Al Jazeera English | Interview with Barnaby Phillips

PRIME MINISTER’S PRESS OFFICE
Wednesday, 19 May 2010

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MR. B. PHILLIPS: Prime Minister George Papandreou, thank you very much for speaking with us on Talk to Al Jazeera.

You are trying to introduce quite radical changes to your country, and there is opposition. We have seen it on the streets of Athens. The scepticism certainly on the financial markets – we are seeing that all the time now. Still, many observers are saying that ultimately this country may have to default; it may have to restructure its debt. Is that still a danger for Greece?

MR. G. PAPANDREOU: Well, first of all, on the scepticism of whether we can make the changes, I think that’s a normal, healthy scepticism because yes, Greece did have a credibility gap. But that’s exactly what we are changing in Greece. And the fact that we have taken these emergency measures has shown our determination and our will.

And I would say they do hurt, and I very much understand the protests. But at the same time I think people are determined, because of the pain, to say, “Never again. Let’s really make these changes. Let’s make Greece a viable economy and a competitive economy.” So people are really behind the major changes.

Obviously it will take some time to show the results. That’s why we needed this support mechanism from the European Union and the IMF, to give us that oxygen, if you like, that time, so that the implementation of the measures will actually show that we are a credible country.

Already, in just the first quarter, we have reached a 42% reduction of deficit, compared to last year. So we are not only on target; we are beyond target. And I believe we can continue that to the end of this year.

So yes, there is a determination, and this is why we can say restructuring is not an option.

MR. B. PHILLIPS: As you will know, some of the economic criticisms, without getting too technical, are that the measures you have introduced could well end up being very deflationary. They are bound to push Greece even deeper into recession. And that ultimately will make it harder, impossible some people say, for this country to pay off its debts.

MR. G. PAPANDREOU: Well, I think it’s right that this is a stability and growth programme. And if you only have a stability programme and you just have deflation, then you in fact don’t move out of this crisis.

So the other side of this is growth. Now, growth means a number of things, first of all creating an environment for investment, and that’s what we are doing. We are cutting down a lot of the blockages, if you like: bureaucratic problems, a huge bureaucracy which we had, which didn’t help investment; also creating new opportunities, because I believe that we have a chance, in this climate change problem that we are facing around the world, and in the Mediterranean in particular, to actually turn our model around, our developmental model around, and make Greece a not only viable but a very important investment place.

Because what investors want to see is: Is this economy going to be a competitive economy?

Now, if they see the Greece of yesterday, I understand. They are saying this is not a viable economy. But we are talking about different Greece, with a very different prospect.

MR. B. PHILLIPS: Well, then, surely a competitive Greece, and yes, Greece does have advantages. But logically, what a country would do in these circumstances is devalue its currency. But you can’t do that, because you are trapped in the euro.

MR. G. PAPANDREOU: The euro has its pros and cons, but it does create a sense of security for investment. It has helped growth in Greece.

And as we are restructuring we are creating a new environment for investment.

And this is what, I think, the combination of both the eurozone but also a new possibility for a competitive economy, I think that combination is a very positive combination in the end.

MR. B. PHILLIPS: The eurozone seems to be under enormous strain at the moment, and many people are saying in fact an economy like Greece’s is so different to an economy like Germany’s. Did you actually see the eurozone in danger of breaking up at this point?

MR. G. PAPANDREOU: What is needed in the world first of all is more cooperation and more integration in a globalised economy. We see that we need to have close cooperation in order to deal with global challenges.

That’s why we need more Europe, not less. We need greater integration, not less. We need more governance, not less governance, in the economic field.

MR. B. PHILLIPS: But yoking countries together seems to be increasing political tensions.

MR. G. PAPANDREOU: Well, this is exactly why we need governance. This is exactly to see where there are disparities, where there are difficulties, where there are institutional gaps, if you like, as we did have an institutional gap. The Maastricht Treaty, the eurozone treaty, did not prepare us for a crisis.

And therefore we had to create an ad hoc solution. We worked very hard. Greece worked very hard with our partners of course in the European Union. It took some time, but it was very quick, for what institutions in Europe are used to, to create this mechanism, this support vehicle, which is very close to EUR1 trillion, to support economies, to go through a difficult period, to revamp the economies, make the necessary changes, possibly take some emergency measures, but in fact make the economies more competitive.

