The crisis in Greece and Southern Europe: A Whodunnit

David Madden (SEESOX Associate; Senior Member, St Antony's College, Oxford)

Professor Loukas Tsoukalis spoke on this subject at SEESOX on 14 November. He spoke mainly about Greece as a catalyst in the crisis: and also about Italy, Spain and Portugal (and Ireland as an honorary member of the Southern European group): less about Cyprus, where the main problem had been over-exposure of Cypriot banks to Greek government debt.

Although a whodunnit, there was not yet a happy ending in sight. The worst economic crisis since WW2 would continue to have profound effects, and shake integration projects. The series of matryoshka dolls got uglier: the bursting of the biggest international bubble since 1929, a systemic crisis of the Eurozone (a currency without a state), and national failures of unsustainable economic models and dysfunctional political systems.

Reflections on Turkey between two elections

Melis Evcimik (St Antony's College, Oxford)

On 21st May, Gamon McLellan (SOAS Near and Middle East Department) presented a talk on Turkey, following the local government elections on 30th March and looking ahead to the first direct election of a president in August and the parliamentary general election due in June 2015. The session was chaired by Dr. Anastasakis. Since 13 May, McLellan said, Turkey had been in mourning for the 301 victims of the mining disaster at Soma, in Manisa province, raising questions about industrial safety and how the government had discharged its responsibilities. European headlines had illustrated how the disaster had given fresh ammunition to European opponents of Turkey’s EU membership. Safety and working conditions at the mine had been atrocious, and an opposition parliamentary motion in October 2013 demanding an investigation into the safety at the mine had been defeated by the ruling AK Party majority. The government’s position had not been helped by the Prime Minister’s press conference in Soma, or by the videos apparently showing assaults on and insults against members of the traumatized community during Recep Tayyip Erdoğan’s walk-about there, with security forces using tear gas and water cannon and eventually closing the town to outsiders.

After the elections: Serbia on its European path

David Madden (Senior Member, St Antony's College, Oxford)

The Serbian Ambassador in London, Dr Ognjen Pribicevic, spoke on the above subject at SEESOX on 12 May. David Madden chaired. The Ambassador summarised the outcome of the March elections. The Serbian Progressive Party had won almost 50% of the vote, and 167/250 seats in Parliament. The party leader, Vucic, was now Prime Minister. There was no mathematical necessity for a coalition, but Vucic had chosen the former PM and leader of the Socialist Party, Dacic, to be Foreign Minister. Not one MP was anti-EU. This was probably unique in Europe. The other key event was the opening of EU accession talks on 21 January.

The number one issue was the economy. Unemployment was about 25%, the public sector was over-sized leading to budgetary problems, and although a firm – and popular - start had been made in fighting organised crime and corruption, this remained a problem. The strategy was to begin with austerity with a 10% cut in public salaries (with no action on pensions yet); and then to introduce new laws on labour relations, encouraging entrepreneurs and FDI. In June there would be laws to simplify licensing requirements, not least to reduce the scope for corruption. On cooperation with neighbours, he highlighted Vucic‘s visit to Sarajevo on 13 May, and continuing work on implementation and extension of the Brussels Agreements. On bilateral relations with the UK, he emphasised the new phase, with particular emphasis on trade, investment, culture and the history of friendship and personal contacts. Today’s Serbia was a country of pop and folk festivals, tourism, good food etc: a member of the European family, and a country in transition.

The Lost Sandžak: The forgotten region of Serbia and Montenegro

David Madden (Senior Member, St Antony's College, Oxford)

On 10 February, Kenneth Morrison and Elizabeth Roberts gave a seminar at SEESOX with the above title, to mark the appearance of their book “The Sandzak: A History”. David Madden chaired. Kenneth set the scene for the undertaking: the first detailed history written in English. Since the Sandzak was not a state or autonomous entity, it had no archives. It was terra incognita: but a unique political and cultural space.

