Dear Delegates,
I welcome you to the Greek cabinet at YMGE with great pride and excitement. I hope that the conversations and debate you engage in over the next few days will not only deepen your understanding of the European Union, but also help you look at issues from different perspectives.
A little bit about me: I am a sophomore at Pauli Murray College at Yale pursuing Economics and Mathematics with a focus on development. Hailing from India, I was born in Scotland and grew up in Delhi, Singapore and Boston. On campus, I am a college aide to the Head of Pauli Murray, a photographer with the Yale Daily News and International Network coordinator for Dwight Hall - Center of Public Service.
Model United Nations was an important part of my high school extracurricular experience. I still remember my first conference as a high school sophomore. I was the delegate of Sweden, a country I hadn’t been to, in NATO, an organization I knew little about. The butterflies in my stomach were palpable. However, over the course of the committee, as I debated and discussed issues of national importance with other passionate delegates, the jitters turned into exhilaration as we rapidly passed directives and resolutions. MUN has been valuable to me because of the nuanced understanding it has allowed me to gain about pertinent international issues. I hope that over the course of this conference you too will learn to look at issues from a viewpoint that is not your own, to empathize with people you will never meet and in doing so, gain values that will be with you for the rest of your lives.
My most positive MUN experiences were the ones in which I interacted with my directors and gained their insights to improve my own thinking thought during committee. To this extent, I will request you all to please feel free to shoot me an email at surbhi.bharadwaj@yale.edu whenever you have any questions or just want to talk! YMGE has a unique conference structure and I understand it can get quite confusing at times! (It will be worth it though, trust me).
The YMGE secretariat has tried make this conference a memorable experience for you from the first pages of this guide to the last sessions of committee. We do hope we succeed in our endeavor. Good luck for your research and I look forward to seeing you all soon!
Surbhi Bharadwaj
Pauli Murray College
Yale University
Class of 2020
Committee History
The Ministerial Council of Greece (simply, the Greek Cabinet) is the official decision-making body of the Hellenic republic. The Cabinet is governed by the rules of the Constitution of Greece which came into force in 1975 after the end of the rule of Greek military juntas from 1967 till 1974. The 1986 Constitutional Revision further increased the powers of the Prime Minister while rendering the Presidency a simply nominal role.
The Cabinet is chaired by the Prime Minister and Ministers. The role of the President is nominal in Greece. In accordance with Article 37 of the Greek Constitution, the President calls upon the leader of the political party which wins a majority of the seats in the Parliament to be the Prime Minister (PM), the head of the executive arm of the government. Ministers are further appointed by the President in consultation with the PM and are also members of political parties in the Parliament. Ministers are responsible for putting forward Ministerial policy in cabinet, representing their bodies in the European Union and appointing administrative agencies and personnel. Each Minister is responsible for all acts undertaken by his office as an agency of government.
The current Greek Cabinet, headed by Prime Minister Alexis Tsipras of the left-wing SYRIZA party, was formed in September 2015. You all hold portfolios as members of the Ministerial Council of Greece and will exercise corresponding powers. Your specialized roles will allow you to weigh in on all aspects of the Greek financial crisis from different perspectives, and hence collectively take informed decisions for the nation.
Article 82 of the Greek Constitution mandates that “the Government shall define and direct the general policy of the Country, in accordance with the provisions of the Constitution and the laws” and seek to implement “government policy within the framework of the laws.” As the main representatives of the executive branch of the Greek government, you can collectively take decisions pertaining to the administration of policy in the nation, as well as determine the course of Greece’s interaction with fellow European states.
The Cabinet has the power to unilaterally take administrative decisions, while matters of legislation, especially those pertaining to pension and taxation, must be introduced in the Parliament. Together with the Prime Minister, Ministers are responsible to the Parliament for the formulation and implementation of the general policy of the government. The Cabinet may continue to function if it has the confidence of the Parliament. Thus, all decisions taken by the cabinet must be in consonance with the Parliaments make up and ideologies. A vote of confidence is called within 15 days of the formation of a new cabinet and is based on "the government program"- an outline of the government's proposed policies and programs.
Topic History
The Greek debt crisis is the sovereign debt crisis faced by the Hellenic republic since the Great Recession of 2008. The crisis has been marked by Greece risking defaulting on billions of dollars of debt, repeated bailouts, a stagnant economy, high unemployment and general disapproval in Greek society about mounting austerity.
Greece’s GDP has fallen 25% in 2015 since 2010 and stands at 194.2 billion USD from its 2008 peak of 354 billion USD. The overall unemployment rate for 15-75-year-old is 23% but unemployment amongst youth is significantly higher at about 60% according to various estimates.
