Speech at the “News Xchange 2010” Conference
Mark Little (Coordinator): Good morning. My name is Mark Little. I think we have watched some of the stories that defined the last year, but I think perhaps the most persistent and most profound are the aftershocks of the financial crisis. And I think I speak particularly for the Europeans in the room when I say this is the story we cover this, next year, perhaps for years to come.
Here in Greece last year, George Papandreou was elected Prime Minister. And he had bad news for his country, on election. He revealed that his predecessors had worked up a national debt which was greater than all the goods and services produced in Greece every year.
Now, in that crisis Prime Minister Papandreou also said there was an opportunity for what he described as a small revolution, a change not just in Greek politics but also the way that Greece does business. But of course first of all there was the crisis.
And here the Prime Minister faced two contradictory constituencies. On the one hand, the international markets, the international community, the international organisations, the EU, the IMF, who came to Greece’s rescue this May with a rescue package worth more than EUR100 billion.
On the second hand, he had his domestic constituency, his own people, his electorate, who he had to carry through very difficult times, through the austerity package that was introduced after the bailout.
And there has been pain, suffering, disturbance, sometimes violent demonstrations here in Greece over the past months.
Last weekend the Prime Minister faced into a decisive local election. He came out of that election with reduced support for his party, with low turnout as well, but at the same time he was able to claim victory, claim a mandate for the process of continuing change in this country.
And in many ways George Papandreou is a man who defines the contradictions that face this country right now. On the one hand, born in St. Paul, Minnesota, I believe, grew up in California, educated in Massachusetts, Sweden, and in Great Britain as well.
So he is a man also steeped in the transition of Greece to democracy, with his father and grandfather before him, also prime ministers of Greece.
He also walks the walk of austerity and of change. I believe he drives a Prius, which he exchanged after getting rid of the fleet of Mercedes and BMWs that his predecessors had.
Would you please welcome the Prime Minister of Greece, George Papandreou.
George A. Papandreou: Ladies and gentlemen, I want to welcome you but thank you for your warm welcome. I am very pleased to be with you here today, among so many people who work in the service for democracy, for civil rights, because in essence that is what you do every day. You serve democracy by ensuring that citizens in every country and around the globe are thoroughly, and hopefully objectively, informed about issues of concern.
And fighting for democracy is a political tradition, which I grew up in, and very bonded with my own personal experience. My grandfather was jailed or exiled six times in his life, my father twice. I lived through a dictatorship when young. And they were in no way unique to this country. They were emblematic of the struggles of generations for democratic institutions in Greece.
So that’s why precisely I am delighted that you have decided to hold your annual conference in Athens this year.
Athens is not just the capital of a country that is going through a very difficult crisis. It is a country that is also grateful for your support.
Athens is also the capital of a country that is undertaking enormous efforts to correct the fundamental, underlying problems that caused this economic crisis.
And in these difficult times we take courage from our history in order to build a brighter future. We are fortunate enough to belong to the land where the very notions of democracy and dialogue were born.
And these are fundamental foundations of our modern societies, and also the essential ground rules on which public information and media are based. And we suffer when we violate these rules, and in the past Greece has suffered when these rules were violated.
Ladies and gentlemen, today I would like to tell you a story, a story of a country, my country, Greece, which only a few months ago was universally considered to be a country in freefall, a country that was doomed to fail.
But just in a matter of months we persevered, and Greece has succeeded in overturning expectations and reversing a downward spiral. And as a result, Greece has also managed to turn around a very negative image in global public opinion.
We still have much to do, but you know better than anyone, you know the image, how the image of Greece has been portrayed and shaped in recent months. We have been playing out the worst financial crisis in our modern history, and doing so under the glare of international media. A very unique, if you like, experience.
First, let me thank you all, all media, for making Greek citizens experts in finance overnight. Everybody in Greece from 7 to 97 knows what spreads and credit default swaps are. These have become household terms, even in the remotest of villages.
The international media has also been instrumental in highlighting many of the underlying problems that precipitated the Greek economic crisis, but I would say how these are also linked with wider problems on our globe, concerning the financial system and global governance.
However, on the other hand, there has also been a degree of media speculation, if you like, which has exacerbated the fiscal problems that do exist and did exist, making them often even harder to solve.
What we found out over the last few months is that there is also a mob psychology in the markets. They can get very excited and create bubbles, or very fearful to risk and stampede. And this is what we saw, but we also saw that this speculative psychology can be exacerbated by speculation in the media.
