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ces papers - open forum

the Greek vicious circle from incremental adjustment to critical juncture?

CORRUPTION, INEQUALITY AND TRUST:

Christos J. Paraskevopoulos

THE MINDA DE GUNZBURG

CENTER FOR EUROPEAN STUDIES


AT H A R VA R D U N I V E R S I T Y

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ces papers - open forum # 13, 2012

Christos J. Paraskevopoulos is Associate Professor of Political Science & European Public Policy at the University of Macedonia, Thessaloniki, Greece. He was a Visiting Fellow at the Minda de Gunzburg Center for European Studies at Harvard University from January to July 2012. He can be reached via email at: chrp@uom.gr (office), or chrp@otenet.gr (home).

ABSTRACT
Drawing primarily on new institutionalist approaches to Europeanization and the institutional theory of trust, and based on critical evaluation of the post-authoritarian period in terms of institutional and policy evolution, this paper argues that the situation in Greece over the last decade or so characterized by relatively high levels of corruption and inequality and low levels of social and institutional trust has constituted a vicious circle that can be conceptualized as a multiple/institutional equilibrium. In this respect, the current period of institutional and policy change should be viewed as a critical juncture, actually a consequence of the external shock facing the country, marked by the serious economic and political crises over the last two to three years. Yet, given that corruption, inequality and lack of trust are characterized as rather sticky phenomena, the paper, differentiating -up to a point- from other theories of transition/change, such as cultural, modernization and/or late industrialization theories, provides evidence of the Greek paradox, namely that this vicious circle is a relatively recent phenomenon that can be traced back to the post-authoritarianism, and in particular post-EU accession period, the main feature of which, however, has been incremental institutional and policy change. In other words, the vicious circle can itself be considered as a side-effect or byproduct of inadequacies/failures of the adjustment and/or modernization processes themselves. In accounting for this phenomenon, the paper points to the congruence of cheap credit, on the one hand, as a result of Greeces accession into the Eurozone, and the long-established weakness of the domestic institutional infrastructure, on the other, identified primarily with political clientelism and/or low quality of government. A key feature of this weakness has been the predominant role of rent-seeking interest groups in Greeces policy-making structure at the expense of (civil) society. This phenomenon, however, is closely linked to the predominance of particularized (amoral familism-like) over generalized/social trust, which constitutes a key feature of Greeces institutional infrastructure. Thus the lack of social trust is identified as a key intervening/ explanatory variable within the research hypotheses of this paper.

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CORRUPTION, INEQUALITY AND TRUST: the Greek vicious circle from incremental adjustment to critical juncture?
Introduction Southern Europe in general and Greece in particular came to be viewed as the main loci of the debt crisis that affected the Eurozone as a repercussion of the global financial crisis and recession that began in 2008-09 and is considered as the worst experienced by the developed democracies since World War II. Yet, while the international crisis itself is considered an outcome of the institutional architecture of the neo-liberal era of the last 30 years, manifested itself primarily in the form of poor international economic governance of globalization, especially in the areas of regulation of financial markets and increasing levels of inequality (Hall, 2011; Bartels, 2008), the crisis facing Greece and other Southern European countries is actually further exacerbated by the poor/doomed to failure construction of EMU (Hall & Franzese, 1998; McKay, 1999 inter alia). In particular, the outbreak of the international economic crisis revealed the fundamental institutional weakness of the EMU, namely the weak institutional formulas for effective and efficient coordination of economic policies, mainly in the form of the Growth and Stability Pact (GSP). In that respect, notwithstanding the impact of the international crisis on triggering the crisis in Greece and Southern Europe, the latter should/has to be dealt with at the EU level itself. In other words, the debt crisis of the EU periphery in general and Greece in particular should be viewed as an EU (Eurozone) crisis in waiting, which has been triggered by developments at the international environment. Yet, notwithstanding the impact of international and Eurozone crises, and taking into account the specificities of the domestic institutional infrastructure that may differentiate Greece from other Southern European countries and have given impetus to arguments about Greek exceptionalism
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summarized by the phrase Keynesianism for all except Greece (Krugman, 2011), this paper, drawing primarily on new institutionalist approaches to Europeanization and the institutional theory of trust, focuses on crucial aspects of the domestic institutional infrastructure as determinants of policy and institutional change in Greece. In particular, differentiating, up to a point, from the main theories of post-authoritarian transition and democratic consolidation in Greece, namely the modernization and/or late industrialization school (see inter alia Mouzelis, 1986) and the cultural/cultural dualism theory (Diamandouros, 1994; Diamandouros and Gunther, 2001), the paper attempts to shed light on crucial aspects of the domestic institutional infrastructure, such as corruption, inequality and social and/or institutional trust, namely on the so called quality of government indicators1, as intrinsic elements of the concept of administrative capacity, which has been identified as crucial component of policy learning and adaptation at the domestic level of government. In this theoretical framework, the paper discusses the post-authoritarianism, incremental institutional and policy adjustment and evolution of state structure and provides evidence from policy implementation in three interdependent and interrelated policy areas, competition, environmental and cohesion policies in Greece. Thus, the first section discusses the theoretical foundations of the interaction between corruption, inequality and lack of trust, and explains the phenomena of institutional equilibriums and stickiness. The second section examines the
1 The term quality of government, theorized by Bo Rothstein and others but also long operationalized by the World Bank, draws partly on the institutional theory of trust. It involves variables, such as honest government governed by the rule of law, and efficient social institutions that secure property rights, information provision and hence fair competition, honest and impartial public administration achieving bureaucratic efficiency, regulatory quality and control of corruption, generalized trust and social capital (see Rothstein, 2012; Rothstein & Teorell, 2008; analytical discussion in relevant section below). In a recent study for the EU Commission, Rothstein and his team developed a composite index to measure the concept as a single variable (see WB, 2011; CEC, 2010).
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complex relationship between Europeanization of public policy and domestic change, empha sizing the role of quality of government and social trust as crucial intervening variables. It also establishes the research hypotheses of the paper. The third section presents empirical evidence on the state of corruption, inequality and (lack of) trust in Greece and briefly explores the evolution of state structure during the post-authoritarianism period from incremental adjustment to critical juncture. The fourth section presents evidence from competition (Single Market), environmental and cohesion policy areas. Finally, the fifth section draws the main conclusions with regard to the impact of social trust and administrative capacity on institutional and policy change, and adjustment to the EU policy environment.

in periods well-known in the institutionalist literature as critical junctures (Collier & Collier, 1991; Hall, 2010; Mahoney & Thelen, 2010). The concept of corruption refers to a complex phenomenon which is very difficult to define and measure2. Rose-Ackerman has provided the most common and well-known definition of corruption within the framework of public choice theory, namely misuse of public/power position for private/ political interests/goals (2004:1). Obviously, while most of the types/forms of corruption covered by this definition, such as bribing, fraud, political corruption etc., are actually beyond the law in most countries, there are other phenomena which constitute cases of conflict of interest and, although they may be considered as belonging to misuse of public power, they are actually outcomes/consequences of regulatory failure in several polities/political systems. Other, probably more sophisticated approaches, however, define corruption rather normatively, as linked to lack of impartiality on the part of formal state institutions (Rothstein, 2005, 2012; Rothstein & Uslaner, 2005). These approaches emphasize partial/differential treatment of citizens within the framework of state institutions, such as the welfare state and/or street-level bureaucracy, as belonging to the core of the notion of corruption. Obviously the concepts of honest government and transparency lie at the core of these approaches. On the other hand, the literature on corruption distinguishes three main forms/types of corruption: petty corruption, routine corruption and grand corruption (see Heidenheimer, 2002:150-2; Uslaner, 2008: 10-11)3. The former refers to everyday life
2 Given that the notion of corruption is considered almost synonymous to the lack of transparency, its measurement constitutes by definition a difficult exercise. Thus corruption measurement is primarily based on perceptions among elites with respect to the levels of corruption. The Corruption Perceptions Index-CPI of Transparency International (TI) is the most well-known annual since 1995 international index involving around 160 countries. 3 It should be noted, however, that, while Heidenheimer concentrates on moral acceptability as a crite3