When the crisis erupted, Greece owed about 356 billion USD in debt, putting the country’s debt-to-GDP ratio at 177%. That is, the country owed 77% more than its entire GDP. Most of its debt is owed to other Eurozone nations (Germany, France and Italy being its three largest lenders), and the remainder to large multilateral banks (including the Troika – more about this below).
The Greek debt crisis came to international attention in 2009, in the aftermath of the Great Recession. However, the seeds of the crisis had been sowed several administrations before and can be attributed in part to structural deficiencies in the Greek economy (an over dependence on the public sector, for one) which were further exacerbated by its Eurozone membership.
1981 - 2009
In 1981 Greece became a part of the European Union and went on to adopt the Euro as its national currency. Greece became one of 19 countries forming the Eurozone within the 28 nation EU. However, Greece had a weaker economy that could not compete with the likes of say, Germany, but had to abide by the same currency and foreign exchange rules. This meant it could not simply print its own money and use it to stimulate growth during periods of low aggregate demand (this will be a key reason for Greeks blaming the Eurozone for the debt crisis).
Greece’s adopting the Euro in 2001 raised investor confidence because now its currency was pegged to that of all other Eurozone nations. This led to a large capital inflow. The new capital was not used to structurally improve the economy and improve its competitiveness at a global scale, by investing in infrastructure etc., but was spent recklessly by the government and used to offset low tax revenue. Government debt rose from 68% of GDP in 1990 to 100% of GDP in 2006 and then to 177% in 2009. Public sector wages, for example, rose 50% between 1999 and 2007 - driven by politicians’ campaign. The government also ran up big debts paying for the 2004 Athens Olympics.
The Crash of 2009 (and bailouts)
When the global financial crisis hit in 2008, costs of borrowing increased – an eventuality the government was not prepared to cope with. In late 2009, reports emerged that Greece had been fudging its budget statistics and spending excessively. The new government revised the estimate of 2009 budget deficit from 6.7% of GDP to 12.7% of GDP and finally to 15.4%. This further reduced investor confidence and exacerbated the debt crisis. Credit ratings agencies downgraded Greece’s sovereign debt to junk status. Being pegged to the Euro, Greece was unable to print currency to stimulate aggregate demand and help the economy which fell into recession in 2009.
As its access to capital markets rapidly declined, Greece had no means of repaying its debt. There was widespread apprehension that banks and Eurozone governments that had loaned to the Greek government would not be able to withstand losses during the time of crisis. To prevent defaulting on its debt, Greece had to be bailed out by the “Troika” - the European Central Bank (ECB), European Commission (EC) and International Monetary Fund (IMF). In 2010, concerned about the systemic risks Greece could pose to the rest of the Eurozone and the international economy, the Troika offered Greece a 124 billion USD bailout package. This bailout package came with stringent conditions - the Greek government had to cut budget spending, hike taxes and shrink its public sector (in 2009, Greek government expenditures accounted for 50% of GDP, with 75% of public spending going to public sector wages and social benefits). It aimed to reduce the government’s budget deficit by 11 percentage points through 2013, bringing it below 3% of GDP, reduce or freeze civil service compensation and hiring, raise the value-added tax rate. The government aimed to raise additional revenues through strengthened tax collection and higher contribution requirements for tax evaders.
In June 2011, the Greek economy appeared to be in a more severe recession than had earlier been predicted and thus necessitated another bailout package. A 2011 European Commission report revealed that Greece had also failed to collect 60 billion euros ($68 billion) in taxes.
Timeline
2001
Greece adopts the Euro
Boosts investor confidence
Combined with strong global capital markets, the Greek economy gains access to unprecedented amounts of cheap capital
This cheap capital is not used to develop the economy and increase its competitiveness, but to fuel public sector pay hikes promised by politicians in their campaigns to voters.
2008
US asset bubble bursts and a global financial crisis is triggered
2009
New Greek administration reveals that government data regarding debt was falsified
2010
Greece risks defaulting on public debt and jeopardizes Eurozone’s financial institutions
May 2010
The European Union, European Central Bank and International Monetary Fund (colloquially referred to as the “Troika” in Greece) announce a 147 billion $ financial assistance package to Greece
The Greek government commits to implementing budget cuts and economic reforms
2011
July 2011
measures taken in May 2010 prevented an immediate default but an year onwards, the Greek economy was still facing a recession and sharply veering towards default.
