It is a great pleasure to welcome you on behalf of the Greek government and the Hellenic Presidency of the Council of the European Union. I want to congratulate, in your person, Mr. President, Group III of the European Economic and Social Committee on the excellent idea of holding – here in Athens, during the Hellenic Presidency – a meeting on such a critical and sensitive issue.
We are experiencing austerity in Greece in an extreme manner, and what Greek society longs for, like every European society, is to get past austerity policies and return to growth, so that the socio-economic repercussions of the crisis can be confronted.
So you will allow me, in lieu of other observations, to share a few thoughts from my own personal experience during the difficult years of the crisis, because Greece really is functioning as a laboratory, not only for the crisis, but also for the recovery we are all pursuing and a return to positive growth rates. The return of normalcy.
As is now obvious to everyone, the eurozone was designed for normal conditions of temperature and pressure. The basic characteristic of the eurozone was the inability to foresee, to avert, and, ultimately, to manage the crisis as it evolved on a global level from 2007 on.
These planning, structural problems of the eurozone and of the European Union more generally resulted – when the crisis broke out in late 2009-early 2010, with Greece at the epicenter – in a configuration that was not provided for institutionally by the treaties, by community law: the configuration of the troika, as the IMF was called upon to take on a very important role in the heart of the European Union and the eurozone.
The fact that the European Union, the fact that the powerful group of the member states of the eurozone, was in a situation where it needed to have recourse to a mechanism like the IMF, seeking not so much capital as know-how, points up the problems that existed in the eurozone’s institutional architecture and political thinking.
Moreover, to be frank we have to stress that this fact also points to a lack of confidence prevailing in many governments at the time: lack of confidence in the role and capabilities of the European Union. So we arrived at the configuration of the memorandum; that is, of the political, economic and administrative conditions that accompany the provision of assistance to Greece and other countries. And we arrived at the troika, as an oversight configuration that greatly exceeds the Stability Pact and the institutional mechanisms provided for by the treaties.
So the truth is that, during these four difficult years, European solidarity with countries like Greece, Portugal, Ireland and Spain was shown at a very high economic level. Economically, this European solidarity is unprecedented. The loan to Greece will exceed €240 billion. The nominal haircut of the debt comes to €125 billion, and the European Central Bank’s show of support for Greek banks ranges between 70 and 150 billion euros.
If we compare these sums to the financial needs of Ukraine, which needs some €35 billion to deal with its crisis, we understand the magnitude of the Greek problem, the eurozone’s problem, as well as the size of the Greek economy and the other eurozone economies in comparison to other regions and countries of the world.
So European solidarity is at a very high level in economic terms, but at the same time it is accompanied by political outlooks and political conditions that have a great social, development and political cost for the countries in these programmes.
From the outset, there were very serious planning problems in the support programmes, especially in the case of Greece. The IMF now admits this, officially. There were decisions that needed to be taken, but they were late in coming and incomplete, and they could not be fully implemented.
There were and are unfair stereotypes regarding Greece and the other countries of the South, the periphery. There is an unfair international debate that has been fueled for some time now by our inability, the European inability, to react in an organized, systematic, definitive, effective manner.
And of course, to get to the issues of particular interest to the European Economic and Social Committee, as an EU institutional organ, the truth is, we were often called upon to deal with demands from our partners and lenders; troika demands that conflict with European community law, with the community acquis, with the perception of the European social state, with rules or directives of soft law deriving from the European Union, from the Council of Europe, from the International Labour Organization.
The negotiations were never easy, because even things that were self-evident, things that were obvious, like the implementation of the community acquis, had to be negotiated and reconfirmed via great efforts and after great delays
The social repercussions are manifest. In recent years, we have had a cumulative recession greater than that projected by the planners of the programme: a recession of about 25% of GDP.
There is a reduction in disposable income, estimated by the IMF at about 11%. But the truth is, there are social groups that have lost 35% of their disposable income.
We have new forms of poverty, which are extremely menacing. We have major structural changes that have altered the job market and the insurance system. But where we do away with entanglements, unjust privileges – where we clash with old guild or statist outlooks – side by side we have just demands, reasonable claims of citizens or social groups seeking the obvious, seeking the implementation of the community acquis.
