Greece will not exit euro
Interview on BBC’S HARDtalk with Zeinab Badawi
Fmr Greek PM George Papandreou: ‘Greece will not exit euro’
Speaking exclusively to Zeinab Badawi for BBC HARDtalk, he added that Greece demanded ”more respect” for the ”major sacrifices” the country had made.
Zeinab Badawi: George Papandreou, welcome to HARDtalk.
George A. Papandreou: Very nice to be with you, Zeinab.
Zeinab Badawi: Thank you. Does this latest bailout deal mean that Greece can avoid going bankrupt?
George A. Papandreou: Yes, this is an historic decision. We have turned a page, both for Greece and in Europe. Greece will not go bankrupt, and Greece will not exit the eurozone. We still have a prospect ahead of us, a difficult road, but we’ve given a positive prospect now to Greece and to the Greek economy and to the Greek people, because there was a great sense of insecurity, all this talk about possible default and exiting the eurozone. Now we can say that we are in a situation where we have much more security, a secure road for changes and reforms we need to make.
Zeinab Badawi: But you had the deal being struck, and then you had people saying that actually you are just staving off the inevitable. One report, which Reuters, the news agency, has got hold of, which is dated February 15th, quoting international experts are saying that actually you are going to have to default on your debts sometime, sooner or later.
George A. Papandreou: Well, I’d like to answer to all these international experts. I’ve heard many experts over the last few years, two years particularly, about all the possible outcomes, and the doomsayers.
We will not default, and we will not exit the euro. And I think this deal has clinched this prospect.
Of course it means we need to do hard work. But I also would demand -and I use the world ‘demand’- more respect. We have made major sacrifices in Greece.
Zeinab Badawi: More respect from whom?
George A. Papandreou: From all the international analysts, and even people in the markets.
Zeinab Badawi: What do you mean by that? Do you think Greece has endured some humiliation?
George A. Papandreou: Well, first of all, there is a lot of pressure on Greece and a lot of speculation about what will happen with Greece if Greece would default and leave the euro, and this has created great pain in Greece. It has even contributed to the recession, because people won’t invest, people are fearing that they take their money out of banks, people are not consuming. And foreigners are also not investing, either.
Zeinab Badawi: So do you accept, then, as the Finance Minister, Evangelos Venizelos has said, that there are those forces in Europe that are trying to push Greece out of the euro? He said that earlier in February.
George A. Papandreou: I believe there is a minority view that some people felt that if Greece left the euro this might be a solution. I believe that this would be a catastrophe, first of all for Greece and for the Greek people. We are enduring pain, but we would endure much more pain.
And secondly, there is a contagion risk. People would say, well, if Greece did this, maybe in the future Portugal, or some other country -I don’t want to…
Zeinab Badawi: Do you really think that’s the situation there, George Papandreou, because I said you granted this was what Nelly Kroes, the Vice President of the European Commission said, before this deal was struck. But she said that there is a view – she said this earlier in February – there is a view that, if one country is pushed out of the Europe – she didn’t said that this was Greece – that it would mean that the others would have to follow, that the whole structure collapses. And she says that this is just not true.
George A. Papandreou: Well, do you want to take the risk is the question. And I think that we have seen that, when Greece was put into a bailout programme, that other countries followed. When there was fear of default, the spreads, the cost of borrowing, didn’t only rise for Greece, but it rose for Portugal, for Ireland, for Spain, for Italy, even for Belgium and France.
So there is nobody can guarantee that there will not be contagion. There are many…
Zeinab Badawi: But it’s such a minority view. That’s the point I’m making. Somebody as mainstream as Nelly Kroes says that it’s just not true that the whole structure would collapse if a country like Greece would…
George A. Papandreou: Well, I think that’s hopeful thinking.
Zeinab Badawi: She’s wrong?
George A. Papandreou: I think that’s hopeful thinking. I don’t know if she’s wrong or right. I think what I am saying is let’s take a more secure path. Because we could be very sure that if we don’t take all the measures this could unravel. The euro could unravel.
Zeinab Badawi: For the rest of Europe, you mean?
George A. Papandreou: For the rest of Europe. So what we are doing here in Greece is both important for Greeks and for the Greek people, but also for the, I would say, future of the eurozone. And we need to make this a success.
