London, United Kingdom, 23 February 2010
The Economist, Interview with Greek Prime Minister Papandreou
George Papandreou on Greece's woes
We haven't asked for a bailout
The Greek prime minister says he understands the EU's concerns but stresses his country is not asking for handouts
George A. Papandreou: We are not asking for German money. We are asking to be able to obtain loans which we will pay back with interest. We cannot sustain loans with very high interest and be competitive and cut down our deficits also. So that is where we need the support of the Germans, the French and other Europeans.
Bruce Clark: In London, this is the Economist. George Papandreou, the Greek Prime Minister is in the eye of an economic storm, a storm which is threatening to batter the entire Eurozone. In the financial markets his country is perceived as the weak link in the zone. Some investors have been speculating against Greece's capacity to cover its gaping deficits without some extraordinary help. I caught up with Mr. Papandreou as he was passing through London and I began by asking him about the recent statement of support from European partners, in which they said they were willing to keep the eurozone in good shape and to help Greece if necessary. What did he think of those? He thought that the statement was a bit vague, a bit lukewarm:
George A. Papandreou: The exact financial tools may not have been dealt with in that statement and that is understandable because this is, if you like, a test case of how we deal with similar problems in the eurozone. But there is a will, there is a political will, and where there is a political will there is a way. A point which has very often been misunderstood and even misrepresented is that Greece is asking for a bailout.
First of all we have never asked for a bailout, secondly if push comes to shove, we are not asking for money, we are asking to make sure that we can borrow on terms which are basically the same or similar terms to other eurozone or European Union members and not at these very, very high rates which very often have to do with speculation.
Greece has certain structural problems. We have had a high level of corruption, a lot of clientilistic politics. That was sapping a lot of the money and bloating public deficit. When you have clientilism you end up bringing in many more public servants to bring in your voters, to give them appointments. We have already cut that through a system of meritocracy. That was one of our first laws we passed in these last few months.
This in another country would not be the problem. However in Greece this means lots of savings. These are the types of measures we are taking.
And if we are talking about the markets, those that are seriously investing in Greece want to see structural changes which will be sustainable, not simply cutting our deficit for one year and not being able to deal with the underlying structural problems. So my message is we are determined to make major changes. We needed the breathing space to regain credibility and that is where the European Union decision is important.
Bruce Clark: So to get that breathing space, will you perhaps quite soon have to ask your partners for a more concrete display of support?
G. PAPANDREOU: That will only be necessary if the markets don’t respond to two things. One is the programme we are implementing. If it is necessary for us to take new measures, we will do so and there will be an assessment over the next days and weeks on implementation and its effectiveness . So we can then guarantee that we will reach that goal of 4% deficit reduction. At the same time the European Union can provide credibility by saying to the markets 'hands off', if you are going to play around we are here to guarantee that Greece will not have a problem in borrowing.
Bruce Clark: Because many people feel a situation could come about where Greece would nave no choice but to allow either the European Union or even the IMF to virtually take over the economy are you really confident that that can be avoided?
George A. Papandreou: Well, in many ways I have said that when you reach a situation such as the one we have reached, and this is what I have criticized the previous government for, you end up losing your sovereignty in a sense of being able to make decisions on your own as to your economy. This is why we need to take these very difficult and sometimes painful decisions in order to restore the capability of our country to chose its own future, obviously within the framework of sustainable governance and sustainable financial decisions.
That is why we are talking about an economy which has to remodel itself. We are talking about a green economy, about making our tourism a quality tourism, moving again to the Mediterranean Greek diet as a staple for exports, being more competitive there, cutting down bureaucracy so that we can really help investment in Greece, and there are many people that do want to invest in Greece.
So these are areas where I think we will be moving with our structural changes and that will create the confidence that we need in the Greek economy.
Bruce Clark: To tackle something as deep-rooted as corruption you may need to do things which are quite dramatic. Can we expect dramatic measures on that front? Can we expect prosecutions? Can we expect high level investigations to really root out this problem and, if you like, frighten the people who are engaged in corruption?
George A. Papandreou: Yes, we have already taken very important measures, for example, the issue of transparency. The numbers were fudged and the previous government did a terrible thing and there will be a parliamentary examination of this. But at the same time we have made a major change by creating an independent agency for statistics. A eurostat member will be on our board. There will be a second body in parliament which will counter-check that and check the balance on our budget. We are working with international consultants to reshape how we organize our whole budget. Every signature that has to do with any money will be on the web so there will be public scrutiny. We unluckily had to set up a number of parliamentary examining committees to investigate previous scandals, a lot of corruption at the high level. So we are giving a very strong signal that at the top level we won’t allow corruption to be part of political practice.
It is an important signal for example because one of the reasons I believe that we have had higher tax evasion over the last few years is the fact that governance have lacked credibility and people were saying: “Well if that guy up there in government is doing what he is doing, putting his money in tax savings outside of Greece, and he is a Minister, then why should I pay my taxes?” So what we are saying is that we are at the top level being the example of what should be done. Everything has to be transparent in our own finances at the political level and in changing our tax system. We are also saying to our taxpayers: Listen, you can be sure that your money is going to be used in a way which will help the common good, which will help services, whether it is in education, or health or in growth, in infrastructure and it will not be embezzled. That creates a sense of credibility in the tax system and we will cut down tax evasion. Now, if we cut down tax evasion that will be a major blow to the ballooning of the deficit. This is just one area where if we are successful – and I think we will be successful – we can really show major changes.
Bruce Clark: As a follow question, there is a perception among German taxpayers, or north-European taxpayers that they may be asked to fork out for a crisis which is not of their making, that ordinary German workers are suffering in their own way from the crisis, as in the age retirement being raised. The strongest way it has been put is that German workers are going to have to work till they are 67 in order to bail out a Greek public sector where people can retire in their early 50s. Now, that may be a cliché but there is definitely a perception of that in the German electorate. What would your message be to voters and ordinary people in Northern Europe who rightly or wrongly have gained the perception that they are being asked to pay for Greek profligacy when in fact their own situation is not all that easy.
George A. Papandreou: If the situation is portrayed as if they are paying for these reckless Greeks, and I very much understand the feelings of the German worker who is also going through a difficult crisis and is also being asked to pay more for this crisis, but the truth is that we are also making changes which are difficult.
We have talked about raising the pension age, we are revamping the pensions system, we have cut wages in the public sector, we are changing our tax system, so what we are saying is help us make these changes, don't help us avoid these changes. Secondly, we are not asking for German money. We are asking to be able to get loans which we will pay back with interest. We cannot sustain loans with very high interest and be competitive and cut down our deficits also. So that is where we need the support of the Germans, the French and the rest of the European Union.
This gives me the opportunity to send out that message to all the citizens of the European Union, of the type of help we need, it is solidarity not only with the Greeks, it is solidarity also with any country that may be facing this problem. And if course Greece were to have huge problems this could create a contagion in the eurozone and also in other areas of the world. So we will live up to our responsibilities and the European Union must live up to its responsibilities in dealing with speculation and in doing so we can get through this crisis in a positive way and make this crisis an opportunity for Greece but also to show that Europe can play a very important role in the financial world.
Bruce Clark: So Mr. Papandreou is extending an olive branch to the hard pressed citizens of Germany where feelings against the Greeks have been running rather high. But it will probably take deeds as well as words to reassure the skeptical Germans. From London, this is the Economist.