It is exceedingly difficult to simultaneously implement an extremely ambitious fiscal adjustment programme – implementing austerity measures, income reduction measures, tax increases – and at the same time implement an equally ambitious structural adaptation programme, major institutional changes for strengthening competitiveness, for deregulating professions and opening up the market. Because when society is facing austerity measures, it cannot bear – as it would do under other circumstances – ambitious and necessary policies for structural changes and modernization of public administration and the conditions under which the market itself functions.
Nevertheless, Greece, as you know, is now – four years later – showing impressive results, thanks to the sacrifices of the Greek people. We started with a primary deficit, without taking into account the cost of servicing the debt, of over 12% of GDP in 2009, and we have now achieved a primary surplus of over 1.5% of GDP.
This means that, in terms of primary deficit/primary surplus, we have achieved a fiscal adjustment that, in absolute numbers, comes to about €28 billion, about 13.5 GDP points.
But to achieve this, the country took over €80 billion in measures. So you can see how much work was required, how many sacrifices had to be made in order to achieve this unprecedented, impressive fiscal adjustment.
Now, even Greece’s fiscal deficit – including the cost of servicing the public debt, precisely because we succeeded in having it restructured, reduced, because we managed to secure a significant reduction in interest rates and servicing costs – is under the 3% (of GDP) ceiling, at 2.1%.
And despite the criticism being leveled at the country, or the doubts that exist, the structural changes in major sectors are clearly visible. The most impressive is the size of the state, when measured as the amount of public expenditure for the needs of funding the state and the wider public sector.
These expenditures in Greece are now at about 35% of GDP. From this perspective, Greece is one of the smallest states in the European Union and the eurozone.
We are now receiving you in Athens, in Greece, two days after the agreement with the troika, with our institutional partners, on our entry into the final stage of the programme, which will take us to a definitive exit from the crisis and the memorandum. It leads us to our return to the normalcy of a European country, a member state of the eurozone that is institutionally equal. And, for better or for worse, this institutional equality, the sovereignty of states, is measured to a great extent by the ability to participate in the international markets and borrow on normal terms on the international markets.
We are at a very important point right now. It is truly a turning-point, because it has now been definitively accepted by our partners – the eurozone, the European Central Bank, the European Commission, the IMF – that Greece neither needs nor can take new fiscal austerity measures.
This is a very important message for the Greek people, as well as for all European societies. Thanks to the large primary surplus, which we are using, to a great extent, to serve the major goals of the programme, we can gradually start to redress the injustices and strengthen the measures for preserving social cohesion, helping vulnerable social groups: families without income, with a lot of children; uninsured elderly persons; long-term unemployed that don’t have the necessary support of the state; the homeless. We can start to deal with the phenomenon of destitution. At the same time, the Greek banking system, which is fully recapitalized, strong, now has the obligation to help entrepreneurship, employment, the real economy.
And we know that we need to turn our attention to the completion of the structural changes, mainly with regard to public administration, and the deregulation of the market, so that they can function under conditions of full competitiveness.
Our next steps have already been determined by our agreement with our partners. The Greek public debt has many special characteristics. 80% of this debt is held by our institutional partners, by the countries of the eurozone, by the European Central Bank, the ESM and the IMF. Only 20% of the debt is negotiable on the international markets. It is extremely well structured. Klaus Regling, the Managing Director of the European Stability Mechanism – with whom we signed the major loan for Greece, when I was Finance Minister – has repeatedly explained why the Greek public debt is fully sustainable and smaller in size than the public debts of many other EU member states, when we look at it in terms of net present value.
Greece is ready to return to the markets. In reality, it never left the markets. It is always present through Greek treasury bills, but we will return in the form of other products, because we have the potential to do this through the institutional framework in effect.
Thus, the fiscal and financial conditions for recovery have been shaped. We didn’t have the option of following another plan. Our institutional partners, the institutional organs of the European Union, imposed this plan on us. They may have miscalculated the consequences – particularly the social and development consequences – but we didn’t have a better solution under the given conditions, which were conditions of extreme crisis and risk of a disorderly default.
