Washington, USA, 8 March 2010
Interview by Greek Prime Minister George Papandreou on " National Public Radio – “All Things Considered” " with Robert Siegel
Greek Prime Minister Seeks Curbs On Speculators
But he said the economic crisis was an opportunity for Europe to strengthen cordination.
Robert Siegel: The Greek Prime Minister, George Papandreou, who incidentally was raised in this country, is in Washington and he joins us now. Welcome to the program.
George A. Papandreou: Thank you very much.
Robert Siegel: Prime Minister Papandreou, you called this a crisis in global governance. Is it at least equally a crisis in your country’s governance, in Greece’s failure to balance its books?
George A. Papandreou: Yes, it is. And we fully take the responsibility for the problems we have in Greece.
I have just been elected just a few months ago, on a new mandate for change, and change we must in many areas, in governance particularly. And I think that when we talk about financial problems, underlying the financial problems are really problems of governance, of how we have handled our economy, whether there is transparency, whether we have the right rules and regulations and checks and balances.
This goes for Greece, but it goes for the world also.
Robert Siegel: You took office back in October. And you have said that only then did you discover that Greece’s deficit was actually double what you had been told. I wonder if you could take us back to that moment, when you first realized the size of the mess that you had inherited.
George A. Papandreou: Yes, it was a shock. I did realize that we were not doing well, as even during the campaign I had been asking the former prime minister, then Prime Minister Karamanlis, about the deficit and I wasn’t getting a straight answer.
And then when we did come into government, we found that the deficit was – and the debt, of course – but a deficit which was very high, and therefore we had a huge problem to solve.
What happened of course is that the international markets were very jittery and wanted to see immediate results, and that’s why we had to bring in an austerity program, which is obviously hurting, but it’s necessary as the sort of bitter medicine, in order that we gain the time to make the more radical or more deep changes in our administration and the way we run our country.
Robert Siegel: In a speech you made at the Brookings Institution in Washington today, you spoke of, and I quote, “malicious rumors, endlessly repeated and tactically amplified, rumors that have driven up Greece’s cost of borrowing money.” Your example was: If Greece borrows EUR5 billion for five years, you pay about EUR725 million more in interest than Germany does. First, who is repeating and amplifying those malicious rumors about Greece?
George A. Papandreou: Well, one of the problems with the markets is that there is no real face on the markets. But there are speculators, obviously, and that’s not one of my revelations, although it was a shock to actually feel that Greece has become the target of a lot of speculation.
There are these CDSs, these default swaps, where you can insure your neighbor’s house and if it burns down you get the money.
Robert Siegel: These are credit default swaps? Speculators are betting on a Greek default, and they stand to make money if you do.
George A. Papandreou: That’s right. And therefore what we had in the press in many parts of the world was that Greece was asking for a bailout, which we were not, Greece is going to default, which we would not. And that of course could have become a self-fulfilling prophecy.
Now, what we have done is we have taken these very stringent measures and given a positive signal to the healthy part of the world market, and at the same time have had the support of our partners in the European Union. We have just had the support of Hillary Clinton.
And we are also saying, and not only Greece but a number of other Europeans we are coordinating with – Angela Merkel the Chancellor of Germany, Nicolas Sarkozy the President of France, others like Gordon Brown, Jose Luis Zapatero – that we will be taking action to see how we can regulate this world market so that speculation won’t be hitting otherwise healthy economies.
Robert Siegel: Would you urge banning what they call naked credit default swaps, that is bets by people who themselves are not buying Greek debt but who are betting on a default?
George A. Papandreou: Well, let me put it this way. I don’t want to be quoted with making a specific kind of proposal, but yes, if that is necessary in order to move on to a healthier market, then yes, I wouldn’t be against that.
Robert Siegel: You said this about the gap between what Greece pays in interest and what Germany pays in interest. When you have a common currency, you said, that simply is not viable. One solution, I guess, would be the American solution: You say you have a common currency; then you have to have a common fiscal policy. Greece would have to balance its budget the way an American state would have to balance its budget, not the way a sovereign country might choose to or not choose to. Is that a reasonable future for the eurozone?
George A. Papandreou: Well, that is very much the heart of the discussion which is going on in Europe right now. We term this the need for stronger financial governance, economic governance, in the European Union. And I think the Greek case has highlighted this debate, and I would hope that from this debate and from this problem we actually use this as an opportunity to strengthen more coordination in the eurozone and in the European Union.
There are also a number of other ideas that have come out of this, for example an EMF – let there be a European Monetary Fund or a guarantee or a Eurobond, as per let’s say federal bonds or whatever, where the European Union would basically be borrowing on behalf of the member states.
So these are different ideas which obviously mean much closer fiscal, economic governance and cooperation. And I believe that you will be seeing more of that as the months and the years go by.
Robert Siegel: Prime Minister Papandreou, thank you very much.
George A. Papandreou: Thank you very much.
Robert Siegel: Prime Minister George Papandreou of Greece, who was speaking to us today from Washington DC.