Ambassador Kaskarelis addresses a Brookings Institution conference December 1st 2010

“Ιn the Wake of the Crisis: Macroeconomic Dilemmas and Financial Regulation Challenges For Europe, America and the World”

Good morning,

It is my great pleasure to be joining you this morning. I congratulate the Brookings Institution, Mr. Justin Vaisse in particular, for this initiative, which I am confident will be very productive.

I am very happy that the Embassy of Greece, through the generosity of the Stavros Niarchos Foundation, is able to facilitate this conference today.

As the world traverses through difficult times, such fora take on added value, as the international community, including Europe and the U.S., is confronted with an economic crisis of profound dimensions. As a result, all of us are being called upon to reconsider and re-assess the manner in which we have traditionally dealt with fundamental political, social and fiscal policies.

It is no secret that Greece has been in the eye of the storm. But it has made serious progress. To paraphrase our Prime Minister, George Papandreou: for a country that only a few months ago was universally considered to be in a freefall, Greece has succeeded in overturning expectations and reversing a downward spiral. Obviously, it is far from where it needs to be.

Greece has set out on a difficult journey of tough measures, a long process of re-evaluating longstanding habits and traditions, not only to confront this unprecedented financial crisis, but also in order to lay the institutional, legal and ethical groundwork for a new era, a new way of addressing issues of governance and practices.

Being at the receiving end of some very harsh measures myself, I can assure you that this is for real. There is no magic wand or magic formula in tackling this problem. We are doing it in a hard way, by cutting down public expenditure, cutting public sector wages, private and public sector pensions, increasing taxes, fighting tax evasion and other unproductive practices. These are difficult and painful measures.

And, with Ireland and other countries following suit, the urgency of the matter is becoming more and more clear and more intense. And while there is no doubt that these countries bear the brunt of the responsibility for their economic hardships, perhaps this is an opportunity for the financial “powers that be” to look at their own speculative practices, and conduct business not simply on the basis of cold numbers, but also taking into account ethical and moral responsibilities, and realize that what they do has ripple affects around the world.

One of the lessons we are learning from this is that, without a doubt, all countries are intertwined and interconnected in such a way that the fate of one is tied to that of many others.

The United States is also confronted with major economic problems and is also in the same soul searching process. It was only a day or two ago, that President Obama announced a two-year pay freeze for federal employees. It was also no coincidence that in March, President Obama was in continuous contact with Angela Merkel, as the decision was pending for an EU financial support system that would initially give Greece $110 billion, and establish the $700 billion fund for future support, in this case for Ireland and perhaps Portugal, if the need arises.

Nowhere is this interdependence clearer than in the European Union. The crisis exposed the fact that many European nations are still reluctant to move towards a more unified, strengthened and a more collective Europe, working together in solidarity.

The EU had to face up to its own fiscal and institutional problems, something it had not faced in the past. If this crisis has taught Europe anything, it is that you can’t have a stable common currency without a common economic policy. That’s why the EU established a financial support mechanism; because it realized that ultimately we are all in this together. In a way, Europe had not, and perhaps has not still fully realized its own potential, of how strong it can be.

And without by any means downgrading the gravity of the situation, dealing with this crisis, Europe has come a long way in recognizing that potential. The silver lining here is that the economic crisis confronted by individual EU member-states has become the basis upon which the EU is evolving into a more solid union.

The crisis in Greece has in fact been a catalyst for some of these changes at the European level, and hopefully at the global level of economic governance. After a prolonged paralysis following the 2008 recession, the sovereign debt crisis has finally mobilized the international community to take collective action to protect the real economy from excessive speculation. The E.U. has taken a common initiative to bring more transparency into market transactions and to strengthen financial regulation, particularly vis-à-vis speculation. We need clear rules on shorts, naked shorts and credit default swaps.

I am also hopeful that the example of how Greece was dealt with in the press and by the markets, will serve as an example to be avoided in the future, so that other countries do not suffer from the mob psychology of fear and avoidance.

This will not only help those countries immediately confronted with a crisis, but it will create a more secure environment for growth, because we know that cutting back on expenditures can lead nowhere unless there is growth.

In this regard, both sides of the Atlantic, Europe and the U.S. must realize that the transatlantic relationship is more crucial than ever. the European Union and the United States are each other’s natural allies; they are each other’s most obvious and important political and trade partners, united by common values and threat perceptions. Thus, a better future for Americans, Europeans and, I might say, for the rest of the world, demands a more comprehensive and operational EU-US partnership.

In such a climate, by bringing together such distinguished scholars from both sides of the Atlantic to entertain vital economic and political questions, this forum provides a great service to the ongoing quest.

Ladies and gentlemen,

I thank you for your time and attention, and I wish you a productive and fruitful conference.