Corruption, inequality and trust: institutional equilibriums and stickiness Corruption, inequality and lack of social trust tend to be considered as crucial and interrelated concepts/phenomena with serious consequences for the functioning of modern liberal democracies in general and public policy in particular. In this respect, while the importance of social/generalized trust for the functioning of modern democracies has already been identified at least since the early 1990s, its interaction and interconnectedness with corruption and inequality constitutes a rather recent finding/outcome of social research (Rothstein & Uslaner, 2005; Uslaner, 2008; Rothstein, 2012). Additionally, what makes the interaction between the three variables/phenomena even more crucial is the fact that they are characterized by virtuous and/or vicious circles, that is they constitute institutional/multiple equilibriums whose change is rather difficult over time and across space (Shepsle, 1989; Pierson, 2000; Hall, 2010; Mahoney & Thelen, 2010). In other words, they are characterized by stickiness (Boix & Posner, 1998; Rothstein & Uslaner, 2005; Uslaner, 2008). Thus institutional change under these circumstances only takes place as outcome of or response to external shocks, namely
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exchange transactions, involving primarily small amounts of money, i.e. bribing street-level bureaucrats to help/facilitate through bureaucratic procedures. Routine corruption refers to rather small value provisions or exchanges that take place primarily within the framework of clientelistic relations, such as preferential provision of contracts to political friends as an exchange for political support etc. Finally, grand corruption involves big money exchange among politicians/patrons and/or political parties and friends/clients, such as provision of lucrative contracts for political/economic support. Overall, the notion of corruption can be viewed as an umbrella concept covering all aspects of the predominance of private interests at the expense of public (goods), either through misuse of roles in the public sphere (misuse of power) or through the dominant role of interest groups in the public policy-making process, thus undermining the public interest/public goods. The latter refers to the well-known phenomena in public policy-making of rent-seeking and/or logrolling (see Krueger, 1974; Olson, 1965; Stigler, 1971)4. The distinction between low and high level corruption, however, is especially crucial with regard to the interaction between corruption, inequality and trust. In particular, while it is well established that the three variables/phenomena are highly correlated and characterized by virtuous and/or vicious circles, there is an extensive debate with regard to the causal mechanisms operating among them, namely the mechanisms of initiation and embeddedness of stickiness. In this respect, while the society-centered approaches to the creation of social trust emphasize citizens interactions within civil society/voluntary
rion for differentiation among forms of corruption, Uslaners analysis emphasizes profitability. In this respect, he considers petty corruption as actually unavoidable, given that citizens use these methods for everyday life needs in cases of inadequate provision of basic public goods due to malfunctioning public institutions. 4 It has to be stressed, however, that rent-seeking is a rather common phenomenon across advanced democracies associated primarily with lobbying and what substantially matters in terms of corruption is appropriate regulation on the part of formal regulatory institutions of the state. ces papers - open forum # 13, 2012

organizations (Putnam, 1993, 2000), the so called institutional theory of trust (Rothstein and Stolle, 2001, 2003; Rothstein, 2002, 2005, 2012; Paraskevopoulos, 2010) attributes a very important role to the perceptions of fairness and impartiality of public institutions on the part of citizens as a crucial variable affecting the creation of generalized trust. Thus, given that confidence in institutions is widely regarded as a very important measure/proxy linked to the identification of generalized trust and social capital at large, what really matters is not confidence in institutions in general, but rather confidence in the institutions mostly involved in the implementation of public policies, that is confidence in the impartiality of the so called street-level bureaucracy5. In a similar vein, Herreros (2004) points to the crucial role of formal social and political institutions -as providers of external solutions to dilemmas of collective action- in the creation of social trust in two important respects: first, a direct one, as guarantor of agreements, that is sanctioning agent; and second, an indirect one, as facilitator of increased participation in associations and hence of building social trust through the provision of selective incentives. While the former function refers to the role of social and political institutions in the form of impartial state (street-level) bureaucracy, the latter refers to the universal welfare state, or, in a broader perspective, to the role of institutions in enhancing generalized trust through absorbing or diminishing the risk associated with trusting other people (Levi, 1996). Yet, this
5 There have been identified at least two main categories of trust: trust in people and trust in institutions. The former is of two types/forms: interpersonal and/or particularized trust, which refers to trust in people one knows or has information about and generalized or social trust, which refers to the level of trust that exists among members of a society or community in general. The latter (institutional) trust, on the other hand, is of two sorts: institutional trust and political trust. The former connotes confidence in non-partisan institutions, such as law and order institutions and/or street-level bureaucracy, while the latter refers to trust in partisan institutions, such as political parties, the government and so on (see Uslaner, 2002; Rothstein and Uslaner, 2005; Paraskevopoulos, 2010).
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measure becomes relevant at the societal and crossnational and not at the individual level of analysis (Newton and Norris, 2000). In other words, while institutional performance and not culture determines trust in institutions at the individual level, at the societal/national level social trust may play a crucial role as determinant of institutional performance that leads to trust in institutions at the individual level. This has also been vindicated by research in postcommunist countries (Mishler and Rose, 2001). In this respect, however, it has to be stressed that what matters most for social trust is trust in non-partisan institutions, such as civil service and rule of law institutions (e.g. legal system and police). This is because citizens tend to make inferences about equality and the level of trust in a society on the basis of their everyday life experiences and therefore on the basis of experiences from street level bureaucracy rather than from political institutions, trust in which may obviously be conditioned by citizens ideological orientations (Rothstein, 2012). Finally, Delhey and Newton (2005) have also found strong evidence that good government, evaluated on the basis of several rule of law, political stability and accumulated freedom indices has a positive impact on the level of generalized trust. Thus in the framework of the institutional theory of trust corruption is considered a symptom of institutional malfunctioning or institutional weakness and therefore it lies at the core of the creation of the vicious circle, in the sense that negatively affects the levels of institutional and social trust, as well as the level of equality, especially equality of opportunity. In this respect, there are countries or regions that have been trapped in the vicious circle and therefore demonstrate high levels of corruption and inequality and low levels of social and institutional trust (e.g. South/Central/East European countries), while others are trapped in the virtuous circle demonstrating relatively low levels of corruption and inequality and high levels of social and institutional trust (e.g. Nordic countries). It is for this reason that perceptions of corruption are widely used as an indirect measure of trust in institutions and therefore of social trust
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(della Porta, 2000). In this analytical framework, instances of high level corruption are viewed as rather internationally widespread6 and simultaneously not so important phenomena for the relationship between corruption and social trust. In particular, is has been argued that high level corruption does not affect citizens perceptions and inferences about the quality of formal state institutions, especially of streetlevel bureaucracy, and consequently about the level of social trust. Conversely, crucial importance for the level of social trust is attributed to the everyday life -petty- corruption, given that it usually reflects the level of impartiality on the part of the state in citizens transactions and therefore it is considered an indirect measure for the level of institutional and social trust in a society as a whole (Rothstein, 2005, 2012). However, there have been serious criticisms of the institutional theory of trust, on the grounds that generalized trust does not seem to depend so much on individual experiences of institutions and hence does not depend on the assessed trustworthiness of others, but rather on socialization-related variables (Uslaner, 2002). Moreover, another school of criticism views institutions as substitutes for rather than builders of generalized trust. In this perspective, Cook et.al. (2005) have conceptualized in some detail how collective action and cooperation could be achieved without trust, but rather enabled through institutional design. Within the same theoretical framework, a critique of the institutional theory of trust concentrates on the role of inequality as a crucial variable/pillar for the creation of the vicious cycle that leads to corruption and low social trust (Boix & Posner, 1998; Rothstein & Uslaner, 2005; Uslaner, 2000, 2002, 2008; Uslaner & Brown, 2003). Indeed, given that increased levels of inequality tend to be regarded as a common phenomenon in several developed/industrialized countries, particularly in Anglo-Saxon ones
6 Given that high level corruption refers primarily to financing of political parties/politicians, it tends to be considered as rather common phenomenon in several democracies, because it is linked to the ever decreasing levels of political parties membership, and therefore the increased need for funding for the functioning of political parties tends to be covered through/by private donors.
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and especially in the US (Bartels, 2008), inequality has emerged, relatively recently, as a crucial variable negatively affecting the level of social trust and social capital at large. Uslaner (2000, 2002, 2008), in particular, has argued that income inequality is the single most important variable affecting the level of generalized trust. His findings establish a link between equality, optimism and generalized trust, and point to cross-country differences in income inequality that can account for a large part of cross-country differences in the levels of social trust/capital, with the US being considered the most striking case in this regard. Dont get rich, get equal is Uslaners (2002:255) suggestion with regard to building up of cooperative relations and subsequently of social trust. In the same vein, Delhey and Newton (2005) have found significant effects of income inequality and Protestant traditions on generalized trust as well. Moreover, Uslaner (2008) has also attempted to link inequality with corruption, particularly high level corruption. Thus, while the institutional literature views corruption of all sorts (i.e. high but also petit corruption) as a symptom of malfunctioning institutions in general and of street-level bureaucracy in particular that has a negative impact on the level of inequality, Uslaner points to the opposite direction: namely that high inequality leads to high corruption and low trust and then to more inequality. In other words, he identifies the relationship between inequality, corruption and trust as a case of what he calls inequality trap (2008:23-57). In this respect, inequality rather than corruption is considered the crucial variable for initiating the vicious circle. Nevertheless, P. Halls findings (1999:432) in the case of the United Kingdom seem to point to a different direction. In particular, while income inequality, as measured by the Gini index, increased sharply between 1980 and 1990 in Britain, the levels of generalized trust actually increased slightly over the same period. In that respect, the coexistence between relatively high levels of inequality and high levels of social trust/social capital in the UK may point to another possibly missing variable as far as the interrelationship between inequality and social
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trust is concerned, and this may be institutions. Yet, while the impartiality and fairness of political and social institutions and equality have been identified by the institutional theory as key predictors of social trust, there is increased concern about the role of specific characteristics of the welfare state, as another crucial factor/variable affecting the creation of generalized trust. In particular, there is some evidence that the universal (Scandinavian) type of welfare state may play a key role in generating trust and building social capital through its capacity for securing equal respect and concern and basic capabilities to all citizens; in other words, through citizens inferences generated by the specific type of welfare state (see inter alia Rothstein, 1998; Rothstein and Stolle, 2001; Kumlin and Rothstein, 2003)7. Conversely, the selective and conservative types of welfare state, involving means-testing programs, divisive and therefore stigmatizing for the needy and deserving and complicated rules of eligibility are considered as undermining generalized trust and thus leading either to overall lower levels of social capital or to its bonding variety (bad social capital). Finally, the Southern European model of welfare state, though not identical, is viewed as inherently carrying the additional burdens of political clientelism, and hence injustice and corruption.
7 It has to be stressed, however, that, although universal programmes are widely considered as the most effective tool for reducing inequality and hence for facilitating the creation of social trust (see Rothstein, 1998; Swank, 2002), in countries already trapped in the vicious cycle of high levels of corruption and inequality and low social trust their implementation is very difficult. This is because, given citizens inferences about the effectiveness and efficiency of state institutions in these countries, people belonging to lower income groups are very difficult to be convinced about the redistributive character of universal programmes and therefore it is highly likely that they will demand/ask for radical redistributive measures. In this respect, the paradox with universal programmes is that, essentially, the prerequisites for their implementation (i.e. fairness, social trust, honest government) are actually positive outcomes expected from the implementation of the programmes themselves (see Rothstein & Uslaner, 2005).
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However, although there is evidence to suggest that indeed the universal welfare state has played a key role in the spectacular development of social trust/capital, especially in the Scandinavian countries, social trust/capital constitutes an intrinsic element of the domestic institutional infrastructure of other countries of Western Europe as well, with selective and/or conservative welfare states and/or high levels of inequality, such as the UK, France, Germany and so on. In that sense, the relevant issue here may be the distribution and not the creation of social trust/capital. Indeed, there is evidence to suggest that, while at the aggregate level these countries demonstrate generally high levels of social trust/ capital, a more detailed look may reveal important differences, along class and/or culture strata. This is particularly true in the case of the Anglo-Saxon countries, where social capital and civil society are mostly identified with a rather middle class-dominated, bottom-up, spontaneous, decentralized character of voluntarism and citizens participation (e.g. charities). Therefore, while the universal welfare state cannot be considered as a prerequisite for the building of social trust/capital, it may be associated with greater equality in its distribution (Herreros, 2004). In sum, corruption, inequality and lack of social trust are sticky phenomena, characterized by virtuous and/or vicious circles, and in this respect they constitute institutional/multiple equilibriums whose change is rather difficult over time and across space. Additionally, while it is very difficult to identify any linear causality with regard to the actual creation of the institutional equilibriums (see Hall, 2003), there have been identified causal mechanisms operating among them, which are based on peoples inferences about institutional performance and/or impartiality of state institutions (primarily non-partisan ones) and/or particular functions and/or types of welfare state. In this respect, peoples inferences matter. Indeed this may be particularly evident in the case of Greece and other South European countries, where corruption and clientelism namely lack of impartial and fair institutional infrastructure- linked to long tradition of authoritarianism are viewed as major
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impediments to the adjustment and adaptation processes. Thus institutional and policy change in these countries is characterized by critical junctures, where change happens as a response to external shocks. The most common source of these shocks is the Europeanization process and the EU system of governance at large.