MR. B. PHILLIPS: Angela Merkel the other day said that, with the benefit of hindsight, Greece should not have been allowed into the euro in 2000. Do you agree with her?

MR. G. PAPANDREOU: We did well to be in the eurozone. We needed to make big, important reforms, to become competitive, particularly in the last five or six years. I would say we had a growth of close to 5% when we got into the eurozone, but at the same time this growth was helped very much by the fact that the euro did give us cheaper money. But cheaper money did not necessarily mean that we made the structural reforms to become competitive in the long run.

That was the opportunity we missed, and now we have to do this at a much quicker rate, and with emergency measures. That’s what we are going through right now, but we are doing it. And with hindsight we could have done it in a much more gradual and normal way.

MR. B. PHILLIPS: You must have been very frustrated about the pace of reaction. You have been going back and forth to Brussels and Strasbourg and Berlin for months this year, waiting for action.

It seems that Europe reacts very, very slowly. It’s very difficult to get coordinated action from so many different governments.

MR. G. PAPANDREOU: I would say yes, Europe is maybe slow, if we look at how the markets react, because the markets are very quick. But on the other hand, if we didn’t have these institutions, if we didn’t have this cooperation, if we didn’t have the capability to intervene when the markets were very volatile, then we would have a real catastrophe.

So I think we need more Europe, and we need to see that our institutions need to be more quick in responding. But at the same time create the necessary rules around our global financial system, and I would say other challenges, too, to make sure that things don’t get out of hand, that we don’t have crises in a few years.

MR. B. PHILLIPS: You have been very critical of markets and the global financial systems, but to a certain extent don’t they just reflect ordinary people’s fears at the other end, if you like? There are people who have invested in Greece. It could be pension funds in Scotland. It could be decent banks in Germany and France. And there are genuine fears that they won’t get their money back.

And you complain about speculators, but sometimes I feel that people in Greece forget that there are real individuals at the other end who stand to lose, if this country were to go bankrupt.

MR. G. PAPANDREOU: Absolutely. I think that what we are saying is that markets can be a very important tool, but we need to make sure that this tool does help in moving changes along in a way which are correct and structured and regulated, and not so volatile.

I think what we have here is we have a fear that has developed because of the 2008 crisis. A lot of risk-averse activity, where prophesies become self-fulfilling, where a fear then becomes a reality. And that is what we need to stop, because that in fact does not allow for a normal ongoing economy, not only in our country but in other countries, to move along in a normal way and make the necessary changes, to in fact become a viable economy and to deal with the logical and rational aspirations of many investors, who say yes, we want to make sure that you are a viable economy.

I will say yes, we were not a viable economy. But we are making the changes. So give us the chance.

MR. B. PHILLIPS: I’m going to cut you off there, because we are coming up to an interval. But thank you very much for speaking to us. We will be back straight after this break, talking to you, Prime Minister George Papandreou, in Athens.

(BREAK)

MR. B. PHILLIPS: Welcome back to Talk to Al Jazeera. I’m Barnaby Phillips in Athens, and I am talking to the Greek Prime Minister, George Papandreou.

Mr. Papandreou, we have been talking about reaction across the world markets. Let’s talk about Greek society. It’s a time of incredible strain in this country. When you see situations like thousands of people outside Parliament chanting “thieves,” swearing at the members as they try and enter, it just seems that there is a complete breakdown of trust in this country between the governed and the governing, at the moment.

MR. G. PAPANDREOU: Well, we came, as a new government, in with a mandate of change.

MR. B. PHILLIPS: A new government but an old party, very much part of the system.

MR. G. PAPANDREOU: A very new government and a party that has been revamped. We have made changes. We were in the opposition. I took over to make changes. We had a very strong party platform for change.

And we knew what the problems were. We talked about these problems for years, as opposition. We were talking about the fact that we have to move away from a clientelistic politics. We have to move away from lack of transparency. We have to revamp the political system to be more accountable. We have to make sure that people have trust in our society.

MR. B. PHILLIPS: And PASOK, historically, your party, had been part of that problem.

