It’s been 3.5 years since Greece’s first bailout package was signed and the country, despite the harsh sacrifices of the society does not see light at the end of the crisis tunnel. What mistakes have been made, according to you?
The problems of Greece were not thoroughly addressed from the beginning. Tough choices have been postponed, both by Greek and German politicians. For example, at first Chancellor Merkel claimed not a single Euro would be spent for Greece. This was merely because she feared losing a regional election in a German state in May 2010. Making tough choices includes speaking the truth to the people, which neither the Greek nor the German government was willing to do. The reason why many Germans are still skeptical about bailing out Greece is Chancellor Merkel and others did little to convince the German public for the common cause.
Right now, SPD is negotiating with the Christian Democrats in order to form a new grand coalition government. Does this mean that you agree with Angela Merkel’s hard line on strict austerity in the European countries whitch are facing fiscal problems?
The SPD does not agree with the course of our government in the last four years. However, we voted in favor most times on the rescue programmes in order to show support for the people in those countries that were effectively cut off the financial markets. Some countries came under pressure because they bailed out their banks and later could not handle their debt.
Other countries were having structural problems with their economy and public sector that were not addressed properly. This is the case in Greece. But there is no easy answer. A solution needs to comprise both structural reforms and growth stimulation.
While Greece is well on the way regarding fiscal consolidation, some structural problems still need to be addressed, such as the size of the public sector or the amount of money spent on the military.
What can change in the management of the Greek crisis with the formation of a grand coalition in Germany?
Chancellor Merkel will need to admit that her promise to keep Greece in the Euro area will come with additional costs for Germany. The SPD has been emphasizing continuously that we need to start focusing on growth and investments, as well as tackling youth unemployment and the dramatic brain drain all over southern Europe. The efforts to stimulate growth came too late and were undertaken without the seriousness necessary. It is hard to understand why the European funds are still not used for this endeavor, although the heads of state have agreed to do just that over a year ago.
Troika inspectors are back in Athens in order to negotiate with the Greek government. Lenders‘ representatives are pressing for additional measures in order to close the 2014 fiscal gap of at least 2 billion Euros. According to you, the adoption of a new set of measures is a one-way road (the only option)? Do you believe that there is scope for further reductions in wages and pensions and for new tax increases?
The question is: why are we facing these gaps over and again? I think we are up against a mixture of false promises or unrealistic expectations. For example, the estimates in terms of the amount of money to be collected via privatizations were unrealistic from the beginning. The ordinary people in Greece have already contributed tremendously with the reduction in wages and pensions as well as through tax increases. With regard to the adjustment program, they carry the biggest load on their shoulders. On the other hand, certainly more things need to be done on the structural side, like reducing the size of the public sector and reforming the tax administration. If there a more than 5o percent in not collected tax revenues in 2012 alone, than this is a huge problem.
Many analysts, German and euro zone’s officials assume that Greece will need further financial support. Do you see the need for a third aid package for Greece and under which terms?
First of all, the conditions of the assistance programme should be completed. If Greece needs help in tackling its structural problems, the European Commission as well as the Euro zone countries should provide technical and administrational support. For the implementation of the privatization programme I support the idea by the ESM of establishing a trust fund to help managing the privatization of assets the country wants to sell.
I am afraid it will not be possible for Greece to return to the financial markets after the current program has ended. Greece will need further assistance and it should be granted further assistance.
Chancellor Merkel recently said that “Greece needs to reduce its debt to 110% of the GDP by 2022”. At the same time Berlin is saying that a new haircut on Greek debt is not an option. What should be done in order Greek debt to be sustainable?
The troika institutions and the eurogroup should stick to their commitments from last fall to bring the debt to the agreed levels first. The problem of the Greek debt should be addressed properly, the problem must not be swept under the carpet.
Greece will need further fiscal transfer or some kind of debt relief, even if the Euro group has taken the option of a one-time debt waiver off the table. Unfortunately, important information about the Greek situation were kept away from the public during our election campaign. The outgoing German government has a responsibility for not addressing the problem properly. During the coalition talks the SPD will demand a clear picture about Greeks medium and long term financial situation. This will be a necessary precondition to address Greece’s problems properly.
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