Europeanization, quality of government, social trust and domestic change The Europeanization process is often viewed as a powerful tool driving institutional and policy change/ reform in Greece, as well as in other countries of the EU periphery at large, since its impact on domestic institutional and policy structures is linked/ has coincided with the post-authoritarian transition in these countries. In this respect, it often tends to be associated with the modernization process8. Yet, both processes are intrinsically linked to the problematique of governance in the EU, whereby the member states are facing the challenge to adapt their institutional and policy-making structures to the EU multi-layered policy-making environment. In par8 This is particularly true in the case of Greece, where, since its emergence on the domestic political arena and public policy discourse in the 1990s, the notion of modernization has not always been clearly defined, thus taking several connotations and meaning different things to different people. In particular, the ambiguity with regard to the content of modernization in public policy is related to its interpretation often used in public policy analysis- as a one-way process of irreversible change leading towards the predominance of a specific paradigm in public policy through homogeneity of preferences and hence towards achieving overall convergence of public policy styles in the long run. On the contrary, however, there is evidence that modernization may take several meanings/interpretations, as these may be determined by the path dependence process which characterizes institutional and policy change/evolution. Thus, one should expect divergence rather than convergence among institutional and policy styles to be the outcome of the modernization process (see Pierson, 2000; Hall and Soskice, 2001; Hall, 2010; Hood 1998). Yet, in the contextual framework of Greece and probably other SEU countries incremental institutional and policy change may be the most possible outcome of modernization process.
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ticular, the notion of multi-level governance in the EU (Marks 1993; Kohler-Koch 1996; Caporaso 1996; Marks et. al. 1996; Chryssochoou, et.al., 2003; Piattoni, 2010) implies that sub-regional, regional, national and supranational authorities interact with each other in two ways: first, across different levels of government (vertical dimension); and, second, with other relevant actors within the same level (horizontal dimension). Given, however, that the notion of Europeanization may take several meanings and refer to a wide variety of processes, that is historical, cultural, institutional (Olsen, 2002; Featherstone, 2003), and therefore there is a need for clarification, in the context of public policy-making Europeanization is primarily viewed as a process of institutional and policy adaptation as a response to EU policies, but also as the process by which national policies are transferred up to the European level and become objective of collective decision-making processes (Paraskevopoulos and Leonardi, 2004; Paraskevopoulos et.al., 2006). This dualism in the meaning of Europeanization reflects the functional discrepancy between policy formulation and policy implementation. Both processes are dominated by the principalagent model, which constitutes a powerful conceptual tool in modern public policy analysis within the public choice school (see Hix, 2011). The former implies delegation of power and authority and hence pooling of sovereignty- about policy design to the supranational level of governance, and more substantially to primarily technocratic bodies, notably the EU Commission. That is why it may be called bottom-up Europeanization. Conversely, the latter refers to top-down Europeanization and involves a key role of supranational institutions, and most notably the Commission, primarily through oversight in policy implementation, along with member states. Yet, in both processes the domestic institutional infrastructure of member states plays a crucial role in EU policy-making. Thus, the Europeanization process refers to the complementary notions of opening up the structures of the traditional nation state to informal and formal rules originating from the supranational level, and, consequently, to their adces papers - open forum # 13, 2012

aptation to the EU multi-level system of governance. In this respect, it constitutes a rather enduring and long-standing challenge to the administrative structures of the member states and hence it is viewed as a positive external shock for promoting institutionbuilding and policy-making innovation at the domestic level of governance. It is in this respect that the Europeanization process is linked to the notion of incremental adjustment at the domestic level of government. Yet, in the conceptual framework of this paper we employ the top-down notion of Europeanization, that is we are concerned about policy implementation, and we have chosen two regulatory (single market and environmental) and one redistributive (cohesion) policy areas to assess the impact of social trust and the quality of domestic institutional infrastructure on administrative capacity and public policy performance. The latter plays an important role in the adaptation and adjustment processes at the domestic level of government. In competition policy Europeanization is supposed to be linked to both the notions of deregulation/liberalization of national markets, as well as to the re-regulation through the EU competition policy (Hix, 2011). However, the member states enjoy substantial discretion regarding the transposition and implementation of EU legislation, given that the program for the creation of the Single European Market (SEM), since its inception in the late 1980s, has been considered as dominated by neo-liberal dynamics and therefore has been causing reactions from citizens and several interest groups at the domestic level of government. In Greece and other SEU countries in particular the transposition and above all implementation of SEM legislation has often been confronted with reactionary powerful interest groups, the so called syntechnies (in Greek). However, there is evidence that an incremental process of implementation of reforms in several policy areas has taken place, especially during the 1990s and early 2000s, albeit with significant delays, successes and failures. In environmental policy Europeanization has traditionally been interpreted as a process by which new member states, either contribute
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to the formulation and advancement of EU environmental policy towards their own national priorities (i.e. higher standards of environmental protection), or adopt the already more advanced European regulations into their domestic policies. This takes place within the framework of the intergovernmental bargaining between the so called pioneers-forerunners group, consisting -prior to the last enlargementmainly of Germany, Denmark and Netherlands, and the latecomers group, which comprises mainly the ex-cohesion countries (Spain, Portugal, Ireland and Greece) (Andersen and Liefferink, 1997). This, in turn, has led to important institutional innovations in almost all cohesion countries. In this respect, especially in the case of the Cohesion and CEE countries, Europeanization is, again, viewed as an independent variable that crucially affects and challenges well-established structures within the domestic policy-making structures in environmental policy. Finally, in cohesion policy and especially in the cases of Greece and other SEU countries- Europeanization is linked to the crucial role of cohesion policy as an indirect form of redistribution actually a substitute for direct fiscal transfers which are common feature in federal states for tackling the asymmetric shocks (Tsoukalis, 1997; McKay, 1999; Krugman, 2011). Indeed, this function of cohesion policy is supposed to be free of the risk of the so called moral hazard effect that characterizes direct fiscal transfers (see Paraskevopoulos, 2001, 2005, 2008). In doing so, however, cohesion policy affects and challenges well-established structures within the domestic systems of governance and plays an important role in administrative restructuring and devolution processes within the member states by enhancing institutional capacity at the sub national level. In particular, its impact on the regional and local policy-making arenas is supposed to be twofold: a direct one, by providing increased resources through redistribution and a new set of rules and procedures for the formulation and implementation of development policies; and an indirect one, by shaping intra-regional interactions and thus promoting local institutional capacity through the creation of intra, inter and trans-regional networks that supces papers - open forum # 13, 2012