Of course, what is most urgent, what is always our top priority, is the measures for containing unemployment. The measures for preserving social cohesion. But we will not get results on the number-one issue – which is unemployment, and youth unemployment in particular – if the atmosphere does not change; if there isn’t security and optimism. Because it is only through the growth of entrepreneurship, investments on all levels of businesses, domestic investments – Greek and foreign – that we will be able to get where we want go: strong growth rates and the creation of new jobs.
We are saying this a few weeks before the elections for the new European Parliament. Our big question is whether there can be a new narrative for Europe. That is, whether there can be a response to the societies that identify Europe with austerity policies, with recession and unemployment, because there are such societies in Europe.
The young generation of European citizens fears that it will not be the generation of rights, but a generation that will not find a place in the sun of the European continent.
The versions of Euroscepticism are multiplying. We have radical, supposedly leftist, Euroscepticism, which, in the end, comes down to being statism and nationalism, because we very often go from Euroscepticism to economic nationalism. We have national strategies that are always present, regardless of what government is in power in a given state.
The debate on the principle of subsidiarity is starting again on odd terms, because the easy answer to the question of whether we want less Europe or more Europe is, we want a better Europe. But how do you work this out in greater detail when you are faced with certain mindsets.
In fact, we do want another Europe: a Europe of values, a Europe with a historical conscience, a sensitive Europe, a pluralistic Europe, a Europe that is the best region in the world. But Europe is shrinking in population, losing competitiveness points. It is no longer the center of the world.
The prevailing outlook is that we will reach this other Europe via three main steps that are being taken. One is the strengthening of competitiveness in the services and industry sectors. Today, the European Council is discussing Europe’s industrial competitiveness. The previous European Council discussed competitiveness in the services sector. But all of these proposals, which are summarized in the Stability and Growth Pact, are conventional. They do not comprise an attractive, innovative approach that we can present to our peoples, to our citizens.
The second step is the Banking Union, which is very important. However, we are talking about the single supervisory mechanism and the single resolution mechanism, but we are not talking about the single deposit guarantee scheme or single interest rates for loans to businesses. An SME in Greece borrows at an interest rate 7% higher than a German business. So we have stark differences in the cost of borrowing, as well as in the cost of energy.
And of course the third step is the general deepening of economic governance, through the various mechanisms that exist. But there is still not a comprehensive response to the big questions, which I will outline, because they have to be dealt with in the European debate now, before the elections.
Nothing will be achieved if we don’t have a serious discussion about the European Union’s own resources; if the community budget remains at its current level. The Project Bond initiative was put together. There are a number of countries that accept the tax on financial transactions as a source of own resources, but the truth is, a serious European political discussion on this is not taking place. To break the vicious cycle, we need a definitive solution to the problem of the public debt of member states.
Yes, the Greek public debt is large. It is €320 billion as an absolute value. Germany’s is €2.6 trillion, France’s is €2.2 trillion, Italy’s is €2.1 trillion. Just three countries have a debt of €7 trillion. The Greece debt is €320 billion. I’m not seeking a technical solution now, what’s going to happen with debt reciprocity or with the euro bonds. But this is an issue.
The third major step is what interests us here. It is the restoration of the idea of the European social state. Can we have a European social state without a demographic and fiscal threat? Can Europe definitively incorporate a high level of protection of the European social state into its model for growth and competitiveness? This is an issue that requires a horizontal, pan-European response, because that is the only way we can return to the Europe of values, as I said, and help Europe to function as a real political entity.
As the crisis in Ukraine shows, this is easier said than done. There is neither planning nor mechanisms that would enable us to function with the effectiveness of a powerful political entity that is greater than the sum of its member states.
It is with these thoughts – which are obvious to you – that I would like to welcome you, wish you every success in your proceedings, and thank you for having the wonderful idea and initiative to organize this meeting on this very issue, at this very moment, here in Greece.
Thank you very much.
March 20, 2014