Interview with Greek Finance Minister: 'Punitive Measures Are Not Appropriate'
In an interview with SPIEGEL, Greek Finance Minister Giorgos Papakonstantinou discusses his country's debt crisis, Athens' plans to radically reduce deficit spending in 2010 and why he feels Greece should turn to the European Union for help rather than the IMF.
Greek Finance Minister Giorgos Papakonstantinou: "We have suffered a complete loss of credibility."
SPIEGEL: Mr. Minister, it's five minutes to midnight for Greece, as bankers say -- or is it already five minutes past the hour?
Papakonstantinou: We are in a very serious fiscal situation. We have debts with dangerous dynamics, but we have a new government that clearly recognizes the problem. Thanks to our cost-cutting program we will reduce the deficit in the coming year by 3.6 percent. In addition, we will introduce major reforms to the public sector to reduce public expenditure, and we will tighten up the tax laws.
SPIEGEL: Do you still need fresh capital this year?
Papakonstantinou: Our deficit is less than that of other countries, such as Great Britain and Ireland. Our total debt is also not the highest in the European Union, although it admittedly may be so in the coming year. But we have suffered a complete loss of credibility.
SPIEGEL: Will this loss of credibility result in you not being able to get any more money on the markets?
Papakonstantinou: Interest margins have increased. But this trend will reverse itself when we show that we are doing everything in our power to improve the financial situation. We don't currently need new loans.
SPIEGEL: When will you return to the capital market?
Papakonstantinou: In early January we will issue a new bond. The exact amount has not yet been determined.
SPIEGEL: Greece owes money to companies all across Europe.
Papakonstantinou: We have made provisions for most of these claims, and for the remaining debts we will establish a repayment schedule that adheres to a specific timeframe. This is not an amount of money that we cannot deal with.
SPIEGEL: Private individuals in your situation would be bankrupt.
Papakonstantinou: Is Ireland bankrupt? Is Italy bankrupt? Sovereign states have credit ratings that take into account the default risk. We are a member of the EU and a member of the euro zone. We accept the rules. But that does not shield us from market turbulence. Nothing justifies the excessive pessimism of the markets. There are many experts who assert that Greece is currently undervalued and a good investment.
SPIEGEL: Nevertheless you have to reestablish your credibility on the markets. How do you intend to do this?
Papakonstantinou: Many of our problems have less to do with the absolute figures as with the fact that nobody believes us because our statistics are not correct. This has prompted us to make the agency responsible for this area independent of the state -- as the EU unsuccessfully urged our previous government to do for five years. In addition, an independent commission will regularly closely examine and evaluate our budget. We will even have this in place before Christmas. With respect to our political credibility, a certain amount of time will have to pass, quite simply because it will take a number of weeks and months before the initial results become apparent.
SPIEGEL: You nevertheless still want to stick with automatic pay increases for government employees.
Papakonstantinou: Our main problem is the bloating government bureaucracy -- and we have halted that. Every time someone retired, two new people were hired, and this went on for years. We have put a stop to that. In fact, we are reducing the workforce.
SPIEGEL: Will that be enough to satisfy Brussels?
Papakonstantinou: The (European) Commission would like to see more decisive measures, that's true. But we've argued that our cutbacks are sustainable. It would be counterproductive if we further exacerbated the recession.
SPIEGEL: Are you afraid that Brussels will place you under guardianship?
Papakonstantinou: Of course we are on the watch list. But as long as we respect the guidelines, it must be clear that we determine the political course in this country. Punitive measures are not appropriate.
SPIEGEL: You mean the countries that are threatening to axe EU funds for infrastructure projects?
Papakonstantinou: That is not an official EU stance. It has been suggested by individual countries, for example, Germany. It shows the level of frustration with us there. But we shouldn't forget that we have played according to the rules for all these years, and that we have endeavored to be a responsible member.
SPIEGEL: You have always received money from Brussels ...
Papakonstantinou: ... that is a point of view that is perhaps acceptable from countries that are not in the euro zone, but not from the members. Germany has also benefited from Greece -- we buy your products.
SPIEGEL: You could also ask the International Monetary Fund for supportive loans. Would you prefer that?
Papakonstantinou: There is absolutely no reason for that. We will solve our problems within the EU and according to their rules.
SPIEGEL: Wouldn't it be better for Greece if you left the currency club?
Papakonstantinou: The euro may have sparked inflationary phases in our country -- but, all in all, it has been a great advantage to us.
SPIEGEL: Many in Europe would feel relieved if you were not -- or no longer -- a member.
Papakonstantinou: I also hear these voices. They reflect a general sense of uncertainty with the difficult economic situation in Europe. The euro is a huge experiment -- and it also has to prove itself in crisis situations, or the experiment has failed.
Interview conducted by Hans-Jürgen Schlamp and Wolfgang Reuter. Translated from the German by Paul Cohen.
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