Greece and the Balkans: From Stabilization to Growth



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Greece and the Balkans:

From Stabilization to Growth


Dimitris Keridis

Assistant Professor of International Politics, University of Macedonia, Greece

Constantine Karamanlis Professor in Hellenic and Southeast European Studies,

The Fletcher School, Tufts University, USA


Based on a lecture given at the Hellenic Studies Unit at Concordia University

in Montreal, Canada, on March 3rd, 2006


Since 1989 Greece’s relations with its Balkan environment has changed a lot as the country itself changed profoundly in the years following the end of the Cold War. The following nine points address the “how” and the “why” of this change.
Point One
1989, the so called annus mirabilis or miracle year of post-war European history, was a cataclysm for Greece since, among all Western nations with the exception of Germany, it was the most affected by the collapse of communism and the geo-strategic change following the fall of the Berlin wall. The opening of Greece’s northern neighbourhood and East Europeans’ economic and political convergence towards liberal market democratic politics provided a huge new space for potential interaction and mutual cooperation. Greece acquired a hinterland where there was none before, since the northern border was mostly closed during the Cold War. Thus, 1989 presented Greece and its political elites with a real, historical change that shook old certainties to the core.
Point Two

Since 1989, the Balkans emerged as Greece’s primary strategic space where most of Greece’s foreign initiatives unfold in politics, in economics and business, in culture and elsewhere. For example, whereas until 1989, Greek-Balkan exchanges were minimal and 70% of Greek trade was with Western Europe, after 1989 trade with Western Europe decreased to approximately 50% with the difference going mainly to the Balkans. Suddenly, Greece started trading and investing heavily in the Balkans.1 Today, Greek investments in the area have reached around 20 billion dollars, with Greek banks and OTE/Cosmote leading the way. Whereas Greek diplomacy was primarily preoccupied with Turkey in the 1970s and the Middle East and the Third World in the 1980s, in the 1990s it turned its attention towards Southeastern Europe. Currently, the Balkans and Turkey are the primary interests of Greek foreign policy.