port local development initiatives (Paraskevopoulos, 2001, 2005, 2008). However, given the complexity of the multilevel governance structures within which the adaptation process takes place and the distinctive character of the policy-making structures at the EU level9, the degree of adaptational pressures facing domestic institutional and policy-making structures in order to comply with the European rules and regulations in public policy is high, especially in unitary and centralized states like Greece. Yet the presence of a high degree of adaptational pressures constitutes a necessary but not sufficient condition for domestic institutional and policy change. Indeed, there is evidence to suggest that the latter is crucially conditioned by the presence of specific institutional structures at the domestic level of governance that may facilitate or inhibit the adaptation process (Brzel and Risse 2000; Paraskevopoulos, 2001, 2004, 2005, 2008; Paraskevopoulos et.al., 2006). In other words, although the Europeanization process plays a key role in the transformation of the domestic systems of governance in general and public policy-making structures in particular, specific features of the pre-existing institutional infrastructure at the national and subnational levels of government matter for adaptation (Jeffery 2000; Paraskevopoulos, 2001; Risse, et.al, 2001; Brzel 2001; Keating et.al., 2003). It is in this respect that in the framework of institutionalist approaches to Europeanization the close relationship between Europeanization, aspects of quality of government, such as rule of law, impartiality of social institutions, social trust, and domestic institutional and policy change is established. Indeed, the notion of quality of government (QoG) essentially draws on a key theoretical as9 Although significant variation from one policy area to another is considered as the main feature of the EU policy-making structures and practices, it has been argued that the EU institutional structure is more federal than unitary and its policy-making processes more pluralist than statist (Schmidt 1997). In that respect, it has been predicted, that the more centralised and unitary member states is likely to face stronger adaptational pressures than the decentralised and federal ones (ibid.).
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sumption of institutionalist theory, namely the distinction between redistributive and efficient institutions (see inter alia Rothstein, 2012; Tsebelis, 1990). While the former imply formal or informal rules (i.e. tax system, welfare state, corruption, familism, etc.) that transfer resources and power from one group of actors/agents to another, the latter refer to formal -but primarily informal- rules of the game (i.e. impartiality, rule of law, control of corruption, social trust, civil service ethos, etc.) that improve the position of all actors/agents. Although this distinction may be viewed as partly vague given that even efficient institutions may have at least indirect redistributive effects, the academic debate on the potential trade-off between efficiency and redistribution, and hence levels of equality/inequality, is an old and very important one in the social sciences (see inter alia Hopkin and Blyth, 2012). In this theoretical framework, the term quality of government refers broadly to features of the so called output side of politics, primarily to institutions, such as the principle of impartiality, that enhance efficiency in policy implementation and in the exercise of power at large, as one source of political legitimacy. Obviously, this contrasts the other, more traditional source of legitimacy, namely the input side linked to access to power, that is electoral democracy and/ or representation. In this respect, theorized by Rothstein and others, but also long operationalized by the World Bank, the concept of quality of government is closely linked to the so called institutional theory of trust (see Rothstein, 2012; Rothstein & Teorell, 2008), and relates to/comprises variables, such as rule of law, property rights, control of corruption, voice and accountability, government effectiveness & bureaucratic efficiency, regulatory quality and so on, while in a recent study for the EU Commission Rothstein and his team developed a composite index to measure quality of government as a single variable (see WB, 2011; CEC, 2010). Moreover, this emphasis on aspects of quality of government goes hand-inhand with similar trends in contemporary democratic theory (see Maravall and Przeworski, 2003). Hence, what the analysis above suggests is that quality of government implies a shift from personal or particces papers - open forum # 13, 2012

ularistic to impersonal or universalistic institutions and universalism at large. In this respect it affects the quality and character of crucial redistributive institutions, such as the welfare state, and thats why it is considered as complementary to the Power Resource Theory (PRT) in accounting for existing variation among types of welfare state across countries and/or regions (see Iversen, 2005; Rothstein, 2012). Yet, the crucial question/theme in this regard is who might have an incentive to provide efficient institutions. Indeed, given that the provision of efficient institutions constitutes a second order dilemma of collective action, and hence no one has any clear incentive to provide such institutions, the notion of quality of government relates also to the so called corruption, inequality, low trust social trap and therefore to the inherent stickiness problem (see Rothstein, 2005). In this framework, given that coalition building among actors is widely viewed as a prerequisite for institutional and policy change (see Hall, 2010; Mahoney & Thelen, 2010) and that social trust constitutes a prerequisite for coalition building among individual and social actors, qualitative features of the domestic institutional infrastructure, such as corruption and inequality, may play a key role in the creation or destruction of social trust. On the other hand, given that one of the fundamental functions of institutions is the formation and/or stabilization of actors expectations, then the same features of the institutional infrastructure may play a key role in formulating actors normative beliefs about the outcome of institutional and policy reforms with regard to distributive issues (Hall, 2010). In this respect, specific features of the pre-existing domestic institutional infrastructure constitute a crucial independent variable affecting domestic policy and institutional change and hence can account for the pace of the Europeanization process. This leads to the formulation of the first hypothesis of this paper. H1: Low level of QoG (i.e. lack of impartiality of institutions, corruption, inequality) may lead to low levels of social trust, through peoples inferences about widespread corruption and/or inequality and thus may affect peoples normative beliefs (Hall,
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2010) about the real outcome of institutional and/or policy reforms in terms of distributive issues. Additionally, social trust constitutes a crucial conceptual tool for resolving dilemmas of collective action and hence for the formation of advocacy coalitions and/or other issue-specific networks, such as epistemic communities, that play a key role in the process of social learning, by facilitating the formulation of actors instrumental beliefs (Hall, 2010) and hence reducing uncertainty about possible outcomes of institutional or policy reforms. Thus social learning constitutes a fundamental mechanism of domestic change and in this respect identifies networks (either epistemic communities, or advocacy and/or issue-specific) and informal institutions, namely political and organizational cultures and social norms, as thick mediating mechanisms that affect actors preferences through the re-conceptualization of their interests and identities and thus facilitating the institutional and policy adaptation processes (Hall, 1993; Risse, et. al. 2001; Checkel, 2001). In other words, the process of social learning emphasizes the role of experts in the policy process as policy-change entrepreneurs through their increased capacity for diffusion of new information and knowledge (Haas, 1992; Hall, 1989, 1993, 2010), on the one hand, and informal conventions, namely social norms, as glue providers for the re-stabilization of the relations among actors involved in the learning process, on the other (Sabel, 1993; Paraskevopoulos 2001, 2005). Thus social trust is identified as a crucial intervening variable between the contextual institutional variables and domestic policy change. This leads to the formulation of the second hypothesis of this paper. H2: Low level of social and high level of particularized trust (i.e. bonding social capital) may undermine capacities for collective action and subsequently for coalitions formation (i.e. advocacy coalitions, epistemic/ issue networks, etc.), thus limiting the potential sources for instrumental beliefs (Hall, 2010) which play a key role in reducing uncertainty about possible outcomes of institutional/policy reforms.
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Finally, the institutionalist literature has identified the presence of multiple veto points and existing formal institutions as crucial mediating factors that affect domestic actors capacity for action and hence policy and institutional change (Tsebelis, 2002; Mahoney and Thelen, 2010). Thus low levels of social trust may lead to weakness at the societal level in relation to achieving collective action and hence massive mobilization in support of institutional and/ or policy reforms. This may indirectly strengthen the role/position of any veto players/points which can block undesired institutional and policy reform. This situation relates to a process that has been conceptualized as single-loop learning (Argyris and Schoen 1978), whereby actors acquire new information, alter strategies but they pursue given, fixed interests. Indeed, at the EU level single-loop learning is significantly affected by the intended and unintended consequences10 of the redistribution of power and resources between the supranational, national and sub national levels of government within the EU, and subsequently by the degree of decentralization and administrative restructuring of the state. This leads to the third hypothesis of this paper. H3: Low level of social trust may have negative effects on the capacity for collective action and/ or (massive) mobilization at the societal level, thus undermining the processes of institutional and policy learning/change and adjustment to EU policy environment; by indirectly strengthening the role of interest groups (e.g. rent-seeking), which, through their increased capacity for collective action based on selective incentives, can function as effective veto
10 The impact of the 1988 reforms of the Structural Funds on the redistribution of power between the levels of government, by strengthening the role of the sub national level and establishing direct linkages between supranational, national and sub national authorities through their role in managing and monitoring Operational Programmes (OPs) of the Community Support Frameworks (CSFs) may be seen as a characteristic case of unintended consequences initialized by institutional or policy reforms at the EU level. Moreover, the core of these reforms remained almost unchanged even after the 1993 reform put forward after the negotiations over the 1994-99 Structural Funds programme (see Pollack 1995).
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players/points and block the reform process. Obviously, this discussion reflects the broader distinction within the academic debate about how paradigm change occurs in public policy between interests, ideas/norms and institutions as fundamental conceptual tools/variables affecting change in public policy styles in general (Hall, 1989, 1993, 2010). Additionally, given that time and space constitute crucial variables affecting the learning process (Rose 1993, 2002), they contribute to another beyond the single-loop vs. social- conceptual dichotomy within the theory of learning, namely learning across time and space. While learning across time refers to the process by which lessons are drawn from the past (that is from ones past successes and failures), learning across space implies the drawing of lessons or policy transfers across/from other jurisdictions: either from within the same country, or from other countries or regions. Thus, while it is clear that learning across time for Greece should refer primarily to the post-authoritarian period, learning across space is overwhelmingly marked by the tendency/ willingness towards policy transfer from other EU countries. In a similar vein, there is a potentially crucial negative or positive role of the outbreak of economic crisis in inhibiting or facilitating the learn-

