Europe’s development and solidarity
Speech at the Federation of German Industry for the “Day of German Industry” on “Looking to the future: Europe’s development and solidarity”
“Ladies and gentlemen,
President Keitel, thank you for your warm welcome.
Thank you for your invitation. Thank you for the honour to speak at your conference.
We are living through a very difficult and complex crisis, in the world, in Europe and of course in Greece. And so many people in Greece ask me: Is all the pain worthwhile? Can we make it? Will we reach, all together, Ithaca, or will this be a Sisyphean task, to allude to ancient mythology? Is there any hope? Will we ultimately succeed?
My answer is yes, we can. Greece has the potential. Europe has the potential. And through global cooperation, we all have the capability to turn this crisis into an opportunity for real and necessary change.
After the crash of 2008, governments and multilateral institutions came to the rescue of our banks and our economies. However, we did not solve the underlying problems of our global economic system, problems like the lack of transparency in financial markets, weak governance of our interdependent economies, particularly in the eurozone.
And yet paradoxically what the markets are now looking for is stronger political leadership, to restore confidence.
Greece has been struggling for the past two years, not simply to reduce its deficits but to regain its confidence, confidence in the markets, confidence in itself.
My government has not shied away from self-criticism. We have been brutally honest about the political and economic failings that led us to the current crisis.
We know that this crisis, on the other hand, provides us a unique opportunity to launch important reforms, which we are doing, that Greece badly needed to become competitive again.
That is why the rescue plan for Greece is not only to keep us afloat. It is an investment in a different Greece, a Greece that is confronting problems that were overlooked for decades.
We have passed unprecedented reforms in a matter of months. Yes, we are making this crisis an opportunity. And I can assure you that your investment in Greece will not keep us stuck in the past. It is an investment to move Greece into the future.
What is Greece’s future? Well, let me begin with what we must change from the past.
First of all, Greece does have great potential. We are not a poor country. We were a mismanaged country. So total transparency and accountable governance are our priorities.
Let me give you an example. Every single euro spent by the government is now published online for every citizen to see. When we computerised medical prescriptions for one pension fund a few months ago, we had a decrease in costs by over 35%. With our first electronic procurement of medical equipment, we cut the final bill to one-sixth of the estimated costs.
But we still have much to do, and this is a project very complex and time-consuming. That is why I have asked for technical help and best practices from other countries, with the support of the European Union Commission. And for example, the German SAP will be very important in restructuring, reorganising our public civil service.
The Greek public sector was one of our major obstacles to growth, competitiveness and investment. Very soon this will no longer be the case. Whether it is setting up a business, getting building permits or dealing with tax offices, we are simplifying procedures and cutting red tape. We have already consolidated local government from 49 regions to 13.
So bad management of our resources was one problem. Lack of competitiveness was another. That is why we have passed a law, for example, effective July 1st, to liberalise dozens of closed professions.
Here easy money did not help, either. Let me give you another example. Over the last 30 years Greece has received important sums for agriculture. Yet the way the EU’s Common Agricultural Policy subsidised Greek products, made in Greece, made Greece less competitive rather than more competitive. From an exporter of agricultural products, we became a major importer. For a country with products with a worldwide brand name, our olive oil, our feta, our fruit, our Cretan diet, this was unthinkable. Yet it was true.
Now we are again becoming an exporter. We are investing in quality products, organic foods, green agriculture. Working with our business community, this year exports hit a historical record high, not only in agriculture but also in construction materials and medicines, in fish farming, in metals. This year our exports are up 40%.
Tourism is another area where we have made the most of our comparative advantages, to boost revenues. We had lost markets, but now we are targeting new markets, increasing quality and reducing prices, liberalising cruise ships. Again we reached historical highs: over 16.5 million visitors to Greece this year.
We have launched an ambitious privatisation programme to attract infrastructure, energy and real estate investment, starting with the extension of the Athens Airport concession and the sale of 30% of its shares, the extension of two gaming licences and the sale of the state lotteries.
There has been impressive interest in Greek harbours and airports. And from where? From emerging markets wanting access to European markets. They see Greece’s tradition in shipping and easy access to ports in the East as an ideal hub.
Those who have already expressed interest are China, India, Korea, Australia, Brazil, even Argentina.
We are working with Qatar. They are investing in our banking sector and many other areas.
In Germany you have shown the way in developing renewable energy. With our natural assets, Greece has every reason to follow your lead.
One of our most ambitious new projects is called Helios, Ήλιος, the Greek word for ‘sun’. We intend to develop photovoltaic units up to 10,000 megawatts and export this energy to countries such as Germany.
And investment in Greek sun yields 50% more than in Germany, for obvious reasons: sunshine. This is a win-win project for us both.
Both green energy and waste management are at a nascent stage in Greece. So here there is a dynamic emerging market ripe for investment.
So these are only some of the many bright prospects Greece holds out in the near future.