Point Three
Interestingly, the Balkans became a primary battleground where a sort of old and new Greece fought for political supremacy. The old and the new Greece fought over what to do in the Balkans and how to interpret and adapt to changes there. One cannot understand Greece’s engagement in the Balkans after 1989 without an appreciation of the broader ongoing struggle for the redefinition of Greece’s political culture and identity towards the European mainstream.
Old Greece was and is still defensive, fearful, nationalistic, isolationist, populist, etatist, that is statist, and protectionist. Since it thinks of the international environment as being full of threats, risks and hostile conspiracies, this is a traumatized Greece that remains hostage to its resentment of past foreign domination and Turkish aggression. After all, independent Greece quickly found itself under the protection of three great powers and for much of the first 120 years of its national existence it remained under the tutelage of Britain, only to have the US take Britain’s place after 1947. The emergence of the Turkish threat in the mid-1950s and especially after 1974 complicated Greece’s relations with the outside world even more and further enhanced its defensive reflexes. Past traumas and current fears have made Greece very resistant to change. Rather than adapting and making the most of the new geo-strategic environment following the end of the Cold War, old Greece remained attached to the “truths” of a bygone era, immobile and reactionary.
In contrast, the new Greece is confident and self-assured, and therefore, generous, proactive and, often, takes the initiative in contributing to the positive shaping of regional dynamics rather than waiting passively for events to unfold. It is an engaging post-nationalist Greece, which, having already spent a quarter of a century sharing sovereignty with its European partners and building an ever closer European Union, appreciates fully the benefits of cooperation and the costs of isolation, especially in today’s globalizing world. This is a business-oriented Greece that understands entrepreneurship is the primary engine for growth. This new Greece gives priority to trade, investment and economic diplomacy compared to traditional geo-politics. Where old Greece sees risks new Greece sees challenges and opportunities to be seized and exploited. In a world where China, India and others rise to take full advantage of globalization, being stuck in the past is a strategy for relative decline.
Point Four
Initially, Greece reacted defensively to changes in the Balkans and in the rest of Eastern Europe. Its political class appeared incapable of breaking away from old Greece. At the time, two interrelated issues dominated in Greece: first, Greece’s unyielding support for the preservation of the unity of Yugoslavia, even after war broke out; and, second, its fierce objection to various aspects of the independence of the Former Yugoslav Republic of Macedonia. All western countries, including the United States and Canada, initially supported the unity of Yugoslavia. But as violence mounted they changed their policy from favouring unity to sanctioning the independence of the break-away republics. Greece was the last Western country to come to terms with this new reality and its continued support for Yugoslavia was increasingly misinterpreted as a direct support for Milosevic’s greater Serbia policy. Furthermore, Greece’s maximalist position on FYROM’s name, adopted by Greek leaders in 1992, that demanded the elimination of any reference to Macedonia from the new republic’s name, gave the impression internationally that, at a time of great unrest and bloodshed in the Balkans, the region’s western-most nation, Greece, a member of NATO and the European Union, was more part of the Balkan problem rather than part of its solution. Both the perceived support of Greece towards Milosevic and its opposition to FYROM led to the isolation of Greece from its western partners and seriously weakened its international position. For a time, it seemed as if Greece were missing a great historic opportunity to play a constructive role.
Point Five
The Greek business class was mostly an exception to this initial bleak picture. In contrast to politicians, journalists and overall public opinion, Greek businessmen, broadly speaking, saw the changes in the Balkans as an opportunity for expansion and growth and started exporting and investing heavily. Much of the Greek business community diverged from domestic populism and became pragmatically engaged abroad. Thus, the new Greece first emerged out of business initiatives. For all the ups and downs, Greece’s entrepreneurial endeavour in the Balkans after 1989 has been a great success story. Today Greece is the primary foreign investor in Albania, FYROM and Bulgaria and the third in Serbia and Romania. Greek banks, utilities, food and agricultural industries, textile, retail and tourist groups have used the opening of these countries to expand their business to better withstand the increased international competition. Given the pressure of globalization, Greek business cannot afford to be secluded in its own small market. If it is to survive it has to expand and it has to engage.
In the Balkans, Greece looms large and lucky. Greece has a larger economy than all the Balkan countries combined. In 2007 the Greek GDP will reach approximately 300 billion dollars, when FYROM’s GDP is around 6 billion or 2 % of Greece’s.2 Despite their robust growth in recent years, a great economic asymmetry between Greece and its northern neighbours persists. Furthermore, Southeast Europeans often view Greece as the West’s darling for being forcefully dragged outside the iron curtain in 1949 and for being handsomely supported ever since, including around 150 billion dollars in EU subsidies after 1981. Neither Romania nor Bulgaria can aspire to similar levels of aid; they will be lucky if they secure a small fraction of this amount now that they have become members of the EU.
Point Six
What started first with Greek business gradually spilled over into Greek politics after the mid-1990’s. In particular, 1999 was the year of truth for Greek foreign policy and Greece’s regional and international position. The year started with the Ocalan crisis that developed into a diplomatic disaster in which Greece was attacked by Kurds and Turks, as well as by most of its Western allies, Europeans and Americans alike. It ended with the promising Helsinki compromise when Greece lifted its objections and lent its support to Turkey’s European orientation and EU accession prospects. Thus, in 1999 a paradigm shift occurred in Greece’s international perceptions starting with Turkey. The shift involved a turning away from a realist, security-obsessed, Clausewitz paradigm of international relations towards a liberal, cooperation-focused, Kantian paradigm. What started with Turkey had a great effect on Greece’s relations with its Balkan neighbours.
The reasons for this paradigm shift are multifaceted. To begin with they have to do with the failure of past policies which instead of resolving, have complicated Greece’s problems. For example, the list of Greek-Turkish differences progressively got longer instead of shorter and tensions escalated becoming harder and harder to manage. During the 1996 Imia crisis, the US intervention proved crucial in avoiding a military confrontation with Turkey, as the then prime minister Kostas Simitis admitted. But Greek policy-makers were quick to notice that the US, in the absence of the pressure of the Cold War and often diverted by crises elsewhere, cannot always be relied upon to be ready and willing to intervene and manage relations between the two neighbours.
Another reason of course is globalization and the pressures of intensified international competition. As a small country with a stagnant and aging population, Greece needs to put its resources to better use than simply misspend them on armaments. For example, in the late 1990s Greece’s strategic priority was to join the Euro, in order to enjoy price stability and German-type low interest rates. But to make this happen, Greece needed to decrease its public deficit and rein in an ever-expanding defence budget of close to five billion dollars annually while strengthening the investment community’s sense of stability and security.
Participating in the process of European integration has also been extremely helpful. Being an EU member required a totally new approach to international relations, something that Greece has been gradually learning. Mentalities and attitudes learned in Brussels naturally spill over to Greece’s relations with the outside world more broadly, and especially with the part that aspires to join the EU itself, the Balkans.

Point Seven


Since 1999, Greece Europeanized its foreign policy in two ways: first, in embracing a policy of engagement abroad rather than counter-balancing, and, second, in using European integration as the best process for the resolution of its bilateral problems with its neighbours, mainly Turkey. Greece was helped by the emergence of the European Union as the only, or at least the main, “game in town.” All Balkan nations want to join the EU and as a member Greece has veto power over their entry. Thanks to Greece’s well established position within the EU, the Republic of Cyprus entered the EU despite Turkey’s, and many Europeans’, objections. Moreover, even Turkey had to radically change its traditional position on Cyprus and instead of opposing, it fully embraced the UN-proposed plan for the resolution of the Cyprus problem.