ing and adaptation processes. On the one hand, the economic crisis may exacerbate the already difficult reform process in Greece and other SEU countries, while, on the other, it may play a positive role as an external shock or critical juncture increasing the pressure towards reform, adaptation and adjustment. Overall, social trust/capital is considered a key concept in the academic debate on the impact of the Europeanization process on domestic policy and institutional change. This is primarily because of its role in facilitating collective action and hence the learning process among actors within policy networks/ policy communities, which is viewed as a fundamental precondition for domestic policy change. Although it is supposed to be linked to the social rather than the rational choice type of learning, it may be viewed as a conceptual tool for bridging the gap between the two approaches and in that sense, it may fit well with the so called actor-centred version of sociological institutionalism which is better equipped for capturing the actor (interests, preferences, identities) structure (norms, institutions) interactions (see Paraskevopoulos, 2001, 2004, 2005, 2006). Thus the research hypotheses of the paper are depicted in the following graph.

Figure 1. Research hypothesis

Political Trust Corruption Institutional Performance Inequality Institutional Trust Social Trust Domestic Change

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Corruption, inequality and (lack of) social trust: the Greek vicious circle from incremental adjustment to critical juncture In Greece, the problematic state, namely the lack, of social trust/capital has been identified as a key factor/variable linked to the blocking of institutional change and policy reform in several policy areas, from the economy (Lyberaki and Tsakalotos, 2002) to the environmental and regional policies (Paraskevopoulos, 2001a-d, 2004; Paraskevopoulos et.al., 2006). This is attributed to the fact that the weakness of social trust goes hand-in-hand with the strength of family and kinship-based, particularized, essentially bonding (that is unsocial) type of social trust/capital, similar in many respects to amoral familism identified by Banfield (1958) in Southern Italy. Additionally, and interestingly enough, there is some evidence based on collective memories11 that this type of bonding social trust/capital played a key role in underpinning the spectacular economic growth of the 1960s and 1970s, which was primarily based on family enterprises and the support of the interventionist and patronizing state of that era (Lyberaki and Tsakalotos, 2002). Thus, while the post-civil war era was marked by a serious and long-standing lack of fairness and impartiality on the part of state institutions and hence by low levels of institutional, political and social trust12, the bonding social trust/ capital played a key role in facilitating the achievement of spectacular economic growth rates under the
11 It should be reminded that Greece was only included/first participated in the major international surveys measuring crucial socio-economic attitudes, such as World Values Survey (WVS), European Social Survey (ESS) etc., in the late 1990s-beginning of 2000s. Therefore, given the lack of reliable data, evidence for the first post-civil war and post-authoritarianism periods is primarily based on collective memories. 12 It has to be stressed that primarily institutional and secondarily political trust are supposed to be closely linked to social trust. Yet, in contrast with the assumptions of the institutional theory of trust that institutional and not political trust matters for/affects social trust, factor analyses based on ESS 4th wave (2008-09) data show that in Greece and other European countries -except the Nordic ones- political and not institutional trust is actually the crucial predictor of social trust. ces papers - open forum # 13, 2012

authoritarian state, which has been captured by the key phrase (state of the Right), indicative of peoples imagination and inferences13. In this respect, with regard to the state of social trust/capital, Greece belongs to a group of primarily Southern, CEE and/ or Balkan countries (see regression graphs), while, simultaneously, this raises serious doubts about the post-Olympic games (i.e. post-2004) euphoria in relation to the emerging civil society and the strength of the so called third sector (i.e. voluntary and NGOs sector) in Greece. Finally, while Greece, along with other Mediterranean countries, seems to perform rather well in the so called socializing-related variables, such as contacts with friends, colleagues, etc., empirical evidence shows that this has no serious impact on the level of social trust/capital, thus underlining the limitations of the so called interactive factors in relation to social trust/capital building. The low level of social trust, however, goes hand-in-hand with high levels of both grand and petty corruption. Although traditionally linked to aspects of political clientelism, a dominant feature of the Greek political culture at least over the postwar period, corruption gradually emerged as a massive and widespread phenomenon since late 1980searly 1990s, and especially during the 2000s. This has become evident in the deterioration of Greeces position in all relevant international measurements, such the Transparency International. Thus, paradoxically enough, the emergence of relatively massive corruption as a dominant feature of the Greek socio-political structure seems to have taken place during a period of intense and intensive institutional and policy change, marked by the so called boom of the 1990s-2000s, but still considered an integral part of the incremental adjustment to the EU that has dominated the post-authoritarianism and particularly the post-EU accession period. In particular, while the first post-authoritarianism period under K. Karamanlis governments (1974-80) has been characterized by a rather smooth and successful, in terms of
13 It should be noted that this key phrase has dominated the domestic policy discourse up until recently (i.e. late 1980s-1990s).
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institution-building, transition to democracy, especially when compared with the other Southern European countries, notably Spain and Portugal (see Diamandouros, 1994; Gunther, Diamandouros and Puhle, 1995), Greeces accession into the EC/EU coincided with the emergence and coming to power of the first PASOK (A. Papandreou) government in 1981. This first period of PASOK-socialist governments (1981-89) was marked by intensifying the democratization of the state, actually opening up the state structures to previously excluded groups (leftists etc.), some basic human right-related reforms, and expansionary fiscal policy accompanied by social policy/redistribution-related reforms, based primarily on borrowed money. This eventually led to the rapid increase of public debt by late 1980s. Yet, the main feature of this period, in terms of institution building, has been the institutionalization of political clientelism and the emergence and expansion of bureaucratic clientelism and populism (Lyrintzis, 1984, 2005; Sotiropoulos, 2004), along with the predominance of political party(ies) in almost any aspect of social and economic life, the so called partitocracy (Mouzelis, 2005). In this respect, Papandreous charisma has been viewed as a key qualitative feature of his leadership that contributed to the development and embeddedness of populist culture (Pappas, 2008), though the latter has long been considered intrinsic element of political clientelism in Greece. Nonetheless, the level of corruption over this period was still closely linked to political clientelism and not considered a massive, widespread phenomenon that constitutes a serious problem for the functioning of democracy and the society as a whole. Thus, it was during the 1990s, namely initially during early 1990s under the New Democracy government, then during the A. Papandreou governments 1993-96, but also during the Simitis post1996 and 2000s period, that corruption, and especially petty corruption, gradually became a major issue for the functioning of democracy and the country as a whole. Ironically, this period (mid-1990s through mid-2000s) has been characterized by the most serious in its inception and design and systematic in
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its implementation programme of institutional and policy reform, what may be called Simitis modernization experiment, that the country has ever experienced over the whole post-authoritarianism period. In particular, fundamental reforms of this period included the shift from interventionist towards regulatory/enabling state through the creation of independent /regulatory authorities, such as the ombudsman, the Supreme Council for Public Sector RecruitmentASEP, in an attempt to tackle political clientelism and enhance trust in state institutions and especially in civil service, as well as reforms towards restructuring of local government (Kapodistrias plan) and separating the state from political party (ies) functions, i.e. de-politicization of the state/civil service as agency for policy implementation (see inter alia Eleftheriadis, 2005; Lyrintzis, 2005; Pagoulatos, 2005; Paraskevopoulos, 2005; Sotiropoulos, 2004). Additionally, reluctant privatizations, primarily in the banking sector, as well as an extensive programme for improving the countrys infrastructure (actually a shift from small scale to large scale infrastructure projects), took place over this period (Paraskevopoulos, 2005). However, this reform programme, no matter how ambitious in its conception, failed or did not have enough time to tackle sensitive areas linked to widespread corruption, such as the substantial reform of the civil service or what can be called the deep state which is the main agency of statism in Greece, along with the so called Public Enterprises and Organizations-DEKO (in Greek), the reform of the judiciary to speed up the judicial system and above all reform in sensitive areas such as the pension system in early 2000s (see Tinios, 2005) and the so called closed, that is well-protected, professions. Finally, reforms of this period did not touch special and most powerful interest groups, such as the media industry in Greece which is unregulated and may constitute one of the main echelons of grand and/or petty corruption. In sum, reforms of this period have been characterized as reforms from above, namely without (civil) society mobilization and coalitions building (Lyberaki & Tsakalotos, 2002; Paraskevopoulos, 2005, 2007). Hence the pathogens of Greek state/civil service, namely legalism and statism, still
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predominate, while a renewed concern with regard to inadequacy of the so called core-executive e.g. PM office etc.- has emerged relatively recently (2010). Nonetheless, it should be clear that, taken all pros and cons into account, the Simitis governments left the country in a rather good shape in 200414. In this respect, grand corruption is primarily related to the financing of political parties15, major cases of tax evasion and the role of unregulated media groups since the early 1990s16. Petty corruption, on the other hand, involves primarily sensitive sectors of public policy/civil service, such as tax evasion and facilitating/bypassing or speeding up bureaucratic procedures, especially in the area of health17. It is indicative that according to Eurobarometer opinion survey of 2009, 98% of the population views corrup14 Yet, although both the consecutive ND under K. Karamanlis (Jr.) (2004-09) and PASOK under G. Papandreou (2009-2011) governments had adopted very ambitious agendas of institution building, with the former stressing the need for re-foundation of the state and the latter emphasizing the importance of enhancing transparency and fighting corruption, both failed to live up to citizens expectations, because of serious inaction and/or delays in pursuing institutional and policy reform. Additionally, it was the failure, especially on the part of the ND governments, to anticipate the serious consequences of the looming economic crisis and to take prompt and appropriate action that led the country into the brink of collapse. 15 Indeed, the most important/serious case of grand corruption linked among other things with the financing of the main political parties, has been the so called Siemens case, which was publicized/emerged in 2008, namely involving the financing by Siemens of the two main political parties, but especially PASOK, as an exchange for lucrative public sector contracts. 16 It has to be stressed that the powerful and unregulated media industry /private media groups emerged in late 1980s-early 1990s, when a statist system involving very strictly controlled by central state and/or the political party (ies) in power media was replaced by a completely unregulated, actually anomic, system, as often happens in such cases (i.e. actually reminiscent of similar cases in post-communist societies...). 17 It is for this reason that the ESS has failed to capture the impact of corruption on institutional trust since it only focuses on trust in rule of law institutions (that is, police and legal system). ces papers - open forum # 13, 2012