So we realised on the one hand that we have a responsibility to live up to our problems, and we are the first to do so, being very open and very honest about the deep-rooted issues that we have to tackle.
But we also have seen some unfair criticism, not just coverage, of the Greek people, which were very close to stereotyping what it means to be a Greek, and sometimes something between information and stereotyping is a grey area. So we had information, but we also had infotainment, and for Greece that was infopainment, I would say.
I won’t forget the times when we were told that we should deal with our financial crisis by selling off Greek islands, in order to avoid bankruptcy, or articles that also painted pictures that Greece is simply a nation of indolent idlers. I looked up the statistics: Actually in the OECD statistics – we are a member of the OECD – it just so happens we are number one in working hours amongst OECD nations.
So we have had to deal with the crisis on many fronts. But through sheer effort and determination we have succeeded in changing, I believe, to a large extent, negative stereotypes. But we also have to change our country, and we are doing so. Through the commitment and struggle of every Greek citizen, we have shown that we can perform what previously may have been thought of as a miracle. They aren’t miracles; they are simply the will and the determination that we are not going to be plagued by chronic problems. We look them straight in the eye, square in the eye and take collective responsibility for fixing them.
A nation that can stand on its own two feet, both with dignity and with hope, and in fact use this crisis as an opportunity to look at issues that we had overlooked or had felt were secondary sometimes, but in fact were of primary importance, in order to make our nation a viable one.
Ladies and gentlemen, your job is to report the facts as objectively as possible. My job is to be honest with you, with the Greek people, and of course with the international community, which is supporting us in this effort to deal with the crisis, present the facts as they are.
The story of my country during this past year is a story of a country that came close to the brink, managed to avoid irreversible disaster. A story of a country that finally found the courage to tackle problems that it should have dealt with for many years.
In October 2009 the Greek people voted for change, a little over a year ago. The Greek people voted resoundingly for a government full of ambition, a government that had the political will to change all the things that were holding the country back, a government committed to major institutional reforms, a government committed to total transparency, committed to wiping out tax evasion, committed to changing our development model and greening our economy.
But this government came into power and discovered that there were three critical challenges, immediate challenges.
The first, of course, was the unprecedented fiscal mess. Despite the fact that we knew things were bad, the true state of Greece’s public finances was far worse than anyone had predicted, had expected. The deficit turned out to be more than double what had been officially reported by the previous government, only a few days before the elections.
It was reported – you know the facts – that the deficit was 6% of GDP. It turned out to be 12.7%, and Eurostat is working hard with us over the last few months, in order to make sure that we are totally transparent and have picked up any possible areas of deficit. And the figure for 2009 will be substantially higher.
There is a second challenge we had, of course, and that was the complete lack of confidence in our state institutions by even our own citizens, because of the counterproductive public sector. Unluckily widespread graft, a lack of political transparency, and this inevitably created a deep sense of social injustice amongst our citizens, but it also impeded initiatives, creativity, innovation, productivity. In a way, it stopped any form of liberating our potential, the great potential that our country has. It disempowered our citizens, rather than empowered our citizens. And this very much was due to the way our political institutions and public institutions worked. So that is a major challenge we are facing and dealing with.
But this second challenge also had an effect on our competitiveness, with a double-digit external deficit, clearly not sustainable within the eurozone.
Thirdly, and perhaps most pressing at the time, was the severe problem of credibility; we had a credibility deficit. Nobody believed our numbers, nobody believed our policies, nobody believed what we said we were going to do. Nobody believed our country.
And first of all the markets themselves had a lack of any sense of belief in what we were trying to do.
So we had to hit the ground running. It was a race against time. The financial markets were already in turmoil, after the global financial collapse of 2008. And this was clearly affecting the way they perceived things in Greece.
No matter what measures we adopted, no matter how many cuts we promised to make, the markets only would react by being deeply sceptical of any policies, of our ability to follow the promises in a credible way, deeply sceptical of Greece’s capacity to change.
Instead, the markets kept repeating the same old mantra: Greece is doomed to fail. And unluckily many in the media also amplified this message.
At the same time, the European Union had to face up to its own fiscal and institutional problems, a crisis it had not faced in the past. If this crisis has taught Europe anything, it is this, that you can’t have a stable common currency without a common economic policy.
That’s why the EU has established a financial support mechanism. And Europe may not have acted fast enough for the markets, but we did act, and in European Union terms very quickly, because ultimately we know that we are all in this together.
In fact, this action, this mechanism which we created, was an intervention in the markets, which were not responding in the most rational of ways.