MR. G. PAPANDREOU: PASOK has been a party of change. In 1981 we came in for the first time after 40 years, basically a progressive government, with a small, brief period in the ‘60s, when again there was a progressive government. So PASOK has been a party of change.

MR. B. PHILLIPS: But with all due respect, sir, if you talk to Greeks they’ll tell you that the period of clientelism, if you like, and a huge state, almost a parasitic state: that grew a lot in the 1980s. In fact it grew when your father was prime minister. I mean there is an amazing irony, in a way, to what you are trying to achieve now.

MR. G. PAPANDREOU: Two different things here. And I think it has to be very clear. It’s very different, when PASOK came to power, to say we are going to put money in creating a health system, we are going to put money in making sure that we have unemployment benefits, we are going to put money to make sure that there is a better pension system. Yes, money was put into that.

And that was, I think, a necessary change, which in fact spurred economic growth. That helped Greece become part of the eurozone, and we did so on our merit.

What happened in the last six years is we had added to our debt EUR100 billion, which is a huge, a huge, huge growth of debt. And that was in the previous 5-6 years.

So it’s easy to go back and do criticism. And one can talk about the necessary changes in the past. We may have had some missed opportunities.

But the real problem was that we had a conservative government. Unluckily, the neoconservative government not only in Greece but in other countries such as the United States, they in fact created big government, a lot of waste, a lot of help for big business. So big government helping big business or special interests in the end created a huge lack of trust, but also a very big deficit.

We had tax cuts, we had clientelism, we had graft. These are the things we are changing. And we are absolutely determined.

So I agree with these people that are out in the streets saying you know, we have to change the political system; we have to make changes in governance in our country. That’s what we are doing.

And that is the mandate that we had when we were elected in October. The fact that we have been dealing with the economic crisis for six months doesn’t mean that we haven’t forgotten that in the long run if we don’t make these changes Greece will continue to be in a crisis. And that’s why we are determined to make these changes.

MR. B. PHILLIPS: Well, what I’ve heard a lot on the streets from people who are in favour of changing Greece is that the way you are going about it is not fair, that you are hurting very hard pensioners, teachers, people who are on EUR1000 a month, decent, hardworking people, some in the public service as well, nurses, people who have seen maybe EUR1000 becoming EUR800.

And the refrain you hear again and again is: I did not create this mess. Why should I pay for it? Are you not sympathetic to that?

MR. G. PAPANDREOU: Absolutely. I am very sympathetic to that, because what happened is the fact that we had tax evasion, the fact that we had tax cuts for the rich, the fact that we had, unluckily, a lot of lack of transparency, clientelism, even graft meant that money was lost, money was not put in the right areas, was not invested well, money was not productive. There was a lot of parasitic activity rather than productive activity.

And we faced a situation where we had to take emergency measures. We faced a situation where we were almost not able to pay for even the basic wages and pensions in our country because we could not borrow on the markets.

So we had to take these emergency measures. And these emergency measures, yes, did hurt even people who were not responsible for this crisis. And I recognise that.

But that’s why we are changing the tax system. That’s why we are talking about the redistribution of wealth. And we are doing that with the new tax system. That’s why we are talking about growth. That’s why we are talking about investment. That’s why we are talking about new jobs. That’s why we are talking about transparency, putting signatures of all ministerial decisions and public servant decisions, on the web, so that people know where their euros go, and know where their money goes.

And that’s why we are also being very clear that the rule of law does not allow for those that simply have power or somebody in power to be able to avoid…

MR. B. PHILLIPS: So no fear or favours. You will go…

MR. G. PAPANDREOU: Absolutely. Meritocracy is something we have brought in, in employment, transparency in government, and these are major changes we have been making these last six months.

MR. B. PHILLIPS: When I talk to people on the streets, they say, well, George Papandreou, he’s the prime minister who promised us our salaries would go up during the election campaign, and once in power, he did the exact opposite. That seems to be the perception here.

MR. G. PAPANDREOU: Yes, well, I think nobody understood the magnitude of this crisis.

MR. B. PHILLIPS: You had no idea?

MR. G. PAPANDREOU: We knew that there was a lack of transparency; we knew that there was a bigger deficit than was being reported. We didn’t know the depth of the problem or the reaction of the markets, which were very volatile in this critical point.

