Costas Simitis passed away at the age of 88.
According to initial reports, the former Prime Minister passed away in the morning at his holiday home in Agioi Theodoroi. He reportedly did not have any significant health issues.
Costas Simitis was a university professor and politician. He served as President of PASOK (30 June 1996 – 8 February 2004) and as Prime Minister of the Hellenic Republic (18 January 1996 – 10 March 2004). He was born in Piraeus on 23 June 1936.
Who was Costas Simitis?
After the fall of the Junta in 1974, he was one of the founders of the Panhellenic Socialist Movement (PASOK) and held several ministerial positions when his party came to power.
On 18 January 1996, he succeeded Andreas Papandreou as Prime Minister following a vote by the PASOK Parliamentary Group, representing the “modernisation” faction with a primary focus on economic reform and social convergence of Greek society with a “strong” Europe.
On 30 June 1996, shortly after the death of Andreas Papandreou, Costas Simitis was elected President of PASOK during the party’s 4th Congress. He was re-elected Prime Minister after winning the September 1996 and April 2000 elections.
How he succeeded Andreas Papandreou
In November 1994, Vasso Papandreou convened the “Dinner of the Four,” inviting Costas Simitis, Paris Avgerinos, and Theodoros Pangalos to discuss “finding a way out of the declining course of PASOK and the government.”
In late November 1995, Andreas Papandreou was hospitalised at the Onassis Cardiac Surgery Centre, and his deteriorating health did not improve. Following Andreas Papandreou’s resignation letter, the Parliamentary Group elected Costas Simitis as the new Prime Minister on 18 January 1996.
At PASOK’s 4th Congress, held after the death of Andreas Papandreou, Costas Simitis was elected President of PASOK with 53.77% of the vote against Akis Tsochatzopoulos (46.23%).
At PASOK’s 5th Congress in March 1999, he was re-elected as President. During the Parliamentary Elections of 9 April 2000, he was re-elected as Prime Minister, with PASOK increasing its share of the vote. At PASOK’s 6th Congress in October 2001, he was elected President of the Movement for a third time.
On 7 January 2004, aiming for a smooth political succession, he announced his resignation as President of PASOK but remained Prime Minister until the end of his second term and the Parliamentary Elections on 7 March 2004, completing more than eight years as Prime Minister.
He was continuously elected MP for the 1st Electoral District of Piraeus from 1985 onwards.
Greece’s entry into the EMU (Economic and Monetary Union)
As Prime Minister, Costas Simitis pursued a moderate foreign policy alongside the gradual privatisation of Greece’s large public sector, aiming for economic stability in line with the policies of the European Union.
As the leader of PASOK, he moved the party’s rhetoric away from radicalism, prioritising Greece’s path towards European integration. His second term was marked by the implementation of austerity measures aimed at reducing inflation and national debt, as well as efforts to resolve Greek-Turkish differences regarding the Cyprus issue in the realm of foreign policy. One of the most significant achievements of his tenure was Greece’s entry into the Economic and Monetary Union (EMU) in 2001.
2000–2003: The early years in the Eurozone
During his second term as Prime Minister (2000–2003), Greece experienced its first years in the euro. On 1 January 2002, euro banknotes and coins were introduced into circulation simultaneously with those of 11 other countries.
The benefits of joining the euro became evident in those early years. Investments for the preparation of the 2004 Olympic Games in Athens also played a significant role in boosting the economy.
Greece’s adoption of the euro brought increased credibility alongside significant limitations to the country’s macroeconomic policy. Monetary policy became the sole responsibility of the European Central Bank (ECB). Fiscal policy had to adhere to the commitments of the Stability Pact, including maintaining low budget deficits and reducing public debt.
Uncertainty caused by fluctuations in exchange rates among current Eurozone countries was eliminated, and cross-border transactions were significantly facilitated. However, Greece’s entry into the Eurozone also limited traditional macroeconomic policy tools, making structural reforms a political priority.
The impact of Eurozone membership
At the same time, Greece’s inclusion in the Eurozone removed the market’s role as a “punisher” for economic imbalances or insufficient economic policies. As a result, past economic crises transformed into a new type of imbalance that accumulated without becoming immediately apparent.
With the backing of a strong single currency and in an environment of low interest rates, there was time to implement the necessary reforms gradually, while taking advantage of available EU funds.
Reforms and economic performance (2000–2003)
Despite efforts, the reforms during this period did not advance significantly due to widespread resistance. A characteristic example was the attempt to reform the pension system, known as the “Giannitsis reform.”
