George Papandreou: Greece Had To Make Changes The former leader is from the most powerful family in Greek politics, the third man in his family to be prime minister. But Greece's debt crisis brought down his government, his party and his family's dominant role in running the country.

George Papandreou: Greece Had To Make Changes

George Papandreou: Greece Had To Make Changes

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Former Prime Minister George Papandreou stands by the tough austerity measures that ultimately brought down his government — and ended his family's leading role in Greek politics. Here, the then-leader addresses the Socialist party parliamentary group at the Greek Parliament in Athens in November. Louisa Gouliamaki/AFP/Getty Images hide caption

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Louisa Gouliamaki/AFP/Getty Images

Europe's economic crisis has been driving leaders from power, one after another. Among those toppled was George Papandreou, who stepped down as the prime minister of Greece last November, just two years into his government's four-year term.

Many Greeks have harshly criticized him for agreeing to austerity measures in exchange for billions in international bailout loans. Just before he left office, Papandreou tried to build public support by asking for a referendum on the bailout and, by association, the euro. But the referendum never happened; terrified European Union leaders, as well as many Greeks, rejected that idea.

Recently, the 59-year-old American-born sociologist also stepped down as leader of PASOK, the Socialist party his father founded in 1974, after Greece returned to democracy following seven years of military rule.

The Papandreous, who are a bit like the Kennedys of Greece, have played a leading role in Greek politics for more than half a century. The debt crisis stalled this dynasty, at minimum. But Papandreou says he's at peace with his decisions.

"I was very conscious of the difficulties," he says. "I knew that these would not be popular. And I knew, sooner or later, I would be very much the target."

Ending Financial Dependency

The debt crisis began in late 2009, shortly after Papandreou's government was sworn in after winning a landslide election. Papandreou says his government discovered a huge, undeclared debt left by the previous administration, led by the main opposition New Democracy Party. He says the country's deficit was more than double what New Democracy had reported.

After Papandreou's government revealed the debt, the markets went haywire. Greece could no longer borrow money and teetered on the verge of bankruptcy. That's when Papandreou asked for some $150 billion in bailout loans.

The money came from the European Union, the European Central Bank and the International Monetary Fund. Greeks call these international lenders "the troika."

But the troika's cash came with very tough conditions — including severe wage and pension cuts, and tax hikes. The cuts have been tremendously painful for Greeks. The unemployment rate is now 21 percent — more than double what it was in 2009.

Angry anti-austerity protesters often march to Athens' Syntagma Square, which is across the street from Parliament. They say Papandreou gave the troika too much power. But Papandreou says the country had already lost much of its sovereignty before 2010.

"Yes, we have lost a lot of our capability to take autonomous decisions, but that wasn't because of the last two years. That is because of the dependence we had on borrowing money to sustain an economy that was not viable," he says.

"We became dependent because there's this big umbilical cord, whether it was European funds, whether it was the capacity of the euro to give us cheap money, whether it was the Greek state that was not helping the competitive economy," he says. "So we were not building up our own strengths."

Papandreou says he wanted to remake the state by tackling corruption.

"Greece has great strengths, but much of this potential has been wasted," he says. "That's because of a wider political system, but also because of a lack of an institutional framework. [There's also] a lack of transparency, a waste of resources. So we needed to change."

'Monster' More Powerful Than Government

Greeks cringed when Papandreou talked about corruption to the European Union. Europe's populist politicians still ridicule Greeks as lazy and hopeless.

But EU leaders like Jean-Claude Juncker, the Luxembourg prime minister who leads the Eurogroup, welcomed Papandreou's straight talk.

"I think he was right," Juncker recently told Greek journalist Alexis Papachelas. "And since then all kinds of initiatives have been taken to fight corruption. [That] has to be welcomed, of course."

Papandreou had specific initiatives in mind, such as reforming the tax system and putting government budgets online.

But the troika wanted much more, including downsizing Greece's huge and inefficient public sector.

That's where the former prime minister ran into resistance, says economist Manos Matsaganis. PASOK and New Democracy have long used the public sector to give patronage jobs to supporters, Matsaganis says.

"It was as if the troika asked the government to kill its own child, and of course, it couldn't," he says. "It didn't even know how to do it. So the government created a monster that was more powerful than the government itself."

Need For United European Effort

But Papandreou says his government did make progress on reforms. He cites a recent report by the Organization for Economic Cooperation and Development that gives Greece top marks for its speed on making structural reforms.

"Very often, people will come out and say, 'Greeks aren't doing things, Greeks aren't making changes, there's no reform,' " he says. "That is hogwash. We have made a huge effort. The Greek people have made a huge effort."

And Papandreou says this effort is going to pay off, despite the pain the Greeks are sure to feel over the next few years. He says the European Union must avoid scapegoating and stick together to survive.

"Together we stand, divided we fall," Papandreou says. "We in Europe have great capacities. If you put all the European countries together, we are the biggest economy in the world. An economy like Greece's economy, which is 2 to 3 percent of the total GDP of the European Union, [that] can't be a problem we can't solve."

It's unclear who will be at the EU table for Greece after early elections this weekend. Polls show a country so divided that no party will get enough votes to govern.

Papandreou will be in the next Parliament. As a former prime minister, he's guaranteed a seat by law. He will represent Achaia, the district in southern Greece from which his famous family hails.