Elizabeth set out the history up to 1918. The Sandžak was a small region with changing borders and regular population shift. There was a mixed Orthodox/Moslem population (currently roughly 32%/60%). Its network of interconnecting river valleys made it a transit route (for trade, travel, and armies) though the mountains. These factors brought wealth at times but also misery e.g. during the Ottoman/Hapsburg wars of the 17th and 18th centuries. One constant was that this small wedge of territory provided a vital connecting corridor between Istanbul and the frontier provinces of Bosnia and Herzegovina, while for Vienna it stood in the way of the coming together of Serbia and Montenegro. The Sandžak gained heightened importance, and attracted increased outside attention in the period between the 1878 Congress of Berlin and the 1912/1913 Balkan Wars. Austria-Hungary, having occupied Bosnia and Herzegovina under the terms of the Berlin Treaty, chose merely to garrison the Sandžak while leaving it under Ottoman administration. When Austria-Hungary annexed Bosnia and Herzegovina in 1908 they sought to blunt international protests at Vienna’s expansionism by withdrawing their garrisons from the Sandžak, allowing the territory to revert to full Ottoman control. At the same time the Austrian Foreign Minister, Alois von Aehrenthal, was able to allay the misgivings of the military hawks over the Ottomans’ inability to resist Serbian and Montenegrin aggrandisement by arguing that Vienna should focus on subjugating Serbia rather than seeking to bolster their presence in the Sandžak. Ironically Vienna’s decision, which took no account of continuing Ottoman decline, allowed Serbia and Montenegro to gain a common border when they defeated the Ottomans in the ensuing Balkan War of 1912. One of the cardinal principles of Austria-Hungary’s policy in the Balkans had been undermined; Serbian nationalism had been strengthened rather than tamed.

Greece: Taking stock - economic and financial changes since the onset of the global and euro area crises

Francisco Torres (Santander Visiting Fellow, St Antony's College, Oxford)
Jonathan Scheele (ESC Visiting Fellow, St Antony's College, Oxford)

On 17 February Eleni Dendrinou-Louri, Deputy Governor of the Bank of Greece, spoke at a SEESOX seminar organised in association with PEFM. The session was chaired by Max Watson, PEFM Director, and Francisco Torres, Santander Visiting Fellow, was discussant

On the economy and economic adjustment, she characterised the pre-crisis period from 2001 to 2008 as a low inflation and low interest rate environment, with negligible spreads vis-à-vis German government bonds but large and growing fiscal and external imbalances.

On the fiscal front, the deficit was almost continuously above 5% of GDP, worsening considerably from 2007 onwards. At the same time, those fiscal imbalances were structural, given the unfunded pension system, the lack of budgetary controls in healthcare, the weak tax administration and poor collection rates, the large underground economy and the clientelist political system.

On the competitiveness front the situation was no better, with Greece losing competitiveness by about 30% against its trading partners between 2001 and 2009. The current account deficit widened significantly between 2001 and 2008 and the relative price of non-tradables increased substantially. Greece ranked worst in the euro area as regards its twin deficits – budget and current account. Thus ‘the debt crisis was an accident waiting to happen’. Spreads sky rocketed and gave rise to self-fulfilling debt dynamics, resulting in a debt-GDP ratio of 176.2% in 2013.

Whatever happened with Transition in Central and Eastern Europe?

Jonathan Scheele (ESC Fellow, St Antony's College, Oxford)

Alina Mungiu-Pippidi is a regular visitor to SEESOX and, as always, gave us a thought-provoking evening and material for much further work. Last year she spoke about corruption in the new EU Member States, but this time she developed some of her earlier work on transition, in particular her 2009 paper “The Other Transition”[1]. There, she had argued that the history of the post-communist transition could be rewritten as a renegotiation of a social contract between state and society after Communism.

Now, 25 years after the fall of the Berlin Wall, Alina felt it was time to re-examine the whole issue of transition. Among a list of questions to be answered was whether “transition” still deserved a word for itself. Are ‘transition’ and modernisation synonyms? How does transition relate to development and is it a necessary stage? When can we consider transition as accomplished? And once it is accomplished, is it sufficient for development? Are some transition policies more successful than others? And what is the share of policies and institutions in shaping transitions?

The Eurozone crisis: An insider’s view from Cyprus

Androulla Kaminara (Academic Visitor, St Antony's College, Oxford)

On the 27th of January Dr Michael Sarris[1] gave a very lucid account into the functioning of the Eurogroup, as was experienced by the Cypriot delegation during the two meetings of March 2013. The first meeting resulted in a decision for a bail-in of Cypriot banks by all depositors and the second decision of bail-in from depositors with deposits of over 100,000 euro.

He highlighted that the current narrative is based on looking only at some of the symptoms of what is wrong with the European construction and not at the underlying problems. He believes that many Member States took seriously the benefits of the Eurozone and less seriously the obligations emanating from being a member.  However the Eurozone architectural construction had shortcomings that were not addressed, as for example, the lack of a mechanism to control imbalances, in both surplus and deficit countries. “When we realised that they were a lot of fires burning – we concentrated on rules to avoid new fires from developing, rather than to put out existing fires.”  Crisis mismanagement and a faulty decision making process are at the heart of the Eurozone’s continuing troubles.