Zeinab Badawi: I will talk to you about what you are doing in Greece in a moment, but just to carry on with this, because I do want to say to you what is being said in Europe now, even after this bailout deal was signed the Swedish Finance Minister, Anders Borg, says, “The Greeks remain in their tragedy, but I think we have reduced this to just a Greek problem. It is no longer a threat to the rest of the eurozone.”
George A. Papandreou: Let me put it this way. I believe that fighting the programme in Greece and for Greece in fact is helping Europe and the euro also to survive.
So I think they are linked. And they have been linked for the last two years. They are linked simply because we are linked in the eurozone. We have the common currency. What happens in Greece, even though we are about 2.5…
Zeinab Badawi: You are 2% of the whole eurozone GDP. So why should people care, then, Mr. Papandreou?
George A. Papandreou: That’s right.
Zeinab Badawi: Why should they care? You’re just 2%.
George A. Papandreou: I would say, in fact, first of all, since we’re only that small of a problem we can solve it. And this is where Europe, even though we moved quite quickly for Europe, we moved quite slowly for the markets, and this has put more pain on Greece.
But Greece is also seen as a precedent, even a small country, but it seems a precedent for other countries. And that is what will create fear in the markets. The markets will tell you that whatever happens in Greece will be seen, whether we like it or not, whether we make statements or not, whether we pronounce that this is only a unique case, it will be seen as a precedent for other countries.
Zeinab Badawi: So you are sure of that? You don’t think opinion has shifted in the last few months, that they think actually, as I said and as Borg, the Swedish Finance Minister said, this is not just a Greek problem, and Nelly Kroes saying, well, the whole house is not to come collapsing. You think that that is not the case, categorically?
George A. Papandreou: I would say it’s not the case, and I would also say that there are other issues that Europe must now address, which have to do with fortifying the Europe, which have nothing to do with Greece per se; they have to do with the euro more widely.
For example, common borrowing, such as Eurobonds: If we had done that from the very beginning – we haven’t done that yet – we would have staved off this pressure on Greece and other countries.
Zeinab Badawi: So Greece, in your view, is a symptom of problems that are not unique to the country. OK, but under this deal the country has to accept an economic monitoring commission to make sure that actually you do abide by the tough austerity measures that the coalition government has signed up to. You only get the EUR130 billion in tranches: You need the first EUR14.5 billion by March 20th in order to stave off bankruptcy. But you are going to be watched. And people here are already saying, “Greece is not suffering. We are being governed by Berlin,” is what people tell you all the time.
George A. Papandreou: Well, Zeinab, this is something which we all want to bring back our own pride and out own sense of autonomy, if you like. And that’s what we need to do. We need to build up our own strengths.
Right now we are on an umbilical cord, if you like, that has to be broken, and we have to be able to stand on our own two feet.
That means changing Greece. It means getting the time to make the reforms.
We have great potential. We have great potential in developing green energy, in creating a tourist industry which is much more robust, in Greek agricultural products which won’t be dependent on simply money from the CAP, from the Common Agricultural Policy, as it’s called in the European Union, but will be competitive around the world. The Greek, Cretan or Mediterranean diet…
Zeinab Badawi: You’ve got a long way to go, though. As you know, tourism accounts only for about 20% of your foreign currency earnings, and you’ve gone from being self-sufficient in agriculture to having to import most of your food needs, so you’ve got a long way to go on that.
George A. Papandreou: That’s exactly your point. That’s exactly the point which we have to work on and make the changes, and that’s why we need the time.
And this deal gives us a breathing space to make these major changes.
Zeinab Badawi: If you deliver. If you deliver. On the question of sovereignty, and the German bashing, frankly, that we’ve seen here, effigies of Chancellor Angela Merkel and also the German flag being burnt and that kind of thing – do you have sympathies with that kind of view, when you see the protesters in the streets here that they say, “We are being controlled by puppets from the European Union, and specifically the paymaster of the EU, Berlin”?
George A. Papandreou: I think we need much more democracy in our European institutions. And we need, not only in Greece but in other parts of Europe – particularly in Greece of with this type of programme – that people feel that there is ownership in the programme, and ownership about what Europe is doing.