If we didn’t have the crisis of 2008, maybe there would have been a much more normal procedure in the way that we would have been able to have time, take more time to make these changes, in a way which didn’t need the immediate emergency measures.

But I would say we had a choice between saving the existing salaries by making some cuts or not being able to pay them at all. So there was not really much of a choice there.

But the fact that there was money – there was money but it wasn’t used well – is the truth. And that’s what I was saying. When we borrowed EUR100 billion the last five years, I say, well, where did it go? Did it go into green investment? Did it go into health and education? No, it went into, unluckily, very non-transparent activities.

That is what we have to fight, because I think this is not only a Greek problem. It is problem of the strengthening of our democratic institutions, so we make sure that they are not captured by special interests.

MR. B. PHILLIPS: One of the most shocking things about the Greek economy is the amount of money that you spend on weapons. Is that going to change?

MR. G. PAPANDREOU: I hope so very much that we will be able to deal with our neighbour in a peaceful way.

MR. B. PHILLIPS: So it’s all to do with Turkey, the weapons?

MR. G. PAPANDREOU:  In order to lower military expenditures means we really have to have a breakthrough in our relations with Turkey. I am working on that. We are working on that.

And we just had a very important visit. It wasn’t a run-of-the-mill visit. It was, in Tayyip Erdogan’s words, a historic visit.

MR. B. PHILLIPS: You talked about reducing defence expenditure?

MR. G. PAPANDREOU: We not only signed 22 agreements, which is also historical. We talked about the reduction of arms. And I think that if we can find ways to reduce the tension in the Aegean, delineate our continental shelf, which has been a controversial issue, these things will allow us to move forward to reduction in weapons.

And I think that’s something that both our countries want and have the political will to do.

MR. B. PHILLIPS: Because many Greek observers I know feel that the high defence expenditure is part of the corruption that has flourished in this country. I mean Greece would be no exception, if huge arms contracts are linked with people siphoning off lots of money on the side.

MR. G. PAPANDREOU: There have been cases in the past, and that is one other reason why not only do we want the arms reductions but we have brought in new procedures concerning procurement.

This will go through Parliament. There will be open discussion and very transparent procedures for any types of procurements from now on. And that not only has to do with arms but it has to do with any procurements for the public sector. We are putting them on electronic, if you like, or Internet procurements, so that they can be online, very clear, very open, very transparent.

I think that we will be one of the most transparent countries not only in Europe but in the world.

MR. B. PHILLIPS: You have also made quite a concerted drive recently for investment from the Middle East, from the Arab countries. If I was cynical, I would say it’s maybe because you can’t get it anywhere else. Europeans are not flooding in to put money in at the moment. Maybe Americans aren’t as well. Is that the attraction of the Arab countries for you?

MR. G. PAPANDREOU: I think that there is a worldwide interest in looking for new investments around the world. The question is: Can Greece become attractive?

So we are, at this point, at a turning point, where we are making the changes and creating the atmosphere and the environment for investment. And I would say Greece is becoming a country which I think is leading the way, even in Europe, in the measures it is taking, difficult measures, in the changes it is making, in order to become a very competitive economy.

MR. B. PHILLIPS: When people are turning on their TVs at the moment, they are seeing buildings burning downtown and police firing tear gas. I just read in the newspaper the other day that perhaps tourism arrivals overall are down 10%. Greece might seem a pretty scary, dangerous place to come right now.

MR. G. PAPANDREOU: It’s very easy to have one picture and then to say that that’s the total of Greece.

Now, it’s obviously a moment in history where people are unhappy. It’s a democratic right, to protest. But it has nothing to do with tourism.

And I would appeal to those who do love Greece and do want to come that they should do so, and they will find a Greece which is, yes, in a moment of I would say creativity and desire to move forward. And they’ll get that real determination that Greece wants to change.

MR. B. PHILLIPS: So it’s a creative crisis, then.

MR. G. PAPANDREOU: We need to make this crisis a moment of creativity, a moment of opportunity, and that’s what I am determined to do.

MR. B. PHILLIPS: Prime Minister George Papandreou, thank you very much for speaking on Talk to Al Jazeera. It’s been a pleasure.

MR. G. PAPANDREOU: Thank you very much.