Economic performance (2000–2003)
Economic data from 2000–2003, after several revisions to fiscal and national accounting figures, show that growth rates remained high. On average, the economy grew at a rate of 4.5% annually in constant prices, driven primarily by investments, which saw an average annual real increase of 8.5%.
Consumption, both private and public, also grew (with an average annual real increase of 3.8%), fuelled by high rates of credit expansion. Credit growth was significant due to the liberalisation of the banking market through the privatisation of banks in the previous decade, as well as easier access to international financial markets.
Inflation and market conditions
Inflation remained higher than the European average, driven by strong demand, low interest rates, and oligopolistic conditions in many product and service markets. The average annual inflation rate was 3.4%, considerably lower than in previous years but still above European norms.
One notable exception was the telecommunications market, where liberalisation and the establishment of Cosmote in the previous decade prevented price pressures, unlike in other markets.
Fiscal deficit and public debt during the Simitis era
The general government deficit during this period increased from 3.7% in 2000 to 5.6% in 2003, despite the existence of a primary surplus from 2000 to 2002 (3.6% in 2000, declining to -0.7% in 2003). The revision of fiscal data in 2004 by the Karamanlis government led the European Commission to place Greece under a monitoring regime. This surveillance lasted until 2007, though it was later revealed that incorrect data were again used.
Public finance practices during Simitis’ premiership
Various practices were implemented in the field of public finance during Simitis’ tenure.
- Extensive use of financial techniques effectively transferred resources from the future to the present. While such practices were not unfamiliar to other EU member states, they were employed in Greece to reduce the public debt on paper.
- In 2002, Eurostat required the Greek government to include amounts from “pro-mortgage bonds” in the public debt. This adjustment raised the 2001 public debt figure from 99.7% of GDP to 104.7%, later revised further to 105.1%after additional checks.
Public debt revisions and misstatements
Following further inspections:
- The deficit for 2001 was revised to 107.3% of GDP, compared to the initial publication of 100%. This represented an additional 3.5 trillion drachmas above the original government estimate.
- Eurostat also mandated the removal of accounting profits worth 160 billion drachmas related to the conversion of drachmas into euros.
- To achieve a “virtual” reduction in public debt, the government borrowed 400 billion drachmas for a period of just five days.
Final figures
After multiple revisions (including a revision of GDP for 2000–2009):
- Public debt as a percentage of GDP increased to 103.4% in 2000 but was reduced to 97.5% in 2003.
- Thanks to lower interest rates and high growth rates, the cost of servicing the public debt fell from 7.3% of GDP in 2000 to 4.9% in 2003.
Living standards and economic developments (1996–2003)
Living standards improved dramatically during the period 1996–2003. Per capita income in Purchasing Power Parities (PPP), as a percentage of the average income of EU-15 countries (the 12 original EU economies plus Finland, Sweden, and Austria), increased from 71.7% in 1995 to 72.3% in 2000, and reached 80.7% in 2003.
Role of EU funds
Community funds played a significant role in this improvement.
- The Second Community Support Framework (CSF) (1994–1999), amounting to €14 billion (EU contributions at 1994 prices), was completed during this period.
- At the European Council in Berlin in 1999, Greece secured €22.7 billion (EU contributions at 2000 prices) for the Third CSF.
Penalties for agricultural subsidy irregularities
Due to irregularities and the inability of control mechanisms to supervise agricultural subsidies effectively between 1999–2004, Greece was fined €250 million in 2006.
Defence expenditures and scandals
Between 1996 and 2001, 5.2 trillion drachmas were spent on defence equipment. The expenditures of the Second Defence Equipment Programme (2001–2006) were estimated at 6–7 trillion drachmas.
Following the arrest and conviction of G. Kantas, suspicions arose regarding his involvement in a bribery scandal linked to German companies involved in defence procurement. The matter remains under investigation by the Bremen Prosecutor’s Office.
Expulsion from PASOK parliamentary group
On 12 June 2008, PASOK President George Papandreou expelled Costas Simitis from the party’s parliamentary group via a letter released to the press, without initiating the formal procedure of notifying the Speaker of Parliament for his removal.
The reason for the expulsion was a disagreement between Papandreou and Simitis over whether a referendum should be held on the ratification of the Lisbon Treaty.
Papandreou accused Simitis of inconsistency, claiming that while Simitis had endorsed PASOK’s 2005 proposal for a referendum on the European Constitution Treaty and had argued in favour of it in Parliament, he changed his position regarding the Lisbon Treaty, which replaced the abandoned Constitution Treaty.
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Source: nea.gr
