IN ATHENS, NEW BEGINNINGS / THE NEW YORK TIMES OP EDITORIAL ( HIGHLY RECOMMENDED READING )

October 26, 2010

In Athens, New Beginnings

By JEFFREY SACHS


ATHENS — I’ve just attended a remarkable gathering here, which displayed politics at its best. Launching a new Mediterranean Climate Change Initiative, the leaders of Greece, Turkey and their neighbors pledged to surmount the current crisis the right way: by investing together in the long-term health of the Mediterranean economy and environment.


Greece might seem an unlikely leader of such a long-term strategy. The country spent much of the past decade racking up enormous debts and using the services of investment banks such as Goldman Sachs to keep the growing debt burden hidden and off the books.


The government of Prime Minister George Papandreou came into office late last year just as the financial subterfuge was being exposed — revelations that fed a vertiginous collapse of the country’s creditworthiness.


Pundits declared early this year that Greece was finished, a breath away from financial perdition and default. Papandreou, a soft-spoken intellectual scion of Greece’s leading political family, was having none of it.


In a country known for tax evasion and phantom bureaucrats collecting public salaries, the new government launched tough austerity measures light years away from the glib populism of Greece’s own past and America’s present. Since then, general strikes have come and gone. Papandreou’s soft resolve has won the support of the majority of the population, despite the undoubted pain of the adjustments ahead.


Yet Papandreou has done something even more difficult and remarkable. He has insisted that Greece look decades ahead to protect the fragile Mediterranean environment while building skills and technologies for a new era. His Mediterranean colleagues have joined Greece in that vision.


How easy it would have been for the leaders of Greece and Turkey to stoke traditional tensions to distract their citizens from the current economic woes. Yet Panpandreou and Turkey’s prime minister, Recep Tayyip Erdogan, are doing the opposite.


All of us at the conference here felt a sense of history as we watched Papandreou and Erdogan spend a day together on constructive problem-solving on a range of issues including economic recovery, energy security, environmental management and migration.


The stakes are extraordinarily high. The future hinges not only the ability of Greece, Turkey and other countries to escape the deep economic crisis but also upon their ability to respond effectively to global climate change. The Mediterranean region is likely to be hard hit; it is already dry and likely to get drier as the planet warms. Health, food production and tourism are all at risk.


On the other hand, the region is home to vast and largely untapped resources, starting with the region’s magnificent blue skies, signifying the vast potential for solar power. Financiers and solar power companies were in ample attendance in Athens.


Other investments — in high-end tourism, high-value agriculture, information technology, and modernized shipping services — are in the works.


Some will say that a Mediterranean initiative merely papers over the obvious: that Greece and some of its neighbors are flat-out broke, and that financial default still lies ahead. They claim that Greece is only in early days of austerity, and that as the pain mounts, so too will the unrest.


Such views discount the capacity of countries to adjust to massive change when the needs are real and the political leadership is wise. Papandreou has done extremely well to avoid the assertions of the inevitability of failure.


It is true that Greece will have to sustain tough economic adjustments for many years, and that the national will might falter. But there are certain cards up the country’s sleeve.


First, Greece’s debts are more manageable than they seem because Greece’s hidden economy, and the hidden wealth of the elites, are also much greater than they seem. Money has been salted away for years in hidden bank balances. If that wealth can now be tapped through honest work of the tax authorities, the budget will be brighter than appears possible today.


Second, and even more important, is the growing role of Greece in the wider world economy. Greece’s new rapprochement with Turkey is not only diplomatic, but increasingly economic as well. Two-way trade is on the rise, as are regional infrastructure projects. Greece has also branched out to Bulgaria, North Africa and other neighbors. With rising demand coming from the Middle East too, economic recovery could yield some pleasant surprises.


The newest key player is the one halfway around the world. As in so many other parts of the world, China is suddenly playing a new, important and perhaps even decisive role. Greece is angling to become China’s shipping hub in Europe via a bold Chinese investment at the port of Piraeus.


Prime Minister Wen Jiabao recently visited, and quickly put China’s stamp of approval on Greece’s efforts. Don’t worry, he said, China will hold Greece’s bonds and can expand its bond purchases in the future if necessary. Good news at the right time.


Other regions should find their way to sustainable recovery along the same path. As with the new beginnings in Greece and Turkey, so too should India and Pakistan, China and the United States, and others as well, temper their rivalries, cut arms spending, and raise cooperation in clean energy and the environment. If the new cooperation in the Mediterranean comes to fruition, that ancient cradle of civilization will offer a global lesson for 21st century renewal and survival.


Jeffrey Sachs is director of the Earth Institute at Columbia University and author, most recently, of “Common Wealth.”