Greece Regionalization Essay

Globalization can be conceived as a myth, a rhetorical device, a phenomenon, an ideology, a reality, orthodoxy, rationality. In both academic and popular discourses globalization has become one of the catchwords of the 1990s. In fact, globalization is a short form for a cluster of related changes: economic, ideological, technological, and cultural. Economic changes include the internationalization of production, the greatly increased mobility of capital and of transnational corporations, and the deepening and intensification of economic interdependence.
The economic manifestations of globalization include the spatial reorganization of production, the interpenetration of industries across borders, the spread of financial markets, the diffusion of identical consumer goods across distant countries, and massive transfers of population.
Ideological changes include investment and trade liberalization, deregulation, privatization, and the adoption of political democracy in the institutional realm.
Technological changes include information and communications technologies that have shrunk the globe and the shift from goods to services.
Finally, cultural changes involve trends toward harmonization of tastes and standards, a universal world culture that transcends the nation-state.
Globalization can be also defined as the intensification of economic, political, social, and cultural relations across borders (Holm and Sorensen 1995. p.2-3).
Globalization is pushed by several factors, the most important among which is technological change. The process is uneven in both intensity and geographical scope, in its domestic and international dimensions. Hence, we might obtain different types of globalization across a rich regional variation.
Regionalization can be conceived as the growth of societal integration within a given region, including the undirected processes of social and economic interaction among the units. As a dynamic process, it can be best understood as a continuing process of forming regions as geopolitical units, as organized political cooperation within a particular group of states, and/or as regional communities such as pluralistic security communities.
The term regionalism refers to the proneness of the governments and peoples of two or more states to establish voluntary associations and to pool together resources (material and nonmaterial) in order to create common functional and institutional arrangements.
Furthermore, regionalism can be best described as a process occurring in a given geographical region by which different types of actors (states, regional institutions, societal organizations and other non state actors) come to share certain fundamental values and norms. These actors also participate in a growing network of economic, cultural, scientific, diplomatic, political, and military interaction. (Mittelman, 1996).
Regionalization (the tendency or process to form regions) and regionalism (the purposive proneness to create regional institutions and arrangements) find expression in the economic and security domains, including convergent motivations toward both political/security and economic forms of integration.
There are three possible options regarding the mutual relations between regionalization and globalization, especially in the economic dimension:
regionalization as a component of globalization (convergent trends);
regionalization as a challenge or response to globalization (divergent trends);
regionalization and globalization as parallel processes (overlapping trends).
Regionalism is emerging today as a potent force in the processes of globalization. If globalization is regarded as the compression of the temporal and spatial aspects of social relations, then regionalism may be understood as but one component, or ‘chapter’ of globalization. According to this view, by helping national economies to become more competitive in the world market, regional integration will lead to multilateral cooperation on a global scale, the adoption of liberal premises about cooperation, and the opening of the local economies.
Moreover, since globalization unfolds in uneven rather than uniform dynamic patterns, it may reveal itself in processes that are less than geographically global in scope. Therefore, globalization may be expressed through regionalization (Holm and Sorensen 1995, 6–7).
Thus, the process of regional integration can be interpreted as part of the international (or global) economic order at the end of the twentieth century; if impelled by raw material forces (of the market), then it becomes a result and a component of globalization.

European Union: general information
The European Union history has started since the Second World War. A first step, a forming the Council of Europe, was made in 1949, when Europe was already divided into East and West parts. That’s when modern European cooperation has begun, but its official status was confirmed in November 1, 1993 by the Maastricht Treaty.
Under conditions of the Maastricht Treaty European political and economic integration was enhanced through common currency, a common foreign and security policies, unified and equal citizens rights, and due to cooperation in immigration policies, asylum issues, and judicial affairs.
27 European countries consist of the European Union nowadays. Its first members presented western Europe, later it was expanded and several central and eastern European countries were included as well. Among the modern days members are Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
On May 1, 2004, Cyprus, The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia were added to the European Union, making it the largest trade unit in the world. In 2007, Romania and Bulgaria joined, and Turkey, Croatia, and the Republic of Macedonia are candidate countries. What should a European country do to qualify for EU membership? First of all, it must be a stable democracy, respecting human rights, the rule of law, and the protection of minorities. Second, it must adopt the common rules, standards and policies that make up the body of EU law. Finally, it must have a functioning market economy
that has low inflation, a low budget deficit, and exchange rate stability (its currency doesn’t fluctuate much). Once a country has fulfilled those obligations, and becomes a member state, it enjoys the benefits of the four freedoms on which the EU is based – free movement of goods, services, labor, and capital. In other words, EU citizens may live in any EU country, work in any EU country, sell their goods in any EU country, and invest in any EU country. Everyone enjoys the opportunities and products of the largest and most diverse market in the world.
