BBC – «NEWS NIGHT» | Interview with Kirsty Wark

PRIME MINISTER’S PRESS OFFICE
June 24, 2010

JOURNALIST:  Well, earlier today I spoke to the Greek Prime Minister, George Papandreou, and began by putting it to him that his country’s historic problem with tax evasion has exacerbated the crisis.

MR. G. PAPANDREOU: The problem that we have here is not in fact that we had some big welfare state that we were paying lavishly for. this was a mismanagement of the public sector in particular, a clientelistic state with a large number of civil servants, more than we actually needed, but also the lack of transparency which allowed for waste, very often, of taxpayers’ money, but even graft.

We have just tabled a law where every single signature of the public sector, from the Prime Minister to a civil servant, if it has to do with money, will be on the Web. People will be able to see where their tax money goes, and that is a huge, a huge change in creating a strong impediment for any kind of corruption.

JOURNALIST: Do you recognise that when you went into the eurozone you could borrow money much more cheaply, and there was a kind of spending bonanza in Greece on everything from pensions and wages and so forth. And that created a problem. That was a big mistake, wasn’t it?

MR. G. PAPANDREOU: Yes, but it wasn’t the pensions problem. Yes, we do have some problems with the pensions and people are paying. We have cut down in some of the pension benefits.

But the spending was, unluckily, by giving tax benefits to the richer. As I said, and as you have mentioned, the question of tax evasion.

So in fact this gives us a cushion, if we deal with these issues. We just passed a tax law which is asking the richer in this society to pay their share of the burden for this crisis.

But also, if we do deal with this informal or shadow economy, whether it’s tax evasion or people not being registered as they work, and a lot of the corruption that exists in some of the public sector, particularly in the health sector, that means we can quickly come back to a growth perspective and deal with our deficit and our debt much more effectively.

JOURNALIST: Do you think that you will have to leave the eurozone?

MR. G. PAPANDREOU: No, we will not. That’s absolutely certain, and of course that’s why we have taken these measures, that’s why we have the support package. The fact that the whole of the European Union, and of course the eurozone, the European Central Bank, the European Commission, have come in to create the support package – the support package is of course loans which we will be paying back at a good interest – that means that all of Europe wants us in the euro, and we do certainly want to remain in the euro.

JOURNALIST: Ahead of the G20, it appears that there is a fundamental divide between America and Europe, and President Obama is warning against so many countries rushing to save so quickly, and the idea that you are removing the stimulus package so quickly might mean a new recession.

MR. G. PAPANDREOU: Yes. Well, I think the divide is more political than it is geographical. There are divides within Europe also as to how Keynesian we should be, and how much we should consolidate our budgets.

I believe that yes, we do need, as the developed countries seems to be hit because of the fact that we do have social welfare states, but that shouldn’t be the cornerstone of our competitiveness, of our dealing with our competitive problem.

Our debt is because our economies are not as competitive as other countries in the emerging market. But there are countries, such as the Nordic countries or Canada and Australia, which have very strong welfare systems, which are also very competitive on the world market.

JOURNALIST: As a socialist prime minister, part of the austerity measures is a cut in the size of the state. The state will shrink. Now, do you think that this is a kind of undercover move to the centre right in Europe?

MR. G. PAPANDREOU: We will not get out of this crisis if we are only talking about austerity. We have to have growth.

And growth we can have of course by becoming more competitive, by exporting, but also by investment. And we need to find resources.

Now, where are going to find the resources? I know and I understand, and this is something that of course we are going through now, we are not going to find it through public monies, as we do have a sovereign debt, or we’ll have a small portion of public monies and public investment.

We have to do it by bringing investment, but also by creating the resources. That’s why we’re talking about a transaction tax, a transaction tax in the European Union, to bring up to approximately EUR200 billion. That could be important money for infrastructure projects; if we do develop infrastructure projects in areas which are poor or are lagging in Europe, such as Central and Eastern Europe, Southern Europe, Southeastern Europe, this will not only help those countries, but it will also give jobs to the major industries in the developed areas of Europe: Germany, France, the UK, the Nordic countries and so on.

JOURNALIST: Finally, Prime Minister, do you think that the pain is going to be pretty terrible for everyone over the next 12 months?

MR. G. PAPANDREOU: The pain is difficult, and we are all taking this pain, and it’s not only in Greece; it’s in other parts of the world.

And this is why I think we need to be able to see, not only in Greece but also in the G20, the days that are coming up in Toronto, very clear political will that we regulate the markets that were at the core, if you like, of this crisis, the lack of transparency. We regulate so that we don’t have this speculation against sovereign states, but in fact we have markets that help growth and that help us move out of this crisis.

We also make sure that we look for new resources which will allow us to create jobs, growth, and move our economies to a green economy, because don’t forget: This is not simply an economic crisis; it’s not simply a financial crisis. We are talking about a global warming crisis; we are talking about an energy crisis. We went through a food crisis.

These are major issues where we need to work together, and this is where the G20 has to show the will that there is a common understanding of our problems and a common will to implement – not simply talk about but implement – measures which will move our globe out of this crisis, but also find solutions for the crisis in the future, such as the warming of our globe.

JOURNALIST: Prime Minister Papandreou, thank you very much.