So Greece now has some time, a short time, to be engaged in an unprecedented effort to bring our deficit to a sustainable level, but not only fiscal measures. We are also undertaking a raft of structural reforms, most of which should have been implemented many years ago.
Reforms to open up closed professions, major changes in our tax system, which we already have passed, to minimise loopholes, scope for tax evasion, but also redistribute income in a more sustainable and just way. A new budget system that doesn’t allow hidden deficits. Reforms to ensure the viability of our pension system. We overhauled our pension system. We have passed laws for green development, opening up our country to new areas of comparative advantage.
This is only one year since our government took office. But the 12 months behind us seem like many years. And indeed Greece has moved forward, I would say even light years.
By the end of the year we will have reduced the deficit by at least 5.5% of GDP, hopefully more.
Regardless of the revised figures from the Eurostat, which will be released next week, this does not change the fact that we have fulfilled our promise: an unprecedented 5.5% adjustment of GDP in one single year.
We didn’t have a magic formula to achieve this result. We have done it in a hard way, by cutting down public expenditure, waste, but also cutting public sector wages, private and public sector pensions, increasing taxes. Difficult things for any government, difficult things for any society.
But we did it because we had to. I believe the Greek people felt this also as a patriotic duty.
Of course if we had the luxury of time to make these reforms over a period of a number of years, we would have done things differently. The pain would have been less; it would have been there, but it would have been less.
But we had no time. So both the Greek citizens and the government had to choose the hard way.
At the same time we have already launched all major reforms I mentioned earlier: tax system, pensions, streamlining public administration, opening up closed professions. We are in the middle of local elections, but what you may not know is that in fact last year we made a major overhaul of local government. We had 57 regions; they are now 13. They are elected. There were some 1050 local government entities; they are now 350. And there were some 6000 local government companies; they are now 2000 companies. So this was also a major overhaul of our administration just the last year.
So this election in fact consolidates this huge reform we are making for our democratic institutions.
Our financial sector is beginning to show the first signs of life. Greece’s biggest bank, the National Bank of Greece, has achieved a huge capital increase. And international interbanking markets are now opening up for Greek banks again.
Just five months since we launched our three-year reform, the programme which we have launched, Greece already feels very much a different country.
We still, of course, have a long way to go. We have taken the first major steps on this difficult journey, and the first step is usually the hardest one.
I am heartened also by the results of the elections last week. Despite the fact that we are in the middle of a painful crisis, there is a broad consensus; there is a real understanding throughout Greek society that what is being done is necessary, is necessary to make our country a viable one. Necessary to secure our country’s future, but also necessary to create a more efficient, more just, more transparent Greek state.
Necessary to ensure that every Greek is able to fulfil their enormous potential, because our country does have enormous untapped potential. Whether it’s in the area of green energy or high-quality tourism, or our Mediterranean diet and agriculture, or in shipping, or in services, we have untapped potential.
So this is the story I wanted to tell you today, the story of my first 12 months in office and surely one of the toughest years in Greece’s long history.
I hope you will keep this perspective and these facts in mind, as you continue to follow this unfolding story. I wanted to be very open and honest with you, because there is no room for misconceptions in an economic and political climate of heightened sensitivity. Such sensitivity brings heightened responsibility, both for government but also for media, in reporting facts accurately.
I just want to say that we often see stock footage of a burning trash can in Athens. It obviously makes great TV, but as any Greek in this room will tell you, it doesn’t tell the real story or the whole story about Greece.
As a nation, we are not chained to our past. We learn from it, from the good and the bad, but we are moving forward every day.
We are in a process of completing the most ambitious consolidation and structural reform programme in modern Greek history. For Greece this is the news story of the decade.
There are always obstacles to overcome, but the momentum of the country is unmistakable. Greece is changing, and changing rapidly. And I believe there is nothing that can hold us back now.
Thank you very much, and again welcome to Athens.
Mark Little: Thank you for giving us that insight, but also agreeing to stay and take a few questions. First of all, if I can ask you, you talk about Greece feeling like a different country, but the narrative internationally seems to remain really fixed. The markets are imposing strict borrowing costs on you. The media narrative also focused on those burning bins in Athens. To what extent are you prisoners of international perceptions right now in Greece?
George A. Papandreou: Well, I wouldn’t say prisoners. Obviously international perceptions are there, and once media create a perception, overturning that, changing that is not easy.
At the same time, I think that what I have seen is that the fact that we are actually making change and there are things other than just burning trashcans that are happening in Greece, that is also reported. And in fact that is a stark contrast from what people have seen earlier.