The Troika announce a second set of bail out plans for Greece (see next section)
2015
January 2015
Alexis Tsipras’ left wing Syriza party comes to power
June 2015
the public votes 61% against austerity measures
Greece misses a major payment with the IMF
July 2015
Tsipras accepts a third bailout package with similar austerity conditions
Current Situation
The far left, anti-austerity SYRIZA party came to power in January 2015 led by the Prime Minister Alexis Tsipras. On June 30, the Greek government did not make a 1.6 billion USD payment to the IMF, making it the single biggest missed payment in the IMF’s 60-year history. In a referendum held in July, 61 percent of Greeks voted no on a bailout deal that would have imposed more austerity measures.
On July 12, 2015, an agreement was reached by Eurozone heads of government to advance with the first option: keep Greece in the Eurozone, provide a third financial assistance package to Greece (of 92 billion USD), and mandate more spending cuts - precisely the austerity measures the Greek public had voted against the previous month.
Snap legislative elections were called in September 2015 and turnout dropped to 56 percent, the lowest in Greece since the fall of its dictatorship in 1974.
1. Grexit and relations with the EU
The Greek debt crisis has often been attributed to Greece’s membership in the Eurozone. The cabinet should strongly consider the possibility of Greece leaving the Eurozone. The Grexit movement has especially gained momentum recently considering Brexit and similar movements across Europe.
In this context, it is important to note a strongly held view amongst Eurosceptics – that Europe was a project nations came to for political reasons, they did not consider the economic ramifications of the same. Greece is currently bearing the brunt of precisely these ramifications.
According to the Congressional Research Service’s April 2017 report, negotiations between the Greek government and European institutions have fallen
“into three major categories:
(1) extend a third financial assistance package and require additional reforms in Greece, while keeping Greece in the Eurozone;
(2) have Greece exit the Eurozone, either through a unilateral decision by the Greek government or a negotiated temporary suspension;
(3) keep Greece in the Eurozone, but provide more flexibility to the Greek government in terms of debt relief and reforms.”
If Greece were to leave the euro, the process of implementing a new currency would take many months to complete. The printing of new bank notes would have to take place in secret and capital controls would stop money leaving the country.
Questions to Consider
A. Should Greece seriously consider leaving the EU? What will be the ramifications of the same and how will Grexit be implemented?
B. If not, how should Greece-EU relations be restructured and future negotiations be approached to hold the Greek public’s interests as a priority?
2. Taxation, spending and the economy
A sustainable long-term solution to the debt crisis requires a fundamental structural rehaul of the Greek economy. Tax evasion, corruption, inordinate spending and an oversized public sector - factors that led to the crisis, must be brought under control. Each bailout negotiated with the EU involves some targets towards achieving this goal but radical austerity measures also adversely impact public services. It is extremely important for the cabinet to reach resolutions on a long-term action plan for economic reform. Some issues to consider include:
● Privatization and Public Sector
The Greek public sector is extremely large and efficient, leading to very low outcomes. There has been a strong push for privatization of public services, such as airports, and liberalization of more sectors of the economy.
● Pension costs
Greece has the highest pension costs in the EU as a proportion of GDP, totalling at about 1.8 billion Euros, or 1% of GDP. The Troika has pressured Greece to drastically reform its pension policy to reduce spending.
● Tax evasion
● Overregulation
This 2012 McKinsey report tries to define a growth model for the Greek economy with a breakdown for each sector - you may find some inspiration to shape your own stance.
This report also provides useful insights into potential solutions.
3. Refugee crisis
Thanks to its geography, Greece has been at the frontline of the refugee crisis that has unfolded across the world over the last two years. In 2015, over 1.2 million refugees from Syria, Iraq and North African nations made their way into Europe through Greece. Greece was not their destination, but a port to move into North European states. However, as time progressed and European states tightened their border, more and more refugees found themselves stuck in Greece. While the arrival of refugees was drastically reduced by the EU-Turkey deal, there are over 62,000 refugees stranded in Greece. More than half of the refugees are women and children. Refugee children can study in Greek schools, a move that has brought much criticism from the Greek right parties. There are about 2,500 refugee kids currently studying in Greek schools. The costs to Greece are surrounded in controversy. Some politicians have argued that Greece should use its support in the refugee crisis as leverage at the EU negotiating table to ask for more lenient bailout packages. At the same time, under already stressed resources, it is becoming increasingly unsustainable for Greece to support refugees.
Questions to Consider
How does the refugee crisis affect Greece’s position in negotiations with the EU?
4. Unemployment and Health
Since the start of the crisis, Greece’s birthrate has fallen by more than 10 percent to 1.1 live births per woman, one of the Eurozone’s lowest. This can be attributed to rising poverty and women fearing that they will lose their jobs if they get pregnant. Greece’s native-born population has begun to rapidly decrease. In 2014, disposable household income in Greece sunk to below 2003 levels.
