discipline. That should be nurtured, not imposed.

How can people be persuaded to embrace such a tough program when they're already so tired?
We might have suffered hardships, but the reconstruction of a society requires the activation of every single force within a nation. There's no other way. Particularly the elite of the country—not only the political but also the economic, scientific, and intellectual elite—must be mobilized toward an effective exit from the crisis. I believe this last bailout deal offers a bit of hope that can happen.