That is very useful for us. I am not saying, you know, don’t report objectively. Objectively report what we are doing. That’s all I would want to say, is do it as objectively as possible. Give the whole story.
If you give the whole story, I think it becomes a very different story, a story of a people that, yes, we know things went wrong in our country, know that many things were mismanaged.
But at the same time we are determined to change, and we are changing. And we are taking the pain.
And it’s an unfolding story. It’s not an easy story, because we have much to do. We have much to continue to do.
I believe that the media is one. Markets are something else. Markets slowly are changing, but this is why we needed this intervention, if you like, the European mechanism for financial stability, because markets were slow to react, or very sceptical, and the psychology that does exist in markets today – and this is one of the problems – is one of high risk. People don’t invest, people are wary of investing, people are looking for the least risk.
Therefore if a country does have a problem, it would be attacked, in a way. And the slightest inkling of a problem will become magnified, and any story will become self-fulfilling; any prophecy will become self-fulfilling.
This is why we needed this mechanism. And that is giving us time. It’s giving us three years. Hopefully we want to get out onto the markets earlier than three years, leave this, if you like, protective bubble, which is a protective bubble, a protective shield, if you like, as early as possible, and stand on our own two feet.
But it does give us time to make the necessary changes, and prove, not only to our people, not only to the international community, but to the markets, that we can do it.
Mark Little: You talked about your people. There is a sense that right now Europe perhaps is looking at a lost generation, disenchanted from politics, facing into an economic crisis not of their making. What is it, 40% of people didn’t turn out in last weekend’s elections? There’s a serious crisis, isn’t there, in confidence, in your democracy?
George A. Papandreou: I think this is a wider problem, and a problem I think the media has much to help here on this issue.
We are facing in our world, I think, a peculiar paradox. People can see that we have huge potential. We have huge power, if you like. There is money around the world. We talked about trillions which we hadn’t used before the crisis, as a number. Even in politics, we never talk about trillions; billions very much, but trillions!
We have huge power with media. We have the capability of communicating, we have the Internet, we have new capabilities in energy, medicine.
But on the other hand, people – so if you talk to our younger generation, they say there’s great potential – but people feel these global problems maybe are too large to solve. Or there isn’t the sense of a global governance or a guidance of where we are going, where this planet is going.
And that hits directly on democratic institutions, which are essentially national.
But nations alone, today, don’t have the capability to deal with climate change. I mean one country, no matter how big, can’t solve climate change, or the financial crisis. We see we have to pool our resources and pool our efforts.
What does that mean for democracy? It means we have to find a way, on one hand at the planetary level, to work together, but on the other hand try to create more participative processes at the local level, so that people can in fact become innovative, more involved, and so on.
I just want to add to this, however, that when we talk about fiscal austerity in Europe, I like to use the word ‘fiscal responsibility.’ Austerity sounds like a punishment; fiscal responsibility also means that we need growth in Europe.
We are talking about joblessness. We are talking about the fact that we need resources to invest in Europe also. It’s not simply dealing with the market question of debt and deficit, but it’s also investment.
As a matter of fact, even markets are saying today that it’s not enough to cut your deficit. You need growth. You need to invest.
And this is where I think Europe needs to find the resources. We have talked about this in the European Council. Our proposals, from Greece and from a number of other countries, are issues like carbon tax, financial transaction tax, Eurobonds. These could be new resources for Europe to invest in infrastructure, for example, for Central and Eastern Europe, Southern Europe. Broadband, greening of our economies, education innovation, which will make Europe really competitive on a global market, which it is not, or at least not as it should be, today. And this would create a comparative advantage.
So this is the other side, which I think is very important.
Mark Little: Before I let you go, I want to take a couple of questions from the audience. We have some microphones here, and please, if you are asking a question, just tell us who you are, where you are from. Who is going to be our first questioner this morning? There we go. Ed Mulhall, actually, from RTE, my boss.
Ed Mulhall (RTE News): I want to refer back to what you talked about, the stampede in the markets. You could say that stampede has begun again, particularly this time related to the other purple countries, Portugal, Ireland and Spain. And despite the announcement of significant austerity budgets and plans in those countries, the markets are now pushing them in the direction that Greece has gone, with possibly having to avail of European protection in the next months. That has been linked directly to discussions at the recent European Council. Do you think that there still remains that solidarity amongst the European group to deal with the crisis in a way that protects the currency and protects the Union?
