21 September 2010Office of the Prime Minister —
Bloomberg Interview with Betty Liu
Matt Miller: Bloomberg’s Betty Liu spoke with Prime Minister Papandreou just a short time ago at the New York Stock Exchange about the health of the Greek economy. Betty asked him why the markets aren’t convinced that Greece is doing what it needs to get back on track.
George A. Papandreou : I think it’s credibility on the one hand, but I think we’re building that. But I think there’s another thing, that yes, the markets are risk-averse right now around the world. There is a difficult situation. They are not really sure if we are moving out of recession as quickly as we should, whether there might be a double dip. These are things are on the minds, I think, of the markets.
Betty Liu: Or even perhaps a prolonged recession in Greece. Do you think that’s a picture that’s likely?
George A. Papandreou: Well, we know that as far as Greece is concerned – I mean there is an international situation, and I think that there is some new optimism, but I don’t want to be a predictor of what may happen in the world. But obviously this is something which is on the minds of investors worldwide.
As far as recession is concerned in Greece, yes, we do have recession. It’s negative 4% in Greece. But that was in the plan; we knew that. We knew that these measures in fact would be bringing us 4% minus this year. But the structural changes have created a positive shock, if you like, a lot of pain, yes, for all of us, but a positive shock for the economy, a supply shock, if you like, which we believe next year will show the beginning of a more dynamic competitive economy.
Betty Liu: You mean so that you might come out of recession next year?
George A. Papandreou: That’s right. I think by the end of 2011, according to the program, if everything goes well, we’ll be seeing growth.
Betty Liu: Nouriel Roubini, who I am sure you are familiar with his work, says that Greece is basically insolvent. Why is he wrong?
George A. Papandreou: It’s very difficult to contradict a prophet, if you like, but the difference is we know where we were, we know where we are, and we know what we are going to do. And we are doing it.
Betty Liu: But do you dispute his statement that Greece is insolvent?
George A. Papandreou: We are not going to default. And we have done everything we have done, not only us, not only Greece but the European Union itself, and the IMF of course, have basically given us a vote of confidence and we ourselves are following the targets, and we are doing it, in fact, not to default.
If we were going to default, it would have happened. We would have decided that many months ago.
We decided not to do that, for a number of reasons. We think it would be wrong for the Greek economy, it would be wrong for the European economy, it would make things worse in the end. And that’s why we are taking the pain to make these structural reforms, and we are on target.
Betty Liu: Now, why are you so against restructuring your debt? Because I know you have been quoted before as saying it would be a tragedy for Greece, and yet people like Roubini and others say that’s inevitable; you are going to have to restructure your debt. Why are you so against it?
George A. Papandreou: Well, default would be a tragedy, and it would be first of all because we would not gain, as you said earlier, the confidence of markets, maybe for many years. Obviously it would be a difficult problem for not only the Greek banks but for European banks. It could have a contagion effect in the European Union. And in the end it would also be creating much more pain for the people in Greece.
So for all these reasons we have decided to have a very difficult program. It’s one of the most difficult programs, I think, that any country has followed. But we are doing it. We are making it. We are on target. And that’s what gives not only me but the Greek people confidence that we can do it.
Betty Liu: But some would say that the contagion effect is already in place, whether or not you default. And some would say that the benefits of restructuring or of defaulting is that you are able to then put in place the real measures that you would need, that are unpopular with voters, but the real measures to get Greece back on track. Why don’t you entertain even that idea? I mean there is a valid point there, that it could help you be forced to make those difficult decisions.
George A. Papandreou: First of all, we did contain contagion. There was a point where we were seeing this problem creating problems in the whole eurozone and then of course in the international financial world, the world economy. We contained that with this very strong, if you like, package and intervention.
Secondly, we are making real changes. We are making the most painful changes. We don’t need a default to convince anyone that we are going to make these changes.
Announcer: That was Bloomberg’s Betty Liu with Greek Prime Minister George Papandreou on the floor of the New York Stock Exchange just moments ago.