Right now I think people feel disempowered. Our citizens in Europe feel disempowered. And they look at Brussels, or they look at the stronger countries, and they say, well, who is making the decisions? And this, I think, is a question for Europe also.
Zeinab Badawi: But you see it from the Germans’ point of view, don’t you? They say, “Why should we work in Germany till we’re 65 in order that Greek train drivers can retire at 50, in order that they have a minimum wage which, when it was EUR700, is now being cut, was much higher than a lot of other countries in the EU? Why should we support that kind of Greek state?” Do you have sympathy with that view?
George A. Papandreou: I understand that view and I’ve said very often in Greek Parliament that we have to understand citizens of other countries that are helping us: they want to see that we change.
But I think there is also a lot – and this is one of the problems we’ve had in the eurozone and I think which makes it quite unique – we are a family, but we haven’t really understood how deeply interconnected we are in Europe. And that’s why we need more economic governance.
But we need to get away from populism and prejudice and extremism.
Zeinab Badawi: Is that what you are seeing in this country here?
George A. Papandreou: I am seeing it around Europe, around Europe, around this problem, where forces that are prejudicial, even sometimes racist, trying to scapegoat what the real problems are.
Zeinab Badawi: So what, people are being racist against the Greeks, you think?
George A. Papandreou: I would say if there are populist forces that are prejudicial towards everyone, whether it’s Germans or Greeks…
Zeinab Badawi: In which country?
George A. Papandreou: For example, it was said at times that Greeks are lazy, they are not working. Well, I looked at the statistics. We are number one, as far as working are concerned.
Zeinab Badawi: It’s not the case there, if you look at Greek train drivers. They work three days a week. They retire at 50.
George A. Papandreou: OK, so those problems we have to solve.
Zeinab Badawi: But you haven’t solved them.
George A. Papandreou: We actually have made major changes. For example, truck drivers: We have opened up the professions. A hundred and fifty professions have been opened up.
We have changed the pension system. We have revamped, in two years, something that other countries take ten years to do.
Zeinab Badawi: Looking at your record, when you said – you were campaigning to become prime minister (you were elected in October 2009) – you said at the time on the campaign trail there is the money. The money is there, you said. And obviously, because you are head of the PASOK socialist party and keen on public spending and so on, that was the campaign platform.
George A. Papandreou: Actually that wasn’t the campaign platform. That’s the campaign criticism from the opposition party. I never said just we have the money. I said there is money, but we have to see where it’s going, and we have to see where we find it. And we’ll find it through hitting tax evasion. We’ll find it through taxing the richer. We’ll find it through cutting waste. We’ll find it through hitting corruption…
Zeinab Badawi: But you didn’t do any of that. But when you came into power, what happened?
George A. Papandreou: No, no. absolutely not. We have done more reform than any government in the last 30 years, in just two years.
Zeinab Badawi: You were supposed to privatise billions and billions of euros. You signed a deal with the IMF in May 2010, and you were supposed to make very, very severe budget cuts and to try to reduce the number of public employees by a huge number, thousands and thousands. You didn’t manage to do that – so many targets you were off.
George A. Papandreou: That’s not true. That’s not true.
Zeinab Badawi: Thirty thousand public employees by 2010 were supposed to be lost, and you didn’t manage that.
George A. Papandreou: We have reduced in these two years close to 100.000 civil servants, the number, first of all. We have hit tax evasion and waste. I’ll give you an example.
We had prescriptions from doctors, unluckily – and I’ll make it very blunt – big pharmaceutical companies would basically bribe doctors to over-prescribe. We have put things online, cutting down the waste of up to 30% in prescriptions.
On privatisation, we are not privatising right now…
Zeinab Badawi: No, you are not.
George A. Papandreou: We are not, and we will not until the market sees that Greece is moving in a positive direction, because otherwise it would be a fire sale. And that’s not good either for Greece and the Greek economy, but also it’s not good for paying off our debt. We can get much more through privatisation, if we get real important investors, who really want to develop our economy and our industries and our public assets. This is what we want.
I’ll give you an example. Qatar is interested in investing in one of the most beautiful spots Greece has, the old Hellenikon Airport. They of course are going to be waiting to see…
Zeinab Badawi: Whether you stave the euro or whether you don’t, and whether prices have reached the floor.