tion as a major problem in Greece the highest score among EU27 (Eurobarometer, 2009). Additionally, according to the 2010 Annual Survey on Corruption published by Transparency International (TIGreece), it is estimated that bribery cost in Greece amounted to 632 million (US$837 million) in 2010, while according to the overall picture, taken over the four years since the survey started in 2007, on average more than one in ten people report having to pay a bribe for some kind of service, predominantly in public sector institutions. According to the same survey, the areas of public sector /policy mostly affected by corruption in Greece in 2010 were: health (hospitals), 35.4%; tax authorities, 14.4%; town planning authorities, 12.1%; prefectural authorities, 4.3%; social security authorities, 4.1%; and transport authorities (ministry of transport), 2.1%. Moreover, according to Transparency Internationals 86-country public survey, the Global Corruption Barometer, 75 per cent of Greek people surveyed in June 2010 thought corruption was increasing, and 18 per cent of households who had contact with a public service in the previous 12 months had paid a bribe. Finally, according to the recent OECD Review of Greek public administration, almost one civil servant out of three believes that the administrations principal problem is cronyism (14%), clientelism (10%) or corruption (6%) (OECD, 2011). Yet, grand and petty corruption are closely linked to inequality, both income and opportunity. Additionally, both phenomena are closely associated with political clientelism, black economy and tax evasion. Under these circumstances (black economy) the level of inequality is hard to be captured by official data, such as OECD Gini coefficients, given that the latter are based on official statistical data. Thus, according to OECD Gini coefficients, Greece demonstrates rather moderate levels of inequality and appears to be in a much better position, especially when compared with Portugal and Turkey. However, relatively recent but still unpublished research in economics points to a different direction, namely that the real levels of inequality in Greece were/are -even before the economic crisis- much higher that the OECD
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data show (see Matsaganis & Flevotomou, 2010). In particular, a still unexplored key source of inequality, common in other EU countries as well, is what may be called Greek style dualization (see Palier & Thelen, 2012). It refers to the well-known situation of income/salaries differences/gaps between insiders (in the Greek case primarily well-protected workers of state-owned, utilities-oriented, so called Public Enterprises & Organizations-DEKO-in Greek) and outsiders (i.e. private sector, especially servicesoriented employees). Nonetheless, the unregulated activity of several rent-seeking groups operating in several policy areas, along with the well-established during the whole post-authoritarianism period phenomenon of anomie or lawlessness18 constitute crucial additional factors linked to inequality. In sum, obviously the key feature/development of the ever increasing levels of both corruption and inequality over the last fifteen years or so in Greece has been the congruence of cheap credit since the late 1990s, on the one hand, as a consequence of joining the Eurozone, and weak institutional infrastructure, on the other19. Thus, overall, the almost sudden and unexpected for many shift from incremental adjustment, the dominant process of Greeces adaptation to the EU over the last thirty years, to critical juncture, a situation brought about as a consequence of the international economic crisis of 2008, can only be explained by the incomplete and/or inadequate institutional and policy reforms of the boom years of 1990s-2000s. The lack of social trust and the predominance of the peculiar bonding variety in the Greek case has been a key explanatory variable for
18 It needs to be stressed, however, that anomic behaviour, namely a law-abiding behaviour as long as the law does not impede the pursuing of ones interests otherwise he/she brakes the law, has been a well-established phenomenon in post-authoritarianism Greece and may be associated with the well-known distinction in other countries of Southern and/or CE Europe as well, between formal/official structures and informal norms operating across several institutional settings and areas of public policy (see Paraskevopoulos, 2001, 2005). 19 I am indebted to discussions with Th. Pelagidis for this point. ces papers - open forum # 13, 2012

the weakness of (civil) society and hence of achieving collective action and coalition building around/ in support of the reforms. Simultaneously, this weakness has had an indirect strengthening effect for the position of relatively small and strongly-tied interest groups (the so called syntechnies-in Greek) (see Lavdas, 2005), given that collective action within these groups, based on a variety of selective incentives, is easier to achieve (Olson, 1965). However, given that rent-seeking behaviour has been the dominant feature of these groups, they impose important limitations to the exit and voice options of actors, thus inhibiting policy learning and change in several policy areas (Pelagidis & Mitsopoulos, 2011). Indeed, the low level of social trust and trust in institutions is linked to the absence of weak ties among actors within social and/or policy networks that would facilitate the crucial for the learning process- diffusion of information and knowledge (see Granovetter, 1973). Hence social and policy networks are characterized by the predominance of small, stronglytied and rent-seeking interest groups which block the reform process. On the other hand, the low level of social capital/trust crucially affects the level of other actors participation in policy networks, and hence inhibits the creation of advocacy coalitions and/or issue-specific policy networks, such as epistemic communities and independent think-tanks, that would facilitate policy learning and reform processes in public policy at large (see Jenkins-Smith and Sabatier, 1993; Sabatier, 1999). Thus, while the particular type of bonding-unsocial- capital is considered as having facilitated a spectacular and of particular type economic growth in an era of relatively low transaction costs, during the 1960s and 1970s, it seems that it constitutes an impediment to policy reform and adaptation processes in public policy in contemporary circumstances, characterized by high transaction costs. This becomes particularly evident in the coordination problems, especially in policy implementation, across several institutional settings and/or policy areas in Greece. The next section presents evidence on these problems of the reform process essentially the response to Europeanization- in the competition, environmental and cohesion policy
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Figure 2. Corruption Perceptions and Social Trust (2004)

DK

Li near Regression

0.60

NL

SE FI

% Trust ing

0.40

EE
HU IT SIPT

ES

IE BE

UK DE AT LU

0.20

RO

BG EL CZ SK LV LT
PL

CY

MT FR

4.00

6.00

8.00

Corruption Perception (Transparency International 2004)

Figure 3. Corruption Perceptions and Social Trust (2008-09)

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Figure 4. Economic Inequality and Social Trust (2000s)

Figure 5.

Source: CEC (2010) Measuring the Quality of Government and Subnational Variation, Report for the European Commission Directorate-General Regional Policy.

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Figure 6.

Source: CEC (2010) Measuring the Quality of Government and Subnational Variation, Report for the European Commission Directorate-General Regional Policy.

areas. Instrumental beliefs, normative beliefs and public policy reform Evidence from public policy implementation presented here draws on/refers to crucial areas of EU competition policy (SEM), such as privatization/ liberalization, labour market and pension reforms, as well as to specific areas of environmental policy, such as waste management. It also draws on recent research on cohesion policy.