Public health expenditures in most of Europe are 8% of GDP while they account for only 4.9% of GDP in Greece, down from 9.9% pre-2008. Austerity measures have led to greater restrictions on the uninsured from accessing health services, which had proven disastrous at a time when 25% of the youth are unemployed in the nation. After two years out of work, the unemployed also lose their health insurance. It is estimated that about 2.5 million Greeks lack access to medical services.
The rate of depression in the Greek public has risen from 3% to 8% over the course of the crisis. Suicide rates have also experienced a strong rise. Furthermore, austerity measures have forced mental health services to cut back, reduce staff etc.
Questions to Consider
How can the government seek to improve public health in the face of austerity measures?
SYRIZA, short of 6 seats from an absolute majority, formed a coalition government with ANEL to come to power.1. SYRIZABloc positions
The Greek debt crisis entered its eighth year in 2017. As members of the Cabinet of the Hellenic Republic, it is up to you to minimize the impact of past administrations’ fiscal irresponsibilities on your citizens today, and negotiate a more promising future for Greece.
Your individual positions and priorities on the issue will be shaped by two factors - your portfolio and your party affiliation.
Portfolio
Stringent austerity measures have affected some sectors of the government more adversely than the others. Keep your ministry’s priorities in mind while framing your stance. For example - What is the impact of the crisis on the agriculture industry? How do budget cuts and austerity affect education policy and what will be the long run impacts of this?
Party
The current Greek cabinet was formed after the August 2015 snap elections called by Alexis Tsipras after the third bailout package was passed in the Hellenic Parliament, after much controversy and a split within SYRIZA. The voter turnout was 56.6%, the lowest since the end of the dictatorship in 1974.
SYRIZA, short of 6 seats from an absolute majority, formed a coalition government with ANEL to come to power.
1. SYRIZA
The “Coalition of the Radical Left” is a left wing anti-austerity party. SYRIZA is the largest party in the Hellenic Parliament and is led by the Prime Minister Alexis Tsipras. It was founded as an anti-establishment party and today is seen as being mildly Eurosceptic. While 2015 saw SYRIZA come to power based on a ferociously anti-austerity agenda (which manifested itself in the referendum), the party (and the coalition) has taken a milder stance in recent times and have continued to accept austerity packages in return for bailouts. Alexis Tsipras has sought to maintain stability within Greece, even if this means moving away from SYRIZA’s strong anti-EU position. Socially, SYRIZA maintains a left of center position and is composed of members who are social democrats, democratic socialists, left-wing patriots, feminists, anti-capitalists, centrists, and environmentalist groups.
2. ANEL
The “Independent Greeks” are a conservative, right wing populist political party. Anel is strongly opposed to the Troika and in the past, has called for revoking agreements with the EU. On social policy, Anel diverges significantly from SYRIZA. They want to reduce immigration, and support the development of a Christian Orthodox oriented education system. This right-of-center stance may become a source of tension in the Cabinet.
3. Independents
Independent members of the cabinet who lack any party affiliation. For the purposes of this simulation, we can expect them to be primarily motivated by their portfolios’ priorities.
Suggestions for Further Research
Concepts like debt and austerity may seem daunting at first, especially if you don’t have a background in economics (which I don't expect you to). But, once broken down into simple English, it’s easy to grasp their role in influencing and guiding policy making and politics.
I recommend adopting a bottoms up approach to research for this committee.
Understand basic terminology
Investopedia is a great resource for looking up terms you don’t get
Qualitatively grasp the relationship between governments and their debt and the effects of debt crises.
Try to consider these concepts in the Greek context
This is a long compilation of many videos explaining the Greek crisis
If you are interested, reading about how the financial crisis affected Portugal, Italy, Ireland and Spain in addition to Greece (known as PIIGS) may help deepen your understanding of the topic
Consider the effects of the debt crises from the point of view of your portfolio.
Here too, I recommend qualitatively grasping the power dynamics at play, and then using data to corroborate your claims and support your position in committee.
I have inserted a lot of links throughout this guide but don’t be intimidated by them and by no means feel compelled to peruse each of them word for word. These are just resources for research that I personally found helpful, whether you use them is completely up to you. I recommend using these links to gain a basic grasp of the issue and then diving into your portfolio’s specific concerns yourself. I will appreciate new information you present to the committee through self-motivated research! (but make sure you have reliable sources or are able to back up your statements)
Lastly, feel free to email me at surbhi.bharadwaj@yale.edu if you run into any issues or have any questions (committee or non-committee related.) I look forward to hearing from you.
PS: I strongly recommend perusing the Congressional Research Service’s April 2017 report on the crisis. It gives a great low down on the entire crisis.
