Too early for crisis-hit Greece to claim victory

The consensus, such as it is, on the eurozone crisis was neatly summed up on Monday by Hugo Dixon, author and editor at large of Reuters News: “The euro crisis is sleeping, not dead.”

What about the crisis in Greece? Over the past four to five years Europe, supported by the International Monetary Fund, has invested more time, effort and money in Greece than in any other struggling eurozone state. The aim is to reform a country so inefficiently governed, so riddled with corruption and so burdened with debt that it seemed, for certain spells in 2011 and 2012, to pose a threat to the eurozone’s survival.

So it seems reasonable to ask: if this time, effort and money have not changed Greece for the better, what has it all been for?

The EU-IMF financial rescues for Greece are the most costly international bailouts ever known: €110bn in May 2010, and €172bn in February 2012. Their primary purpose was to prevent an abrupt Greek default, stabilise the European banking system and keep the eurozone intact.

A secondary objective was to set in motion reforms that would modernise the Greek state and economy in such a way that a similar emergency would never arise again. As Jean Pisani-Ferry, the French economist, puts it in his excellent book The Euro Crisis and its Aftermath: “Greece had, in essence, been asked to remedy decades of economic and public finance management in only a handful of years.”

This was, undeniably, a tremendous challenge for Greece. So in July 2011 Europe’s leaders offered a helping hand – either because they were convinced of their expertise in such matters, or because they had learnt not to trust Greece’s home-grown reform efforts.

The helping hand took the form of a Task Force for Greece, a group of 60 people – 30 in Brussels, 30 in Athens – who offer advice in areas such as tax administration, anti-corruption measures, healthcare reform and creating a modern land registry. The Task Force publishes a quarterly update on its activities, the seventh edition of which came out last week.

Like many EU documents, this report puts a positive gloss on things. “Greece has now reached 5th place out of all [28] member-states in its absorption of EU structural and cohesion funds, compared to 18th place at the end of 2011. The latest figures show the country has now made use of 81.3 per cent of the funding available in 2007-2013. This is well above the EU average of 69.17 per cent.”

Translated into English, this means that Greece is getting better at finding useful projects on which to spend the billions of euros that it receives under EU aid programs for less well-off states.

The Task Force’s report adds: “Overall, the Greek tax administration has achieved good progress, both in tax administration, with the adoption of a Secretary-General decision outlining the new organisational chart, and in terms of core business procedures, especially regarding results in debt collection and VAT reforms.”

Several elements of that sentence make me wonder how much progress Greek tax reform is really making: 1) the opening word “overall”, 2) the peculiar, burbling repetition of the words “tax administration”, 3) the desperate-sounding celebration of a bureaucratic decision on an organisational chart, and 4) the use of the meaningless phrase “core business procedures”.

I do not question that some reforms in the Greek tax system are making headway. I mentioned some of them in the FT’s Special Report on Greece, published on July 7.

But I suspect it is much too early for Greece to claim victory on the reform front. Keep in mind, instead, what the IMF said in June: “Adjustment fatigue has set in, and the coalition government has a reduced majority of just two seats in the 300-member parliament. This is making it difficult to move forward boldly and swiftly with needed reforms.”