Point Eight


Thanks to all these changes, Greece is playing a constructive and, often, leading role in the building of a new Southeastern Europe that should be peaceful, prosperous, democratic and well integrated into the European Union. Greece lent its support to Bulgaria’s and Romania’s entry into the Union, favours the increase of EU’s support to the Western Balkans, and continues to strongly advocate Turkey’s accession. After years of failure, Greece seems much better at playing the European game, which is based on constant giving and taking and the building of flexible alliances on different issues, so that it can better serve its interests.
Point Nine
Given this rosy picture, what are the remaining problems and points of concern? To begin with, old Greece has retreated but it is not gone and can return with a vengeance. Conspiracy theories still circulate, Greek “rights” are still being threatened and “the Americans are always out there to harm Greece.” Actually, what we now have is a bifurcated reality where much of the Greek business and political elites have embraced the new paradigm but large parts of the electorate remain suspicious of changes, opposed to Turkey no matter what, uncompromising to the extreme on Macedonia and so on. At the same time that the two main parties, New Democracy and PASOK, support Turkey’s European vocation, 70% of Greeks according to The Economist and many opinion polls, remain hostile towards Turkey and oppose any type of membership of Turkey to the EU. Thus, as in many Western democracies, there exists a growing divergence between Greece’s leadership and the Greek people. This gap leaves plenty of room for unscrupulous demagogues to carry the day. Thankfully, despite some attempts, no such charismatic political entrepreneur has yet emerged but conditions remain fertile for such a risky development.
Another problem is that many differences remain unresolved, hibernating, with the potential of waking up some day in the future – such as the Aegean dispute with Turkey, the name dispute with FYROM and, obviously, Cyprus. The general public discourse in the country is not helpful. It remains dominated by views that Greece is the perennial victim of international politics and needs to defend its inalienable rights instead of being a serious player with interests that require alliances with others and beneficial compromises if these interests are to be advanced.
The third problem is that Greece’s strategy is very much dependent on the strength of the EU’s drive for integration and enlargement. This drive in turn depends on Europe’s economic health. In times of economic stagnation, Europe loses its dynamism, protectionist instincts are revived, further integration becomes harder and European citizens, afraid of unemployment and losing their social benefits, grow resistant to enlargement and bringing in new members. For example, the defeat of the EU’s constitutional treaty in the French and Dutch referenda and, more generally, the recent uncertainty confronting the EU, have to do with the general economic malaise that has afflicted the core of Europe and its largest economies, with the exception of Britain and Spain. In this sense, the prosperity and continuous growth of Germany, the great financier of European integration, remain of the utmost importance. Thus, for better or worse, Greek foreign policy finds itself hostage to the broader trends shaping Europe today. Thankfully, the European economy is moving again, adding wind to the sails of Greek policy in the Balkans.
A fourth problem can easily be identified as having to do with the inefficiency and corruption of the Greek state and its public administration. The Greek state machinery is notoriously slow in responding to the changing times and in facilitating Greek business endeavours both at home and abroad. For example, Greek aid to the Balkans is mismanaged, issuing visas at Greek consulates abroad remains too cumbersome, Greek diplomats hesitate to promote Greek economic interests, stuck in old-fashioned geo-politics, the Greek education system fails to prepare young Greeks for the new borderless world they live in and so on.
Finally, as important as its Balkan courtyard is for Greece, it is not enough. New regions, such as the Middle East with reforming countries such as Egypt, Libya and Jordan, open up and Greece, politically, economically and culturally, should not be absent. The reorientation of Greek interests towards the Balkans was necessary and healthy for a time but it has run its course. The surroundings in which Greece lives form an interrelated and interdependent whole and as such they should be understood. Ours is a dynamic world with multiple linkages, trade-offs and exchanges.
Through the Balkans, Greece’s horizons have expanded as never before. The process was not easy nor was its happy end assured. But today a new Greece, a partner in Europe and a leader in its region, can play the constructive role that its history, culture, geography, economics and international politics allow.


1 Actually, according to the Economist Intelligence Unit Greece’s trade with the EU was around 50% of Greece’s total external trade in 2004 (53% of Greece’s imports and 47% of its exports), Country Report “Greece July 2007,” p. 5

2 In particular, according to the Economist Intelligence Unit whereas FYROM’s GDP is 6 bn, Serbia’s 29 bn, Slovenia’s 36 bn, Bulgaria’s 31 bn and Greece’s 299 bn, Country Profile “Macedonia 2007,” p. 24


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