As wonderful as that sounds, not all EU citizens are in favor of enlargement, and it certainly has challenges. The ten countries that were added in 2004, as well as the two added in 2007, represent a much more culturally diverse group than was ever added before in previous enlargements. The economies and societies of the new member countries are much less stable that those of the western European countries.
Finally, in order for the standard of living of the new countries to be raised to the standards of the older member nations, much economic support from the EU will be needed. Many people from the western European countries feel that they are shouldering an unfair burden in the interest of less advantaged countries. They also worry that large companies may relocate their factories in the new EU countries because they can hire cheaper labor there or that cheaper consumer products from the new EU countries will be brought to western European markets and force them to lower their prices. Despite these concerns, most people feel that the enlargement is a good thing, because it will help the people in the new member countries improve their lives and promote peace and stability for the entire continent of Europe.
Another challenge that the European Union will have to face is how to streamline and simplify the process of passing legislation. Beginning in February of 2002, the European Convention on the Future of Europe met under the leadership of Valery Giscard d’Estaing (former President of France). Its task was to draft a new constitution, and create a whole reform package, that would improve the efficiency and effectiveness of the growing EU. In July of 2003 the Convention presented its drafted constitution, and it was agreed by all member states on October 29, 2004.
The draft had now become The Treaty Establishing a Constitution for Europe (TECE) or the European Constitution. The constitution then entered a ratification phase by each member state. In May and June 2005, French and Dutch voters rejected the constitution because, among other things, European feared a loss of national sovereignty. The future of the constitution is unsure, but many leaders are trying to work to reach consensus. There still is much work to do before the citizens of the European Union have a legislative system and a constitution that is easy to
understand and support.
Despite the many challenges facing the EU today, there is no doubt that Europeans have a brighter future because of the steps they have taken toward integration. Removing national barriers and opening markets to free trade promotes a healthy economy and brings prosperity to those who compete well. Besides prosperity, EU citizens reap the benefits of human rights, democracy, and a healthy environment. The EU strives to bring its influence to the rest of the world through trade and investment, by providing humanitarian aid to many developing countries, and by maintaining diplomatic relations with over 130 other countries. It is a major economic, political and diplomatic force in the world today, with the ability to have a
great impact on global affairs.
Greece overview
Greece has entered into EU in 1981.
Its current estimated population is 11 million people. According to official information, an unemployment rate in Greece was about 15 % in January 2011, and that’s relatively high.
Thanks to its key geographic location, Greece links the east with the west, the Mediterranean with the Balkans, and serves as the ideal location for investments and trade.
We should mention its cultural, political and other influences on the whole world. Greece perceived as a pioneer among European civilizations, and its ancient outstanding representatives have influenced heavily politics, art, literature, philosophy, medicine, mathematics and astronomy. Democracy itself was created in Greece.
In regards to its economic climate, first of all, I should mention that Greater Athens area is a base for a half of all Greek industry and commerce.
Greece serves as the business hub for some of the biggest multinational companies. Business giants such as the AIG Group, the Coca-Cola Co., Diageo, Ernst & Young, Kodak, Siemens, Toyota, and UPS established in Greece their regional headquarters for the Central and Eastern Europe, the Mediterranean and/or the Middle East.
Among the most successful industries and sectors of Greece the following could be named: agriculture, shipping industry, construction, banking sector, food producing industry, renewable energy industry, and tourism.
The largest producer of extra virgin olive oil in the world, Greece’s landscape physiognomy and climatic conditions are also ideal for the cultivation of the vine. Other high-quality products that thrive in Greece include Greek honey, vegetables, and sweet-smelling fruits, etc.