Single Market (Competition policy): remnants of protectionism vis-a-vis challenges of flexibility and social dumping The area of Single Market or competition
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policy has been one of the most crucial policy areas for Greeces incremental adjustment over the last twenty years or so, given that reforms undertaken in this policy area are considered both as complementary and hence crucial for other policies, such as macroeconomic adjustment and monetary policy, as well as, simultaneously, touching upon sensitive issues for citizens, interest groups and the society as a whole. This is why there have been and still are delays in the transposition of relevant directives and/or the implementation of specific measures, given the informal discretion enjoying member states within the framework of variable geometry, a dominant characteristic of Single Market-related issues (see Moravcsik, 1991, 1998). Nonetheless, main areas, actually battlefields, of concern over this period have been issues of liberalization and/or privatiza19

tion, labour market and pension reforms, while there are still main policy areas, the so called remnants of protectionism, where reforms are yet to be implemented in Greece. Thus, while an ambitious program of privatizations and market liberalization was initiated in the beginning of 1990s by the then New Democracy governments under K. Mitsotakis, it mostly failed to materialize and a less ambitious but much more coherent wave of gradual privatizations put forward by the Simitis governments in late 1990s and early 2000s. Direct and rather extensive privatizations during that era focused primarily on the banking sector, while in other areas of state-owned, primarily utility-oriented companies, privatization took the form of gradual flotation of minority stakes through the stock exchange with the government usually keeping a blocking minority of stakes and having a say about jobs maintenance. Additionally, in several cases the government had also the right to appoint the management of the companies (see Pagoulatos, 2005). Yet, the rather far-reaching privatizations in the banking sector allowed banks to compete at the international level and actually to expand their activities towards the Southeast Europe and Balkan regions through acquisitions. In this respect, the privatization strategy in the banking sector was put forward in light of general concerns about the broader developments facing the entire region of Southeast Europe. Nonetheless, Greece was lagging far behind almost all other countries of South and/or Central-Eastern Europe in terms of revenue from privatizations during the 1990-2000 decade (see Pagoulatos, 2005). Additionally, crucial sectors of the economy, such as power and energy, are still dominated by state-owned companies. Two other crucial policy areas of eventually failed-reforms over this period were the labor market and pension system. These areas had been identified and prioritized even at the beginning of 1990s, but they were integral parts of the Simitis governments reform agenda, especially during his post-2000 second term in office. Ironically enough, both reforms were put forward/initiated by the same minister, a
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devoted modernizer, T. Giannitsis. Thus, with regard to the labor market reform, along with PASOKs priority and commitment to reduce unemployment by creating new jobs, labor market reform would focus on: increasing flexibility on working time; reducing employers national insurance contributions for newly recruited staff; restricting overtime; and relaxing limits on mass redundancies (see Papadimitriou, 2005). On the other hand, given that fragmentation and inequality were considered the dominant characteristics of the Greek pension system, pension reform was focused on rationalizing the fragmented nature of the Pay As You Go (PAYG) system, and altering the strong incentive structure for individuals to obtain pension benefits unrelated to social policy considerations and disproportionate to their contributions (see Tinios, 2005). Yet, both reforms eventually failed to materialize, following strong reactionary attitudes by the two main trade unions, the General Confederation of Workers (GSEE) and the Confederation of Public Sector Workers (ADEDY), while as Featherstone and Tinios (2005) characteristically put it, the key prerequisite missing for success of the pension reform was social trust. Additionally, policy areas untouched up to very recently, the so called remnants of protectionism, include crucial sectors of the economy, such as transport (i.e. cabotage), education (i.e. recognition of professional rights to non-state college graduates), closed professions, such as pharmacists, as well as issues related to the flexibility of labour market and/ or avoiding/tackling social dumping vis-a-vis other member states in the EU. While the former are viewed as crucial challenges facing Greece in relation to the adjustment process, the latter are linked to lack of a common model/regulatory framework at the EU level of governance, in terms of labour market and social protection regimes. Thus, given the crucial role of labour market and social security/ protection regimes within the reorientation of the main development goals and objectives of the Greek economy, as formulated by the National Strategic Reference Framework (NSRF) 2007-2013, toward greater competitiveness through innovation, these is20

sues go beyond the boundaries of social policy and touch upon the main development challenges facing the country and most importantly the achieving of real competitiveness at the global level. As it is obvious, this debate has become much more relevant and timely recently under the pressure of the economic crisis. Overall, institutional weaknesses linked to the formation of both normative and instrumental beliefs on the part of the citizens and/or interest groups, such as trade unions, about the real outcomes of reforms that would facilitate the reform process should be considered as the main obstacles of the reform process in the crucial areas of Single Market and competition policy at large (see Kazakos, 2004, 2010). In particular, the lack of social trust has contributed to the weakness in relation to achieving collective action and coalition building around/ supporting the reforms on the basis of the ambiguity about the possible redistributive effects the proposed reforms might have in the future. On the other hand, the weakness in relation to expertise involvement, in the form of independent think tanks, in such complicated policy areas and the Lisbon agenda at large20 contributed to rather poor sources for the formation of peoples instrumental beliefs about the possible outcome and/or inevitability of these reforms.

Environmental policy (waste management) Environmental policy in general and waste management in particular is a policy area which perfectly reflects the weaknesses of the institutional and policy-making structures related to the low level of social trust/capital. In particular, rent-seeking and anomic behaviour, both consequences of lack of so20 It has to be reminded that think tanks operating in the policy areas affected by the Single Market include the Institute for Economic and Industrial Research (IOBE), a supposed to be semi-independent think tank reflecting views of and partly financed by the Confederation of Greek Industry (SEV) and the Institute of Labour of the General Confederation of Workers (GSEE), the main umbrella organization of private sector workers in Greece. ces papers - open forum # 13, 2012

cial capital and cooperative culture, facilitated partly by institutional deficiencies, such as the lack of a land registry system (see Paraskevopoulos, 2001), has led to crucial environmental problems: namely, the degradation of the built environment in almost all urban areas; the increased levels of air pollution, mainly because of the huge expansion in the use of private cars; and land and water pollution, because of failures in the waste management policy (Paraskevopoulos et.al., 2006). Additionally, the absence of independent think-tanks and subsequently of advocacy coalitions and/or issue networks, accompanied by the rather weak involvement of civil society actors (NGOs), has led to the predominant role of central state actors in the policy process. Thus, the main institution responsible for the formulation and implementation of environmental policy at the national level is the Ministry for the Environment and Climate Change. However, given that policy-making is shared with other -sectoral- Ministries, such as the Ministry of Agriculture, the Ministry of Culture and the Ministry of Commercial Marine etc., and there is lack of effective coordination mechanisms, the Greek environment ministry has been characterized as a weak one, if compared to ministries of other EU member states, such as the Danish and British ones (see Paraskevopoulos et.al., 2006). Hence, the command-and-control type of regulation, which involves limited discretion and flexibility for the administrative actors, is considered the main characteristic of environmental policy in Greece. In that respect, although even the formulation of environmental policy as a coherent and distinct policy area in the second half of the 1980s was strongly influenced by the need for harmonization of national legislation with EU rules, Greece is considered as belonging to the so called latecomers or laggards group of EU member states. Yet, the gradual identification of the fundamental weaknesses of the command-and-control, namely the statist, system of environmental policymaking has led recently to some steps towards increasing flexibility and efficiency in monitoring and inspection procedures, such as the delegation of certain inspection, observation and accreditation func21

tions to some sort independent bodies (experts) or voluntary organizations-NGOs (see Paraskevopoulos et.al., 2006). In the area of waste management, in particular, the lack of an integrated management/co-ordination strategy that would link the national, regional and local levels of government on the one hand, and the intense conflict among social and institutional actors at the regional and local levels about the location of the disposal or recycling areas on the other, the well-known NIMBY syndrome, create conditions of a unregulated policy-making environment, especially at the local level, the main feature of which has been the plethora of illegal and unregulated landfills around the country. It is estimated that there are around 1000 such illegal landfills down from the around 3000 four years ago. Additionally, the institutional infrastructure at the national (central state) level includes the EU directives which are enforced by insufficient trans-ministerial decisions and the law on the protection of the environment, which has a rather declarative character, resulting in a lack of effectiveness of the policy-making process. Thus, although Greece appears to have a rather good record of adopting EU legislation (in fact all the relevant Council Directives -75/442, 91/156, 94/62- have been transposed), there are serious delays in the process (4-6 years), accompanied by lack of thorough examination of the conditions and needs at the national level (e.g. through research and production of reports). It is indicative that there was a significant delay (7 years) in the incorporation of the Packaging Waste Directive (94/62) into the Greek legislation and there are still several steps that have to be taken for its enforcement (e.g. setting up of an organization for alternative waste management schemes). With regard to policy-making structures (policy network) as the case of the region of Attica, which was selected for fieldwork -Social Network Analysis (SNA)- research, reveals, the policy process is dominated by two main groups of actors. The first group comprises the most central actors, which are primarily central state (i.e., Ministry for the Envices papers - open forum # 13, 2012

ronment and Public Works-YPEHODE) and subnational actors, such as local government associations (i.e., ESDKNA TEDKNA), as well as, organizations of interest intermediation (i.e., Technical Chamber of Greece-TEE). The second -peripheral- group comprises primarily policy and/or issue-specific professional associations, civil society organizations and some small private research companies, such as the Hellenic Recovery and Recycling Association-HERRA, the Ecological Recycling Association-ERA and the Hellenic Solid Waste Management AssociationHSWMA). Overall, the structure of the policy network in waste management arguably reflects the pathologies of the pre-existing institutional structure in Greece mentioned above, namely statism, centralized and weak administrative structure, problematic state-society relations, and weakness of civil society, accompanied by some reluctant indications/early signs of institutional innovation such as, some involvement of civil society, experts/professionals in the policy-making process (Paraskevopoulos, et.al., 2006). As far as the implementation of environment/waste management-related EU programmes and initiatives is concerned, the evidence from the implementation of the CSF III- ROP 2000-06 and NSRF 2007-13 in Attica is indicative. In particular, the sub-programmes, corresponding to the strategic objective of improving the environment and quality of life consistently demonstrate the lowest level of both absorption rate and level of physical completion among all the sub-programmes/strategic objectives of the ROPs, while it should be stressed that the general picture emerging from the evaluation regarding the implementation of other sub-programmes of the ROPs was rather positive. Additionally, and most importantly, the evaluation provides evidence about the significant underperformance (low level of accomplishment) of the specific measures related to the waste management tasks of the ROPs, which is attributed to the so called social reactions factor, namely to reactionary attitudes with regard to the location of landfills (the NIMBY syndrome in the field) (see Paraskevopoulos et.al., 2006). As for the actual
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accomplishment of policy objectives, the main waste management-related problem of the Attica, namely the saturation of the main landfill of the region, remains unresolved over the last ten years at least. Finally, as far as the level of recycling is concerned, despite recent increasing trends, it is still well below EU average.

