Greece faces new problems at home and abroad – newsdubai

Welcome back. It seems like a good time to focus on Greece, where some coinciding geopolitical, economic and domestic political challenges are capturing the world’s attention.

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

August and September this year mark the 100th anniversary of the Asia Minor disaster – usually known to the Greeks as “the Catastrophe”. It is perhaps the most painfully remembered episode of modern Greek history. Turkish forces drove an invading Greek army out of Anatolia, the great coastal city of Smyrna (now İzmir in Turkey) was set on fire, and mass killings and deportations of Greek and Armenian civilians ensued.

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

The EU condemned Erdoğan’s language, calling 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, which are at least nominally Nato allies.

How should Greece, the EU and Nato interpret Erdoğan’s muscle tension? With more calm than alarm, perhaps. It looks like 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 in the past decade, as evidenced by Dimitar Bechev’s recently published book Turkey under Erdoğan.

The consequences for Greece are heavy. Even in moments of economic emergency, such as the sovereign debt crisis a decade ago, Greece has felt the need to keep defense spending above the Nato target of 2 percent a year of economic output. Many Nato countries are below this target – but Greece, with Turkey as its neighbour, sees it as imperative to remain vigilant.

The Greek economy is in a much better place than, say, 2012 or 2015, when the debt crisis almost pushed it out of the Eurozone. Last month, the EU announced the end of its “enhanced surveillance” of the nation’s economic and fiscal policies, marking the end of a 12-year period in which Greece was effectively under orders from its EU and IMF creditors to swallow their medicine in return for bailouts of several billion euros.

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

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

Buried deep in the IMF’s latest full-length report 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 debt under a severe shock depends on continued regional support.

The 10-year Greek government bond yield has risen since the end of August to more than 4 percent. – not dangerously high, but a development that must be monitored.

Moreover, the social scars of the debt crisis are still visible. Greek unemployment, while well below its peak of 27.8 percent of the workforce in 2013, is still 12.1 percent, roughly double the EU average.

Despite these difficulties, the conservative government of Prime Minister Kyriakos Mitsotakis has won plaudits from Greece’s allies for its pro-Western stance on the Ukraine war, competent handling of the pandemic and reforms such as the digitization of the once incredibly inefficient bureaucracy.

Yet this is not the whole story. The government is on the defensive following the revelation that Greece’s intelligence service tapped the phone of Nikos Androulakis, leader of the opposition Pasok party.

Mitsotakis denies ordering the surveillance or even knowing about it – which, while true (and I’m inclined to give him the benefit of the doubt), is a bit embarrassing since he put the intelligence service under his direct control after being became prime minister in 2019.

The revelations have prompted a few of the world’s most high-profile news organizations to publish attacks on the quality of Greek democracy. An opinion column in the New York Times spoke of “the rot at the heart of Greece”.

Der Spiegel, the German news magazine, spoke of “Greece’s slide towards authoritarianism”, focusing not only on the intelligence scandal but on Greece’s pushback against refugees arriving at its borders.

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

I want to make one last point. During the debt crisis, some foreign commentators sounded the alarm about the Greek far-right and the risk of a democratic collapse. But that never happened. Right now, the tensions with Turkey and Greece’s growing economic problems are, in my opinion, more serious issues.

More on this topic

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

Remarkable, quotable

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

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• As Italy holds elections on September 25, hard-right politician Giorgia Meloni is on the brink of power. The FT’s Amy Kazmin and Giuliana Ricozzi in Rome trace the career of the Brothers of Italy leader who could become the country’s first female prime minister

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