European Union’s impact on Greek economy
Over the past decade, Greece borrowed heavily in international capital markets to fund
government budget and current account deficits. The reliance on financing from international
capital markets left Greece highly vulnerable to shifts in investor confidence. Investors became
nervous in October 2009, when the newly elected Greek government revised the estimate of the
government budget deficit for 2009 from 6.7% of gross domestic product (GDP) to 12.7% of
GDP. In April 2010, Eurostat, the European Union (EU)’s statistical agency, estimated Greece’s
deficit to be even higher, at 13.6% of GDP.
On April 23, 2010, the Greek government requested financial assistance from other European countries and the International Monetary Fund (IMF) to help cover its maturing debt obligations.
During the crisis, the Greek government has sold bonds in order to raise needed funds. Greece’s government has also unveiled, amidst domestic protests, austerity measures aimed at reducing the government deficit below 3% of GDP by 2012. It also appears likely that Greece will receive financial assistance from countries that use the euro as their national currency (the Eurozone) and the IMF in order to avoid defaulting on its debt. A common method for addressing budget and current account deficits, currency devaluation, is not possible for Greece as long as it uses the euro as its national currency. If the austerity measures and financial assistance from outside parties prove insufficient, Greece could be forced to default on, or restructure, its debt.
Greece’s crisis has numerous broader policy implications. There is concern that Greece’s crisis could spill over to other European countries in difficult economic positions, including Portugal, Ireland, Italy, and Spain.
Greece’s crisis has raised questions about imbalances within the Eurozone, which has a common monetary policy but diverse national fiscal policies. It has also come to light that complex financial instruments may have played a role in helping Greece accumulate and conceal its debt, which may have ramifications for debates in the United States and the EU over financial regulatory reform.
Greece is currently facing a classic sovereign debt crisis. Greece accumulated high levels of debt during the decade before the crisis, when capital markets were highly liquid. As the crisis has unfolded, and capital markets have become more illiquid, Greece may no longer be able to roll over its maturing debt obligations. Some analysts have discussed the possibility of a Greek
default. To avoid such a default, however, the Greek government has introduced a variety of
austerity measures and, on April 23, 2010, requested financial assistance from the other 15 European Union member states that use the euro as their national currency and the International Monetary Fund.
Greece’s debt crisis has raised a host of questions about the merits of the euro and the prospects for future European integration, with some calling for more integration and others less. Some
have also pointed to possible problems associated with a common monetary policy but diverse
national fiscal policies. Finally, Greece’s debt crisis has implications for the United States. The
United States and the EU have exceptionally strong economic ties, and a crisis in Greece that
threatens to spill over to other Southern European countries could impact U.S. economic relations with the EU.
Greece’s current economic problems have been caused by a mix of domestic and international
factors. Domestically, high government spending, structural rigidities, tax evasion, and corruption have all contributed to Greece’s accumulation of debt over the past decade. Internationally, the adoption of the euro and lax enforcement of EU rules aimed at limiting the accumulation of debt are also believed to have contributed to Greece’s current crisis.
High government spending and weak government revenues have strongly influenced the economic climate of this country. Between 2001 and 2007, Greece’s GDP grew at an average annual rate of 4.3%, compared to a Eurozone average of 3.1%.
High economic growth rates were driven primarily by increases in private consumption (largely fueled by easier access to credit) and public investment financed by the EU and the central government. Over the past six years, however, while the central government expenditures increased by 87%, revenues grew by only 31%, leading to budget deficits well above the EU’s agreed-upon 3% of GDP threshold. Observers identify a large and inefficient public administration in Greece, costly pension and healthcare systems, tax evasion, and a general “absence of the will to maintain fiscal discipline” as major factors behind Greece’s deficit.
Greek industry is suffering from declining international competitiveness. Economists cite high
relative wages and low productivity as a primary factor. According to one study, wages in Greece have increased at a 5% annual rate since the country adopted the euro, about double the average rate in the Eurozone as a whole. Over the same period, Greek exports to its major trading partners grew at 3.8% per year, only half the rate of those countries’ imports from other trading partners. Some observers argue that for Greece to boost its international competitiveness and reduce its current account deficit, it needs to increase its productivity, significantly cut wages, and increase savings.
Greece’s response
Greece’s government undertake attempts to fight the economic problems and one of its steps was a reduction of public sector wages and a number of actions in order to increase Greek exports through investment in areas where the country has a comparative advantage. In the past, tourism and the shipping industry have been the Greek economy’s strongest sectors.