George A. Papandreou: I think there are two things here – well, three things, first of all, the stampede psychology you can see.
And what has happened, from our experience – I’ll give you a little bit from our experience – we took measures. The markets would calm down slightly. Then there would be sort of like somebody making noise, and the stampede would all of a sudden start up again. Somebody would create fear, create an explosion or something, or some kind of news, or whatever. And this happened two or three times. That’s why I think this mechanism of intervention is important.
Secondly, my feeling is Europe hasn’t realised its potential. It doesn’t realise how strong it can be, in dealing with this crisis. I felt that Europe somehow was very fearful, or maybe too standoffish towards markets.
Markets aren’t necessarily rational. I think we have now been seeing over the last years, particularly with the crisis, that we need to make markets work for us, work for our societies. They are not a god to worship. We have to use them as a tool. They are very useful, if we use them as a tool. They can be very, very negative, if we see them as a dogma and a god.
The third point which I think I would like to make on this: Yes, there is solidarity. I would say there is solidarity for one very basic reason. We know we have to work together. We know that we can’t deal with these problems alone.
And we know that if there is a crisis in Ireland or in Greece or in Portugal, or in any other country in the future, that will affect us all. It will affect us all in Europe, and with the Greek crisis we saw that it could affect the whole world.
Now, I would say there is another issue of solidarity here. Yes, in Greece we had our problems. And we will live up to our responsibilities of what we have to change.
On the other hand, if we want to talk about what happened in the world, Greece was not really responsible for the 2008 crisis. The toxic bonds that possibly Ireland or other countries bought up were done so under the premise that they were triple-A. There is a real fraud, a question of fraud here.
Now, who is going to pay for this? This is a real question of justice, and I think politically this is a question which is underlying our political debate, daily but maybe subconsciously sometimes or unconsciously, because someone forgot that there was a 2008 crisis and now we are talking about the Greek or the Portuguese or the Irish, and so on, crisis.
I believe therefore that if we really want to create solidarity we have to look at some of the root causes of these crises, and say OK, Ireland has generally a very sound economy. If it didn’t have these bond attacks, it would have a very sound economy.
So we have to stick up, we have to be in solidarity with the Irish people, to help them get through this crisis. I don’t want to make any suggestions what Ireland will do, if it has to get into this mechanism or not. That’s a question.
I would hope that the markets respond in a way that it doesn’t have to, but at least the mechanism is there.
But I think we need to create more of a solidarity even in Europe, because what we saw also in Europe was a tendency to say, “oh, these bad Greeks,” “oh, these bad Irish,” or whatever, sort of trying to say that the problem was inherent in some sense of a DNA.
No such thing. Each country has its problems, and we have to live up to them. But we have to work together to solve these.
Mark Little: Time for one last question. Right here in the front row, with the microphone coming to you any second.
Peter Barabas (Euronews): Peter Barabas from the Euronews. You mentioned burning trash cans before and the stereotypes about international media coverage. But would there be one good story, one positive aspect coming out of the coverage of the international media of the Greek crisis?
George A. Papandreou: Absolutely. Other than being a little bit humorous in the fact that everybody learned about what the financial terms are, such as the spreads and so on, I believe that when there are positive stories these do get highlighted, maybe more so than they would otherwise, because of our crisis.
So we are trying to produce positive stories. Whether it is the fact that we had record attendance of the Marathon race two weeks ago, and it was a great event, or whether the fact that we are a country which has shown determination; we have shown that we can cut down our deficit, this has been highlighted positively in many countries in Europe, not only in Europe, and even seen as a model.
I don’t want to say that how we deal with our crisis is a model in any way, because we have our special aspects and our special problems.
But I think the fact that people are saying, “You are determined. Greeks have shown that they are determined, that they can make the change,” that has been I think a very positive story. And not simply a positive story for international media; this has reflected on the self-confidence of Greeks themselves. And I think that has given a new dynamic.
Because in our international, global world today we are creating a global consciousness and understanding of each other, in a way we didn’t in the past.
So the views of other countries on ourselves, of your viewers or readership around the world, does affect our psychology, does affect our sense of what our values are, too.
We are creating a sense of what are our global common values. And in this I think that when things are reported that we have done positively, this reinforces our sense of commitment and dynamism in changing our country. And I’d like to thank you for that.
Mark Little: Prime Minister, I know there are plenty of other places at this moment in your history you could be right now spending your time. Thank you for spending your time this morning with us.
And on your behalf, I’d like to thank the Prime Minister of Greece, George Papandreou.