When I am asked, “Where is the European taxpayer’s money going?” I say first of all we are borrowing to repay. But secondly, we are investing in our strengths, not to become more dependent but to become more autonomous. Not to live on borrowed strengths, but to create our own Greek strengths.
And there are many traditional strengths we have, which we lost, which we have to reinvent, to make them modern in this globalised economy.
But today every Greek is still bearing the burden of past excesses. We are now in the middle of a very painful process of fiscal consolidation, and we know there is still much to be done.
But we have already achieved a lot. In 2010, we achieved the largest annual fiscal consolidation ever by a eurozone economy: a reduction of 5% of GDP in deficits. For 2011 we have set an ambitious target of an additional 3% and have taken very difficult measures to achieve it.
From a huge primary budget deficit in 2009, I am confident that Greece will have a primary surplus in 2012. We reduced our primary deficit by 5.4% in 2010. To give you a sense of the scale of this effort, the equivalent in Germany would be a reduction of over 100 billion euros in a single year.
As your Finance Minister, Wolfgang Schaeuble, has pointed out, the Greeks have reduced their deficit to an extent that, in terms of Germany, would correspond to a savings amount of 125 billion. That would be more than a third of the Federal budget.
But of course these changes are hurting. Major reforms in our pension system, education system, major overhaul of our public salary policies, major changes in our tax system have made these systems more transparent, more equal and most just.
Yet there are cuts. And the cuts are hurting Greek citizens, whose pay packets have shrunk, whose pensions and benefits have been cut.
Drastic measures have a dramatic impact on the living standards of our citizens, hardworking taxpayers, who have been asked to make enormous sacrifices to support the country. And they are doing so.
Now of course many Greeks feel that they have little left to give, except a spirit, a spirit of change, which we need to kindle, we need to nurture, we need to encourage.
That is why the persistent criticisms levelled against Greece are deeply frustrating, frustrating not only at the political level, where a superhuman effort is being made to meet stringent targets in a deepening recession, but frustrating also for the Greeks, who are making these painful sacrifices and difficult changes.
We are not asking for applause. We are not even asking for people to say that this is going to be an easy project. We need years to make these major changes.
But we are simply asking for respect of the facts. And you as businesspeople, you know that inspiration, innovation and motivation are important parts of success. If people feel only punishment and scorn, this crisis will not become an opportunity; it will become a lost cause.
And we are determined; the Greek people are determined to make this a success.
But when many ask me, “But do you have the support?” my first answer is, “That is not my problem.” I have said I am here to work for my country, save the country, change the country. Whether I am re-elected or not is not my problem. My problem is to save the country.
But I also know that every Greek does want a different Greece, does want Greece to change. The only question they have is: “Is there real hope?” And this is why it is so critical that our European partners have stood by us, and Greece is grateful for this solidarity, because this gives us the time to make the changes.
I understand the political difficulties in our European family, as one country wonders why it should support another for its past mistakes, or why some countries should take so much pain for a crisis that began with the banking system.
But as I have said, this is not an investment in past failures. This is an investment in future successes, our common success.
But now Europe must go one step further. We must prove to the markets that we have a firm grip on the debt crisis and that we are determined to resolve it together, because our common future depends on it.
Whenever I think of Europe’s future, I also remember Europe’s past. In the bloody and bitter aftermath of the Second World War, Europe decided to “make business, not war.”
This was not just an economic objective. It was above all a profoundly political objective, to build a Europe free of destructive nationalism, ethnic hatred and poverty.
Caught up in the current crisis, it’s easy to lose sight of the bigger picture. But let’s try to get some historical perspective on our Union, a Union of nations with a history of violent conflicts, a Union of nations whose borders have often been disputed, a Union of nations with all kinds of political systems and competitive differences.
Only a few years ago Greece was emerging from a dictatorship, cut off from its immediate neighbours because of the Cold War, in a costly arms race with its NATO ally, Turkey, and with little connection to its traditional markets and friends in the Middle East.
Today Greece has invested in the Balkans, enjoys a boom of exports to Turkey, is deeply involved in helping the Arab Spring, and is again becoming a transport hub between East and West.
This is the work of Europe. Instead of war and imperialism, today Europe exports peace, social and democratic principles. We support common principles, share common interests, resolve our differences through democratic processes. Many of us share a common currency.
Today our nations not only enjoy the longest-ever period of peace and stability, but we are engaged in daily cooperation.
So if Europe is a peace project today, it is also a model, a model of how we can face the challenges of a globalising economy.
So as I hear sceptics braying about the euro’s imminent collapse or the failure of the European Union, I remind myself of why our Union exists in the first place, of the vision of Chancellor Adenauer and Robert Schuman, about our common European future, and why we must go forward with a renewed sense of shared purpose to strengthen our Union, and not abandon it.
In today’s world of climate change, democratic springs, mass migration, financial crises, the need for green growth, if we did not have a European Union we would need to invent it. Otherwise none of us, none of us would have the strength to face these challenges alone.
The European Union has always been much more than a common market, even though we haven’t had a United States of Europe. So if the sovereign debt crisis has strained European unity, here again we can make this crisis an opportunity. Deeper integration, deeper understanding, greater oversight and control.