In an effort to restore investor confidence in the Greek economy, the Papandreou government has pursued a series of wide-ranging fiscal austerity measures. However, the combination of spending cuts and tax increases do not appear to have appeased investors enough to enable Greece to raise the money it needs to cover its maturing debt payments. On April 23, 2010, Papandreou announced that Greece would draw on €45 billion ($60 billion) in emergency financial assistance from Eurozone members and the IMF in order to avoid defaulting on its debt obligations.
Although European leaders and the IMF have welcomed the austerity measures taken by the
Greek government thus far, they are expected to request additional measures and further details
on plans to meet budget deficit targets in exchange for financial assistance.
Some have suggested that, in addition to austerity and financial assistance from Eurozone
member states and the IMF, Greece could finance its budget deficit and increase the competitiveness of its exports by exiting the Eurozone and adopting and devaluing a new national currency. However, most consider this an unlikely policy course as both Greek and European leaders appear committed to ensuring that Greece remain a Eurozone member and exiting the Eurozone could make future borrowing costs much higher for Greece. If the government is not able to satisfactorily reduce its budget deficit through fiscal austerity or financial assistance from a third party, it may be forced to restructure or default on its debt obligations.
Among the other Greek domestic policy responses, fiscal austerity can be named as well. Since taking office in October 2009, the Papandreou government has unveiled three separate packages of fiscal austerity measures aimed at bringing Greece’s government deficit down from an estimated 13.6% of GDP in 2009 to below 3% by 2012. The specific longer-term budget deficit targets established by the government are 8.7% of GDP in 2010; 5.6% of GDP in 2011; 2.8% of GDP in 2012; and 2% of GDP in 2013. Greece’s plan to achieve these targets is detailed in the country’s Stability and Growth Program, which approved by the EC on February 3, 2010.
Eurozone member states have welcomed the Papandreou government’s plans for fiscal consolidation and are expected to request additional measures be taken. Some observers express
concern, however, that the mix of tax increases and sharp spending cuts could lead to higher
unemployment and deepen an ongoing recession in the country. The policy solutions to two of the major economic issues facing the Greek government – cutting large government budget deficits (which requires contractionary fiscal policies to address) and stimulating the economy during cyclical economic downturn (which requires expansionary fiscal policies)—are at odds with each other.
Prime Minister Papandreou has repeatedly emphasized the need for longer-term structural reforms to the Greek economy. To this end, he has proposed wide-ranging reforms to the pension
and health care systems and to Greece’s public administration. His government has also announced measures to boost Greek economic competitiveness by enhancing employment and economic growth, fostering increased private sector development, and supporting research, technology, and innovation.
On April 23, 2010, the Greek government formally requested the activation of a financial
assistance mechanism that was formulated by Eurozone leaders during a series of meetings in
March 2010 and early April 2010. The package could reportedly provide some €30 billion
(approximately $40 billion) in bilateral loans from Eurozone countries this year, at an interest rate of about 5%, supplemented by an additional €15 billion (approximately $20 billion) from the
IMF. Overall, the parties are reportedly discussing a three year deal (2010-2012) worth some €90
billion (approximately $121 billion) in loans. In order to complete activation of the mechanism,
the European Commission and the European Central Bank must give a positive assessment of the
Greek request and each Eurozone country would need to approve the agreement.
Conclusion
The situation with Greece’s economy is quite controversial from the point of view of regionalization. A level of financial assistance for this country from EU is a disputable issue, because there is little political appetite in the EU for providing it. Most EU countries are themselves experiencing financial hardship, and many are exasperated by the idea of rescuing a member state that, in their perspective, has not exercised budget discipline, has failed to modernize its economy, and allegedly has falsified past financial statistics. In addition, many strongly wish to avoid setting a precedent by “bailing out” a member state that has not managed its finances well.
Some observers have argued that allowing Greece to default is preferable to an EU rescue
package. Germany, the European largest economy, has been among the most skeptical member states and large majority of Germans are strongly against providing financial assistance to Greece.
Has a regionalization failed in this case? In my opinion, the crisis in Greece is not a matter of regionalization and globalization issues but rather a question about effectiveness of country’s management in the first place. Besides it, I think that the reason of these economic problems is hidden in cultural and behavioral mindset of Greek people as well.