Davos, Switzerland, 27 January 2011
Interview of Greek Prime Minister George A. Papandreou on the American television network CNBC with Geoff Cutmore
Geoff Cutmore: Well, let’s move our conversation here in Davos on Closing Bell. I am pleased to welcome George Papandreou, the Greek Prime Minister, to our position. Thank you, sir, for stopping by here. Look, I want to ask you this question about the extension of Greek debt. There seems to be a little bit of confusion about what exactly the official government policy is on this, and whether there should be some kind of restructuring, or at least an extension of the payment terms post the expiry of the EU/IMF plan.
George A. Papandreou: Good question. Very quickly, first of all we are on track with our programme, and that is what we are focusing on.
We believe that, with the structural changes we are making – and we are making huge changes: opening up professions, the pension system, labour market, the tax system; we have made these changes – this will give us competitiveness and growth, and at the same time the fiscal responsibility in cutting down our deficit, cut down beyond 6% of GDP this year; next year the same, we’ll be cutting down around 2%.
So we are in a very good, I would say, track, and this is recognised by all, as far as what our programme is. Now, this is a roadmap of being able to deal with the debt problem.
What has been discussed is not restructuring, but in fact the lengthening of the repayment, as you said, of the EU/IMF loan. That would be a positive development. I think the markets would be welcoming this, because, if you look at the debt over the next 5-6-7 years, there is sort of a hump there of a repayment. And if we basically have the same terms as Ireland has gotten, then this would be an evening out and would really make this much more…
Geoff Cutmore: So how far would the repayment be extended out, in real terms?
George A. Papandreou: The terms I think would be, rather than in three years, something like 7-8 years, which is the Irish right now type of loan which they have gotten.
Geoff Cutmore: What do you think your likelihood is of coming back into the capital markets this year to raise money?
George A. Papandreou: Well, first of all we have seen over the last few months that, as we were doing much better, the spreads were going down. But then, with the Irish problem and the sense of insecurity in the markets about where the eurozone was going, spreads went up again.
So I feel that this is not simply a Greek problem, and it’s not simply a Greek problem. It’s a question of how we get our house together at the European level.
I am more optimistic than I was a few months ago about not only the will, but actually look at the tools and the rules of setting up the EFSF, of creating a more robust fund but also a more flexible one, to be able to deal with some of the debt problems, the bond markets.
This I think will calm the markets, and if the markets are calmer I think we can even see in 2011 coming back to the markets.
Geoff Cutmore: OK, but no specific dates at this point. It’s based on the market.
George A. Papandreou: It was based on the market.
Geoff Cutmore: So what do you think sovereign debt expectations are like in the market at this point? Do you think that trend of tighter spreads can continue?
George A. Papandreou: I think that as the markets see that Europe as a collective is taking control of the situation and dealing with some of the problems in the market, and the bonds and the debt and so on, then the markets will calm down, be much more open, I think.
And I think they will appreciate, as they do appreciate – even the rating agencies, which have downgraded a number of countries and sometimes Greece also, are saying that we are doing a very good job at our level, but that there is a wider systemic issue that we have to deal with.
That, I think, is what Europe is now challenged to do. I hope that the Greek crisis and the Irish crisis also becomes an opportunity for Europe.
Geoff Cutmore: I’ve listened to everything you have said here, but it somehow doesn’t seem to match the news flow, in terms of the unity of position, particularly on the issue of expanding the EFSF. Now, I think you want more flexibility and you want the fund to be expanded. But I’m not sure that that is the same message we are getting from Germany, or France, at this point.
George A. Papandreou: Well, I think we have to see the two sides of an agreement. And I think all sides have a validity.
And the German side is saying: We must make sure that countries that have problems, or countries that may have problems in the future, have a mechanism to make sure that we have a fiscal responsibility. We are all in favour of that.
Even if, for example, Greece had zero debt right now, we would still have to make the changes, to make Greece a competitive country, build on our comparative advantages, create a green economy, growth, and so on.
And this is what I think is sustaining the support we have in Greece for our programme, because people are not saying, “You are dealing with the debt. Great!” They are saying, “We are actually changing Greece.” And that is the hope.
And I think this is what the Germans are also asking, and in that sense we agree. But that also means that we also have deal with the wider systemic problem, and I think the Germans are really seriously thinking about that – not only the Germans, the French also and others.
So I think that there is a convergence. I can’t say that this is for sure. We will have two summits coming up in February and in March, and I do hope that this is a great opportunity to make Europe a much more credible and sustainable project.
Geoff Cutmore: I am interested: You talked about Greece’s comparative advantage, because constantly financial market analysts complain that they don’t see what Greece’s comparative advantage is, in terms of European competitiveness. Could you very briefly explain what you think Greece can be a leader in, from here, and how you can re-invigorate the economy without the benefit of a currency that you could depreciate?
George A. Papandreou: Well, first of all we have made types of measures in Greece which have really been able to cut down our deficit. But it’s not only that. There are structural measures where we will be helping certain sectors of the economy which we think have a comparative advantage.
I’ll give you an example: green energy. We are now opening up an investment, where we will have the biggest photovoltaic centre in the world, 200 megawatts up in Northern Greece. There is a great interest for investment there. So green energy is a major area.
High-quality tourism. This is something where we were competitive but not as competitive as we could be. There is a new interest in tourism for Greece. Our Mediterranean or Cretan or Greek diet, where our agriculture was not competitive – now it’s becoming more competitive; we’re investing in that.
Opening up the professions, and innovation and so on: I think this is going to be also an area where people are going to be coming. We are cutting down bureaucracy to investment.
Actually, one of the first times is in the last quarter we have had an increase of exports by 25%. And let’s not forget also that Greece is the number one shipping country in the world.
Now, if you combine this and if we use these advantages, yes, Greece can be competitive and is a big asset for the eurozone.
Geoff Cutmore: The conversations here have focused a lot, I think, on leadership. And some big questions have been asked on a number of policy areas about whether that leadership has failed and whether multilateral organisations, like the G20, the G7, the G8, actually are not working any longer. One person I was speaking with yesterday was talking about a G zero. There is nothing left here, in terms of a multilateral approach to the problems that are facing the world. Do you think in a way Greece has been, in part, a victim of that lack of leadership that we’re seeing at the moment? And how do you believe the world comes back together on some of these issues, or at least on these multilateral platforms?
George A. Papandreou: This is a big question.
I think Greece is not the only one. Greece is symptomatic of some of the problems, that we need to pool our resources, work together and create governance structures, for example in the European Union where not only countries but also at the European level there are transparency, regulation, and so on.
This is a major question. For climate change, for energy, for food security, for migration, for stimulating our economy, for competitiveness.
Geoff Cutmore: What’s the solution, though?
George A. Papandreou: Well, the solution is we are a very interdependent economy, a globalised economy.
We have to sit down – this is one of the major issues now in Davos, is governance – we have to look at the global governance structures. We have to look at the issues of equity and justice, because that is the only thing that will keep our societies glued together.
In Greece, if we didn’t talk about justice at the same time as of being more robust and more fiscally responsible, these two things wouldn’t be able to move forward.
And I would say also green growth. These are the major things for a new environment.
So this is the big challenge that humanity has. Yes, there is a question of leadership and governance. This will be, I think, the challenge for the next generation.
Geoff Cutmore: OK, it’s been a pleasure talking with you once again, sir. Thank you very much for coming here. George Papandreou, the Greek Prime Minister.