Why Greece Was Allowed into the Eurozone Despite Not Meeting Its Requirements
When examining the history of Greece’s admission to the European Union (EU) and the subsequent Eurozone, it becomes apparent that Greece’s entry was driven more by political motivations than economic factors. In this article, we will explore the history of Greece’s accession to the European Economic Community (EEC), the role of financial institutions like Goldman Sachs, and the broader context of political and economic influences.
Historical Context of Greece's Admission to the EEC
Before 1975, discussions about Greece’s full membership in the EEC were frequently postponed due to various political and economic issues. Greece was admitted to the EEC in 1962 as an associate member, with the goal of becoming a full member one day. However, the deadline for accession was postponed until the Greek economy improved. From 1967 to 1975, negotiations were frozen due to the Papadopoulos dictatorship, and in 1975, discussions resumed with the accession date set for 1981.
The consensus among the EEC countries in 1975 was that politically, it was desirable for Greece to join the union. The economy, while flawed, was not considered severe enough to prohibit such an integration. However, without the resulting economic crisis of 2010, the outcome might have been different. The situation made it clear that the EEC’s (and later the EU’s) political aspirations often outweighed economic concerns.
The Role of Financial Institutions
The admission of Greece into the Eurozone was further complicated by financial institutions. For example, Goldman Sachs played a pivotal role in Greece’s debt concealment. In 2001, Goldman Sachs helped the Greek government obscure the true levels of its debt by arranging complex financial derivatives. These transactions temporarily covered up billions of euros in debt, enabling Greece to meet the criteria for eurozone membership.
During the Greek debt crisis, it was revealed that these financial intricacies helped Greece pretend to comply with the necessary economic requirements. This adds another layer of complexity to the reasons for Greece’s entry into the Eurozone, highlighting the role of financial engineering in political and economic agreements.
Political and Economic Motivations
There are several theories explaining the political and economic motivations behind Greece's admission to the Eurozone:
1. Empire and Prestige
One reason for Greece’s inclusion was geopolitical. Greece was seen as strategically important for the EU due to its position in the Balkans and the Mediterranean. The EU’s expansion into Eastern Europe, despite its previous kleptocratic regimes, was primarily driven by the desire to secure its position as the dominant power in Europe.
The Union aimed to stretch from the Strait of Gibraltar to the Crimean Peninsula, thus ensuring its influence in key regions. This strategic expansion, often driven by a desire for prestige and geopolitical dominance, extends beyond the usual goal of democratic advancement.
2. Ignorance and Lack of Vision
The lack of a critical and visionary approach to the creation of the Eurozone is another factor. Many economists and policymakers focused more on short-term gains and political expedience rather than long-term sustainability. The interests of economic players often overshadowed the broader implications of creating and maintaining a common currency.
There was a general neglect or misinterpretation of the long-term consequences of creating an economic entity that would last for decades. The EU created an organism without sufficient oversight, leading to economic instability and significant challenges.
3. Profit and Economic Profiteering
Economic gain played a significant role in Greece's admission to the Eurozone. The financial sector’s involvement in Greece’s entry was driven by profit motives. By allowing Greece into the union, the EU and its member states enabled a degree of economic exploitation that benefited northern European countries at the expense of Greece.
Germany, in particular, profited immensely from this arrangement, receiving returns far in excess of the nominal loans provided to Greece. The EU’s lack of regulation allowed for a situation where Greece was effectively pillaged over several decades. While this was not a direct EU issue, the lax regulatory environment enabled these economic practices to persist.
Conclusion
While Greece’s entry into the Eurozone was justified with political rhetoric about shared values and economies, the underlying motivations were much more complex. The admission of Greece into the EEC and then the Eurozone, despite not meeting all the requirements, reflects a broader pattern of political and economic interests overshadowing economic stability and long-term sustainability. The case of Greece serves as a cautionary tale about the potential consequences of short-term political gains and the importance of rigorous economic evaluation in such critical decisions.