George A. Papandreou: Absolutely, absolutely. Well…
Zeinab Badawi: But just looking at your role, though, specifically…
George A. Papandreou: But this is where this deal is very important, because it gives us the security, and the investor the security, that, if you invest in Greece, you know, there is security.
Zeinab Badawi: So you think the deal is doable? You think the deal is doable?
George A. Papandreou: I think it’s doable.
Zeinab Badawi: A hundred and fifty thousand public employees by 2050, pensions to be squeezed, the minimum wage to be cut again by 22%, so from EUR700 it now goes to EUR400 a month? That’s all doable?
George A. Papandreou: That has already been legislated. The pension system has already been revamped. We have already put our assets into a privatisation holding, and it’s…
Zeinab Badawi: But did you act too slowly? Because you know, I’ve been speaking to Giannis Papathanassiou, who was Finance Minister under the outgoing government before you took power, the New Democracy government, and he says that you found a terrible situation. You blamed the previous government. You said the budget is much worse than I thought it was. But you took a while in trying to get your act together and going to the IMF. Do you think you went to the IMF too late, to the EU? Do you think you should have gone? Do you think you signed up to a deal that was the wrong deal for Greece, when you see what’s going on now, with all the protests? What do you think?
George A. Papandreou: Well, first of all, let me put it this way. For five and a half years the previous government doubled, almost doubled, the debt, from EUR180 billion to EUR320 billion. And they did nothing, as far as reforms are concerned.
So we were hit, and I was personally hit, with a huge responsibility, which I was very glad and honoured to take on, the most dire situation of my country. It was a call of patriotism to not think about my political future but say I am going to help save my country.
Zeinab Badawi: But you didn’t. You mishandled the crisis, excepting what you said.
George A. Papandreou: Let me answer your previous question. I didn’t want to go to the IMF or to this mechanism, but we needed to prepare for it. We did prepare for it, we did create it in the European Union. We didn’t have such a mechanism before. It is the biggest bailout programme in humanity’s history which we got.
I had hoped that the markets would allow us more time to make the necessary reforms. And that is what initially I had convinced even our partners in the European Union, saying, “I will make the reforms.” And we were making the reforms, changing the public sector, changing the pension system. We consolidated 1500 local governments to 300 governments, 6000 local…
Zeinab Badawi: So what went wrong, then? What went wrong? What I am asking is do you think you made any personal mistakes?
George A. Papandreou: When you take action in anything you do, and when you take bold action, you always can go back and say I would have done things this way or that way.
Zeinab Badawi: What do you think you did wrong? In hindsight, what would you have done?
George A. Papandreou: I would say what you said. We could have pushed even further structural changes, even more quickly, even though they were difficult, with the civil service, which was not ready, which has never gone through a perestroika and a glasnost which other Cold War states…
Zeinab Badawi: Because you have a bloated state sector, which counts about a third of all employees in the country?
George A. Papandreou: Yes, we have a huge bloated and clientelistic state sector, a state which came out of authoritarian systems, of dictatorships and so on, which…
Zeinab Badawi: But doesn’t your party, the PASOK party, take part or most of the blame for the last 30 years? Apart from eight years, this country has been led by PASOK, your party.
George A. Papandreou: And our country has, first of all…
Zeinab Badawi: So your party must take the lion’s share of the blame?
George A. Papandreou: First of all, not just eight years, not just eight years. It was approximately the two parties.
Zeinab Badawi: The New Democracy and PASOK have alternated, but it’s mostly your party that has been in power.
George A. Papandreou: Well, we can look at the dates. But I’m proud that PASOK made huge reforms. We brought in democracy into the state. Before PASOK was in power, if you were slightly liberal-leaning or left-leaning, you couldn’t get a job in the public sector.
Zeinab Badawi: But you kept the bloated bureaucracy and state institutions. Do you acknowledge you should have done more, faster?
George A. Papandreou: We tried. I say, looking back, we obviously tried to create a more equal society. We obviously tried to give more benefits to people. But I would also say being in the European Union helped us not to look at some of our weaknesses. Being in the euro helped us find cheaper money, which we didn’t always invest in areas which would make us competitive.
