The rise and fall of George Alogoskoufis

January 7, 2009

Just a year ago, Greek Finance Minister George Alogoskoufis was riding high as the man who rescued his conservative New Democracy party from election defeat with his handling of forest fires so deadly and devastating that they could have toppled any other European government. His star rose and he was seen even as a possible successor to Prime Minister Costas Karamanlis.

On Wednesday, the man once praised by the European Union for cutting budget deficits and pushing reforms, was sacked by Karamanlis in a reshuffle aimed at reviving the government’s
ailing fortunes.

For his friends, the economics professor with the funny name
- translates as ‘horse-hood’ in English – paid the political
price for the conservative government’s eroding public support
as the global crisis hits Greece.

But for his critics, it was Alogoskoufis’s policies that
brought the ruling New Democracy, seen as supporting the rich
and neglecting the needy, to its worst standing in polls in
years.

 ”He was a good economist but he has made mistakes,” one of
his former colleagues at Athens University told me at a dinner
party over the holidays. “He lost his cool.”

 Two months ago, angered by criticism from Greece’s highest
rated news broadcaster Mega Channel, he called the newsroom, cut
short reporters’ questions and hanged up on the air, in an
incident much replayed on Greek blogs -
http://dexiextrem.blogspot.com/2008_10_01_archive.html.

 Alogoskoufis started his ministerial career with a bang.
His first step after the conservatives won power from the
socialists in 2004 was to tell Brussels that Greece had
under-reported its budget deficit to the EU for years, including
2001 when it joined the euro zone. Thisled to Athens being put
under EU supervision but also embedded mistrust in Greek
statistics from then on.

When he proposed a 24 percent upward GDP revision in 2006,
eurostat cut it down to 9 percent. The revision itself – to
include proceeds of crimes such as prostitution and money
laundering – was included in CNN’s 101 blunders in business -
http://money.cnn.com/galleries/2007/biz2/0701/gallery.101dumbest_2007/39.html.

Despite achievements such as bringing the budget deficit
below the EU limit, cutting corporate taxes and pushing
privatisations key for Greece’s economic development, it was his
handling of 2007 summer wildfires that brought him to the
forefront as a contender for the party leadership.

Passing around quick and easy cash – 3,000 euros for every
affected household – was credited with helping Karamanlis win
re-election last year.

The European Union, the World Bank and foreign economic
analyst had long warned a consumer-fed GDP growth of 4 percent
would not be sustained without structural measures, that a huge
foreign debt – almost equal to Greece’s 240 billion euros – and
gaping current account deficit were long-term threats.

But when the shock waves of the long-looming world economic
crisis started to hit Greece, Alogoskoufis appeared surprised.
Just weeks before Iceland’s economy collapsed, he proposed tax
collecting measures that made even the prime minister’s aides
cringe.

He announced a 28 billion euro bank support plan before
taking any measures to help families struggling with mortgages
or heating bills. Two weeks of destructive riots prompted by the
police shooting of a teenager on Dec. 6 were fuelled by
discontent over his policies.

In November, the Financial Times ranked him 9th among 19 EU
ministers, giving him high marks for cutting deficits but among
the lowest for local and European political skills.

“He overestimated the threat of returning to EU supervision
and underestimated the crisis,” wrote commentator Antonis
Karakousis in a prophetic article in To Vima that month. “That
is Mr. Alogoskoufis’s biggest mistake.”

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Alogoskoufis is the worst finance minister in Greece ever. We Greeks despise him. Only bankers and large corporations were fond of him, but will probably not even say hello to him from now on.