Cohesion Policy Although cohesion policy is a policy area mostly affected by the Europeanization process almost since Greeces accession into the EC/EU, and therefore there is some evidence of incremental policy learning from IMPs (1985-88) to CSFs (19892006) and the NSRF (2007-13), the weaknesses of the domestic institutional infrastructure in general and the low level of social trust in particular are evident in both the level of non-state actors (i.e., civil society, expertise etc.) involvement in policy-making (policy network) and the actual outcomes /accomplishments of policy implementation. Thus, even though the interaction between EU pressures and domestic institutional structures has led to a series of important reforms of the domestic policy-making structure over the last twenty five years or so, involving the strengthening of administrative capacity and increased participation of non-state actors, such as private sector and expertise, in policy-making, this has taken place primarily at the central state level, while the overall response of the domestic institutional structure to the challenges of Europeanization has been rather poor and statism predominates (see Paraskevopoulos, 2001a-d, 2005, 2008; Paraskevopoulos et.al., 2006). With regard to policy structures (policy networks), fieldwork research in the Aegean Islands and Central Macedonia regions, both considered as rather font-runner regions in terms of institutional capacity, demonstrate serious coordination problems among key institutional actors. In particular, the policy networks are characterized by the predominant role of state actors, that is Regional Secretariat and
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ROPs-Managing Authorities), as well as by a rather upgraded role of the sub-regional development agencies, the chambers of commerce and industry and the local associations of municipalities and communes, mainly due to their ex-officio participation in the ROP-Monitoring Committees. Nonetheless, the participation of civil society actors and NGOs is minimal (see Paraskevopoulos, et. al., 2006). It is indicative that in Central Macedonia region which includes the broader Thessaloniki area and is considered as the most dynamic region in the country, there have been identified four groups of actors, that is private interest actors such as chambers of commerce, confederation of industries and so on, research and development and higher education institutions and local governments, which are world apart from each other, demonstrating very low levels of coordination. Overall, the main lessons to be drawn with regard to the policy structures in regional policy are the following: first, the limited institutionalization of the region, despite the directly elected regional governors since 2010; second, the slow pace of the learning process (in terms of institution-building and actors participation); and third, subsequently, the primarily single-loop type of the learning (see Paraskevopoulos, et. al., 2006, Paraskevopoulos, 2008). In relation to the long term evolution/change of cohesion policy, as it has been argued (see Paraskevopoulos C.J., 2008), an overall brief assessment of the changes that have taken place in policy design and implementation between the two programming period CSF III and NSRF in Greece is that the reduced funding provided for the fourth programming period 2007-13 due to the recent enlargements of the EU (i.e. some 20.4 billion) is not the main issue. Indeed, policy orientation and the use of EU funds at large is what matters most for policy implementation in Greece. Thus, Europeanization of policy initiative on the part of the Commission in the form of the Community Strategic Guidelines on Cohesion, and the trend towards sectoralization and simultaneously creeping centralization of cohesion policy are the two most important changes between the current and the previous programming period (2000-06). In
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other words, there has been a shift from the decentralization trend of the 1980s to the re-centralization of 1990s-2000s, with the implicit objective to tackle local clientelism and corruption among other things. This has become evident from the fact that seven out of thirteen Operational Programmes supported by the ERDF and the Cohesion Fund (Competitiveness and Entrepreneurship, Improvement of Accessibility, Digital Convergence and Environment and Sustainable Development) and the ESF (Human resources development, Education & Life-long learning, Improvement of Public and Administration Efficiency) are thematic/Sectoral Operational Programmes (SOPs) that are dealt with at the central state level. Additionally, the emphasis on sustainability and competitiveness, not least as part of the Gothenburg Strategy, following the Community Strategic Guidelines on Cohesion and taking into account domestic specificities, and particularly Greeces weakness in relation to specific indicators of the Lisbon agenda, such as those of the knowledge economy21, the main features of the NSRF are reflected primarily on the reorientation of policy priorities in the Sectoral Operational Programmes (SOPs). Thus, overall, the implementation of the EU structural policy, a crucial policy area for achieving socio-economic cohesion in Greece, seems to suffer from the weaknesses of the institutional infrastructure in general and particularly from the lack of social trust and cooperative culture at large.

Conclusions/discussion This paper has argued that the situation in Greece over the last fifteen years or so, characterized by high levels of corruption and inequality and low levels of social and institutional trust, has constituted a vicious circle that can be conceptualized as a multiple/institutional equilibrium. Thus, the current period of institutional and policy change should be viewed as a critical juncture, that is a period of change brought about by the external shock facing the country due to the economic and political crises over the last two to three years. Yet, the paper provides evidence of the Greek paradox, namely that the vicious circle is a relatively recent phenomenon that can be traced back to the post-authoritarianism and in particular post- EU accession period, the main feature of which, however, has been incremental institutional and policy change. To explain this paradox, the paper points to the congruence of cheap credit, as a result of Greeces accession into the Eurozone, and the weakness of the domestic institutional infrastructure. A key consequence of this weakness has been the predominant role of rent-seeking interest groups in Greeces policy-making structure at the expense of (civil) society. This phenomenon, however, is closely linked to the poor quality of government and to the predominance of particularized over generalized/social trust, which constitutes a key feature of Greeces institutional infrastructure. Moreover, given some recent evidence that, despite the positive effects of immigration on the economy and the society as a whole, ethnic heterogeneity may have negative consequences for social trust and social capital in the short-run (see Putnam 2007); and, given that Greece demonstrates high levels of illegal immigration, the interplay between corruption, ethnic heterogeneity, inequality and low social trust may constitute an additional crucial challenge and an explosive mix for Greeces public policy-making structure, exacerbating the already well-established vicious circle. Within such a policy environment, what
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21 It should be noted that Greece lags behind in relation to most of Lisbon targets, such as job creation and employment rate, particularly for women and older workers, risk-of-poverty rate after social transfers, longterm unemployment rate, greenhouse gas emissions and energy intensity of the economy. Yet, the most striking discrepancy, closely linked to the main goal of achieving a knowledge economy is the case of gross domestic expenditure on R&D, whose current level is 0.57% of GDP in 2006 with the EU27 rate at 1.84% and the EU target for 2010 at 3%. It is just indicative for Greeces position that the R&D expenditure target of 1.5% of GDP has been postponed from 2010 to 2015 (see CEC, 2006, as in Paraskevopoulos, C.J, 2008). ces papers - open forum # 13, 2012

the notion of critical juncture obviously implies in the Greek case is a shift/move from one institutional equilibrium to another22, in other words nonincremental, dramatic and radical institutional and policy change, similar in several respects to the fundamental transformation of Sweden away from corruption in the nineteenth century (see Rothstein, 2012:111-118). This would entail an emphasis on strengthening quality of government and efficiency-related formal and informal institutions through a radical shift from particularistic to universalistic institutions/universalism and impartiality. Such radical institutional change would involve rule of law instead of anomie, meritocracy instead of clientelistic feudalism and nepotism, strengthening property rights and anti-trust legislation instead of favoring clienteles and rent-seeking groups, generalized trust and social capital at large instead of familism. What underlines the magnitude of the task, however, is that emphasis should be placed on informal institutions, especially social norms, rather than on formal ones. Yet, this dramatic shift/change should not be focused merely/directly on targeting corruption; but rather should concentrate on an indirect and broader approach to institutional change, in other words on what Rothstein calls indirect big bang approach (2012: 98-119), focusing on radical change of the countrys institutional infrastructure in an attempt to change culture and social norms. This, however, would require/necessitate the participation/active involvement of the countrys elites and the society as a whole, through massive change in agents/actors beliefs about the necessity for, as well as the fairness and quality of the outcomes of radical reform. In this respect, the combination of persistent external pressure and complementary measures toward enhancing economic development, thus alleviating the effects and intensity of depression, as well as extending the time frame for Greeces adjustment program, should be considered as prerequisites for the success of institutional and policy reforms. Nonetheless, even though the current crisis
22 Im indebted to discussions with Peter Hall for this point. ces papers - open forum # 13, 2012

might be viewed as presenting a window of opportunity for promoting institutional and policy change (see Kingdon, 2003), there are serious doubts about whether institutional and policy reform pursued actually/seemingly imposed- by the Troika (IMF/EU/ ECB) are appropriate for and/or tailored to tackling Greeces structural deficiencies. Additionally, it is doubtful whether any institutional or policy reform can be successful under conditions of severe recession, given the lack of societal support and/or the danger of explosion of society. Existing evidence points towards the negative direction

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ACKNOWLEDGEMENTS
I am indebted to Peter Hall for discussions and comments on the paper; but also for intellectual challenge, support and encouragement. I am also grateful to Dimitri A. Sotiropoulos who reviewed the paper and provided very useful comments on an earlier draft. Finally, I am grateful to Arthur Goldhammer and all colleagues/participants of the Visiting Scholars Seminar on New Research on Europe, a key feature of CESs stimulating academic environment.

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