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Greece faces new troubles at home and abroad

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Welcome back. It seems like a good time to focus on Greece, where a number of converging geopolitical, economic and domestic political challenges are drawing the world’s attention.

But first, the results of last week’s poll, which asked whether German policy has changed for the better since Russia’s large-scale invasion of Ukraine. About 67 percent of you said yes, 18 percent said no, and 15 percent were on the fence. Thank you beautiful! I’m at tony.barber@ft.com.

August and September of this year mark the 100th anniversary of the Small disaster in Asia – commonly known to Greeks as “the catastrophe”. It is perhaps the most painfully remembered episode of modern Greek history. Turkish forces expelled an invading Greek army from Anatolia, burned the large coastal city of Smyrna (now İzmir in Turkey), and massacred and deported Greek and Armenian civilians.

Turkish President Recep Tayyip Erdoğan chose this anniversary to make some fierce comments accuse Greece of occupying demilitarized islands in the Aegean Sea. “Don’t forget İzmir,” he said.

The EU condemned Erdoğan’s language, called it part of a continuous pattern of verbal hostility against Greece. A Deutsche Welle article looks at how maritime borders, energy exploration and the divided island of Cyprus are chronic sources of tension between the two countries, who are, at least nominally, NATO allies.

How should Greece, the EU and NATO interpret Erdoğan’s muscle cramps? With more peace than alarm perhaps. It resembles the behavior of an imperious leader who knows he has influence over his allies because of Turkey’s importance to the West in Russia’s war against Ukraine.

On the other hand, Turkey’s foreign policy has become increasingly militarized over the past decade, as outlined in Dimitar Bechev’s recently published book. Turkey under Erdoğan.

The consequences for Greece are serious. Even in moments of economic emergencies, such as the sovereign debt crisis ten years ago, Greece has felt the need to keep defense spending above NATO’s target of 2 percent economic output per year. Many NATO countries are under that target, but Greece, with Turkey as its neighbor, finds it necessary to remain on guard.

The Greek economy is in much better shape than it was in 2012 or 2015, for example, when the debt crisis almost pushed it out of the eurozone. Last month, the EU announced the end of its “heightened surveillance” of the nation’s economic and fiscal policies, marking the end of a 12-year period in which Greece was effectively instructed by its EU and IMF creditors to to swallow medicine in exchange for rescue operations worth billions of euros.

Greece has made such good progress that it repaid all of its IMF loans in April, two years ahead of schedule. Public debt, although astronomically high at 199 percent of gross domestic product at the end of 2021, is on a downward trend. Major Greek banks have reduced their non-performing loans.

But there are warning signs. Russia’s war in Ukraine, the energy crisis, the economic downturn in Europe and rising interest rates in the eurozone are putting pressure on Greece.

Buried deep in the The latest full report from the IMF on Greece, published in June, is this observation:

Despite the government’s large cash buffer and active liability management, Greece’s ability to service its debts under a severe shock depends on continued regional aid.

The 10-year Greek government bond yield has risen to more than 4 percent since late August – not dangerously high, but a development to watch.

Moreover, the social scars of the debt crisis remain visible. Greece’s unemployment rate, although well below its peak of 27.8 percent of the labor force in 2013, is still 12.1 percent, about double the EU average.

Line chart of the annual unemployment rate (percentage) showing the unemployment rate in Greece, but it is still one of the highest in the EU

Despite these difficulties, the conservative government of Prime Minister Kyriakos Mitsotakis has received applause from Greek allies for its pro-Western stance on the war in Ukraine, its competent handling of the pandemic and reforms such as the digitization of the once astonishingly inefficient bureaucracy.

Yet this is not the whole story. The government is on the defensive after it was revealed that the Greek secret service tapped the phone of Nikos Androulakis, leader of the opposition Pasok party.

Mitsotakis denies ordering or even knowing about the surveillance – which, even if it’s true (and I’m inclined to give him the benefit of the doubt), is a bit embarrassing, given that he has intelligence under his direct control. control after becoming Prime Minister of 2019.

The revelations have prompted some of the world’s leading news organizations to publish attacks on the quality of Greek democracy. A opinion column in the New York Times spoke of “the rot in the heart of Greece”.

Der Spiegel, the German news magazine, talked about “Greece is sliding into authoritarianism,” focused not only on the secret service scandal, but also on Greece’s curbing of refugees arriving at its borders.

In a scathing rebuttal worthy of the ancient Greek historian Polybius, Apostolos Doxiadis wrote that, of course, the domestic espionage was wrong but Greece is hardly swinging towards a dictatorship.

I would make one last point. During the debt crisis, some foreign commentators have raised the alarm about: the Greek extreme right and the risk of a democratic collapse. But it never happened. At the moment, tensions with Turkey and Greece’s growing economic problems are, in my view, more serious matters.

More on this topic

It’s time to worry about Greece again – Hugo Dixon assesses risks to Reuters Breaking Views

Remarkable, Citable

I wouldn’t say things can change for the worse, because it’s hard to imagine anything worse. But unfortunately this cannot be ruled out – Kremlin spokesman Dmitry Peskov comments on Liz Truss succeeding Boris Johnson as UK Prime Minister

Tony’s pick of the week

  • With Italy holding elections on September 25, far-right politician Giorgia Meloni is on the eve of power. Amy Kazmin and Giuliana Ricozzi of the FT in Rome follow the career of the Brothers of Italy leader, who could become the country’s first female prime minister

  • Young Poles enthusiastically welcome the Ukrainians fleeing the war, but support the pushbacks of the predominantly Muslim refugees who have arrived at the border with Belarus, Félix Krawatzek and Piotr Goldstein write for the Berlin-based Center for Eastern European and International Studies

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