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Anastasia Balezdrova

Without the budget consolidation that Greece has carried out over the past few years it would have become the European Argentina as stated by former President of the European Central Bank Jean-Claude Trichet. During his lecture on "Lessons of the crisis: Improving the economic and fiscal governance of the Euro area," which he delivered in Athens, he compared the country's role with that of the U.S. bank Lehman Brothers, the failure of which had caused the global economic crisis. "Greece has found itself in the place of the bank, but fortunately we have been able to avoid the negative consequences of that," he said.

According to the French banker, the crisis that broke out in the Euro area in 2010 was the worst one after World War II. "We were not ready and we were quite inept at managing it. Maybe that is why we had found ourselves at its epicentre," said Trichet.

According to him, the crisis has affected the Euro area so seriously due to its main "anomalies", which are as follows:

- the failure to comply with the Stability Pact on the part of all member states, including the major economic powers, especially in the period 2003-2004

- the complete lack of control over the competitiveness of the member states on the part of both the European Commission and the governments of the countries

- the lack of a banking union

- the lack of mechanisms to respond to, and manage, any crisis

- the gaps in the creation of a common market, especially in the field of services

- the failure to carry out structural reforms in the member states in order to accelerate the establishment of the common market.

Jean-Claude Trichet stressed that proper measures to counter the crisis had been taken in the Euro area. "If the governments and central banks of the member states, along with the European Central Bank, had not taken extremely difficult and bold decisions Europe would have ended up in a bottomless recession because of the risk of the crisis spreading and due to the different structuring of the finance in the member states. If this had not happened the shock would have spread faster and more massively."

The banker added that this had not been easy because every decision required permission from the governments and parliaments of each Euro area country. "But today the situation has significantly improved," said Trichet, adding that this is due to the decisions taken during the years of severe crisis.

"Firstly, all countries which were seriously affected by the crisis had taken serious action on consolidation. At the beginning of the crisis, the average budget deficit in Greece, Ireland, Portugal, Spain and Italy was 8%-9% of GDP, its levels being the highest in Greece, 15%. Now there is a surplus albeit very small. And this is a huge change."

According to Trichet, the Euro area members have been able to introduce an effective control system of state budgets, the compliance with the Stability Pact is being closely monitored, there are specific measures to be taken in the event that a country deviates from the expected values and the establishment of a banking union is in progress. "In addition, during these years, all member states have declared their strong desire to intensify the union between them. From the beginning of the crisis, no country has left the Euro area and three more have joined it."

The banker stressed that the countries of Europe should continue to manage their finances in a sound manner in order for them to avoid another economic shock. "Otherwise we will slip again. Nobody should relax and think that we have left the crisis behind."

Regarding Greece, Jean-Claude Trichet said that one of the negative consequences of the crisis, namely the high unemployment, would have been restricted if the burden had been evenly distributed among society. "This is the second lesson of the crisis for the country. Although unemployment is a pan-European problem, a minimal reduction of its rate has been observed in countries with sound economic management". The first lesson for Athens, in his opinion, is that no country should spend more than it produces and therefore, he recommends that the government should continue with structural reforms, which will revive the battered Greek economy.