I would also say that there were mistake made on the European side in these last two years. Let me just give you an example.
Zeinab Badawi: Very quickly.
George A. Papandreou: First of all, we were a test case. We were sort of a lab rat…
Zeinab Badawi: The canary in the mine.
George A. Papandreou: That’s right, to see. Nobody had faced such a situation in such a country in the European Union and particularly in the common currency.
The programme they gave us, we first had high interest rates, much higher than Portugal and Ireland afterwards. That has changed, only yesterday, with this deal.
Secondly, another very important point. Franco-German proposal. If you lend to countries that are high-risk and they default, then you, the banks, will pay for it. That statement pushed a programme that was on track, the spreads going up and everybody saying we would default. And then Portugal and Ireland went in.
Now we have rescinded on that decision, but that created such a fear and anxiety in Greece and around Greece, which brought recession…
Zeinab Badawi: I must ask you about the referendum, because received a great deal of criticism for that. In November 2011 you said you wanted to have a referendum. You never actually explicitly have said – could you go on the record? – what did you want to ask the Greek people? Was it to say to them do you want to stay in the euro, OK back to the drachma? Or were going to ask the Greek do you accept the austerity package? What did you want in that referendum?
George A. Papandreou: The referendum question would have been, approximately: Do you accept these measures and austerity programme, which will keep us in the euro? That would be the question.
Zeinab Badawi: But hadn’t you already decided that when you signed the deal with the IMF in May 2010? You had signed up to the bailouts, on the basis of the austerity package.
George A. Papandreou: I had decided that, as prime minister of the country. but I believe that the ownership of this programme – and you can even see today some people saying, “Well, will the parties accept this? Will the Greek people accept this?” and so on.
I believe that a referendum would have been a positive…
Zeinab Badawi: Why did you feel you had to go in the end, though?
George A. Papandreou: It would have been a positive yes, and it would have been an ownership of the programme. The Greek people would have owned it.
Zeinab Badawi: I want to just get the insights, before we finish, into your thinking at the time when you resigned. What was going through your mind? Did you feel rejected? Did you feel that you’d failed?
George A. Papandreou: Not at all, not at all. I tried, and I am continuing this, to create a wider consensus around a very difficult programme, a programme which I, as a socialist, you know, would have to take measures which I otherwise would not have done, which hurt people on Main Street, if you like: pensioners, wage earners are now taking a lot of the brunt. I would have liked to have seen a much more reform-oriented society, where the burden we have been…
Zeinab Badawi: But the crisis has basically killed your political career here in Greece, hasn’t it?
George A. Papandreou: But let me just finish this, that the burden would have been equally shared by the richer, and that would have been the major structural reforms.
If we had done that, and avoided the market pressure and the cost of borrowing, we could have done this and solved this problem without all this pain, or with much lesser pain than we have today.
Now, what happened, of course, is that, once we reached the point when we needed to take new measures, I said, “Let’s take this to the Greek people, to a referendum.” Otherwise, if we don’t go to a referendum, the other alternative would have been a wider coalition government, with a wider consensus.
When I proposed the referendum, immediately we had a reaction from other parties, and some parties said OK, we are ready to discuss the coalition. I discussed it; it was my proposal, and I am glad that we do have a coalition government. Part of it was that I stepped down and we put in a prime minister which was more neutral, politically, and is doing a very good job.
Zeinab Badawi: We understand that happened, but your feelings, though. The crisis ended your political career, essentially, here in Greece. How do you feel about that?
George A. Papandreou: I think, if a politician wants to be honest with him- or herself, the politician has to be ready to make very difficult decisions, whether they hurt or not their political career, forgetting about polls, forgetting about the circumstantial political situation, and looking for the benefit for the future of his or her country and the benefit or his or her people.
Zeinab Badawi: So no regrets?
George A. Papandreou: No regrets. I feel I’ve done a patriotic duty, and I do believe our country, even with this very difficult time, will be able to proudly move forward and create a different Greece.
Zeinab Badawi: George Papandreou, thank you very much for coming on HARDtalk.
George A. Papandreou: Thank you very much.
Zeinab Badawi: Thank you.