For example, surely Greece, a small country with a GDP not much bigger than the German state of Hessen, cannot be responsible for rattling the very foundations of the Union.
Had the European Union the institutions of oversight in our common currency, we would never have had a deficit exploding by 30 billion over our budget targets, or 15.4% deficit.
Today if we are off in Greece one billion, we are in check. But there are further problems we must face.
More Greek or Irish or Portuguese or Italian fiscal discipline alone won’t end this ongoing crisis, because the sovereign debt crisis has underlined the competitiveness differences between the eurozone economies. Our differences in economic performance were either hidden in the past, and in the past this allowed us to borrow rather than to become competitive.
But today these differences have become a liability, and make the cost of borrowing heavily unequal between countries and unsustainable for many.
So again we need to make this crisis an opportunity. We all need to stop the cacophony and work more in harmony. We European partners must finally stop blaming each other for collective or institutional failings, and acknowledge that no European nation will thrive in isolation.
Even Germany depends on Europe, its biggest trading partner, for growth and jobs. I don’t need to remind the industrialists among you that more than 70% of German exports go to Europe.
We must develop Europe-wide strategies for new growth, green growth policies that will guarantee our competitive advantages and create jobs, tackle acute inequalities both in and across our countries, support European ideas such as the financial transaction tax or the CO2 tax, further integrate our own resources.
We must forge ahead immediately, not muddle through, with the institutional reforms necessary to resist intensifying pressure from financial markets, but also growing competition from the rest of the world, whether it’s from the BRICS or elsewhere.
A solution is certainly within reach, if we can all muster the political will. We must stop blaming each other for our different weaknesses, and unite together with our different strengths.
Yes, each of us, different though we may be, we have many strengths. And we can only develop them if we work together rather than against each other.
The eurozone must now take bold steps towards fiscal integration to stabilise the Monetary Union. Let’s not allow those who are betting against the euro to succeed.
Shoring up our institutions so they can withstand financial shocks is an essential investment in Europe’s long-term security.
Along with much tighter fiscal oversight, we need to expand the EFSF and formulate permanent mechanisms for economic stability and solidarity.
You, Mr. Keitel, have also called for a European IMF.
On July 21st the leaders of the eurozone agreed important steps in the right direction. This agreement is important for our European future. For Greece, it gives us the breathing space for our reforms to yield results. It will create a more sustainable debt cycle by locking in low interest rates. And it will support the recapitalisation of Greek banks during a deepening recession.
The success of the agreement depends on three things: First of all, private sector involvement, a huge, voluntary and unprecedented deal involving hundreds of banks and financial institutions around the world.
Secondly, the ratification by all 17 national parliaments of eurozone members. Our decisions must have democratic legitimacy. In order to convince our constituencies of the merits of the agreement, we need to explain the pros and cons very clearly.
And third, Greece must fulfil all its commitments, according to the terms and targets set out in our initial agreement with our partners in the Troika.
Of course I cannot guarantee the first two components of the agreement, but I can guarantee that Greece will live up to all its commitments. I promise you, we Greeks will soon fight our way back to growth and prosperity, after this period of pain.
Of course it is unrealistic to expect any society to make such fundamental changes without a reasonable period of transition and adjustment. As Chancellor Angela Merkel recently stated, you cannot change a country overnight. I am sure she was speaking from her own experience of the challenge posed by the reunification of East and West Germany.
You know much better than I do how difficult this achievement was. You know how hard it was to overcome scepticism, fears, prejudices that this courageous move entails. And yes, there were costs involved.
Yes, there were many social and economic challenges to be overcome. Yes, it took time to adapt to the radical changes that came with reunification.
But ultimately reunification was not just in the interests of East and West Germans. It was in the interests of all Europeans, because for Europe it was a giant leap closer to peace and security. It was a giant leap to building a European society capable in dealing with the new global frontiers humanity is facing, as we are pooling our sovereignty, to be stronger, not to be weaker.
These challenges are too big for us to hide behind our nationalisms. In these challenging times we need a political discourse, a political spirit that says: I am proud to be German, as I am proud to be Greek, as I am proud to be French, to be Spanish, to be Dutch, to be Polish, as I am proud to be European.
And this crisis must unite us, to make Europe a stronger Europe, one that lives up to the common aspirations of our citizens.
I am confident that in a few years will have undergone the same remarkable transformation achieved in Germany during the early 1990s.
What we are doing is nothing short of the rebirth of a nation. And your contribution, as dynamic members of German industry, can be crucial.
I invite you to Greece, a Greece which is changing, a Greece worthwhile of your investment, an investment in a future which will profit us all.
Dear friends, the fall of the Berlin Wall heralded the end of a divided Europe. Now is not the time to rebuild walls in Europe. Europe must keep moving forward toward permanent integration, built solidly on social justice and sustainable growth.
That is what our citizens want and expect, and what our history demands of all of us. Thank you very much for your attention.”