Press interview of the Vice-president of the Government Mr. Theodoros Pangalos in the chinese newspaper “Diyi Caijing Ribao” (China Business News).

January 10, 2012 | Speeches - Interviews

- Although there are apparently many reasons of the debt and economic crisis in Greece, one can hardly deny the fact that tax evasion and corruption are responsible for economic and social problems in the country. These problems cannot be really solved only with efforts in the economic field. How do you think Greece could deal with these problems effectively?

The Hellenic Government of the Professor Lucas Papademos constitutes a coalition supported by three political parties with an overwhelming majority in the Hellenic Parliament. The Government, based on a wide political consensus, reassures partners and friends that Greece has decided to move forward. 

We are taking all the significant and necessary measures which will allow Greece to return to the international markets.

Taxation and fiscal measures create a heavy burden for the society overall, and especially for the most vulnerable social groups. Higher taxation and the curtailing of wages provoked reactions, however, these measures are unavoidable. Unfortunately these are inescapable consequences of our past practices on the field of state budgets and the financing of the public sector.

Corruption is one of the most frustrating realities in most societies. Governments all over the world are faced with this phenomenon and are taking decisive measures in an effort to reorganize the public sector and eradicate corruption. Our Government is not an exception.

 To be specific, allow me to remind you some of the concrete steps we have taken to deal effectively with the problems of our economy:
1. The Hellenic Government has signed a Memorandum with the European Union, the European Central Bank and the International Monetary Fund concerning economic and fiscal adjustments. Since 2010 we have been implementing this Memorandum in close cooperation with our partners.

2. Simultaneously, we are also restructuring the public sector.

3. In addition, the Hellenic Parliament has been endorsing new laws to eliminate tax evasion which is one of the main reasons for the loss of state income.

Surprisingly, speculators active in the financial markets, as well as private international Credit rating agencies, taking advantage of the climate of international economic uncertainty, continue to widely communicate unfavorable information and estimations concerning Greece, deliberately ignoring the fact that Greece borrows money only through the European mechanism, which was established to support European economies, and not from the markets. The European Financial Stability Facility (EFSF) offers a guarantee for the Greek economy and for creditors and foreign investors focusing on Greece. These investors include China, the Gulf Countries, the USA, Russia, Germany, Spain and others.

The bankruptcy of Greece is an assertion as well as a stake for all speculators who are also trying to regain credibility and increase their income after their disappointing economic miscalculations just one day before the break down of Lehman Brothers.

- Recently, Greece’s new interim PM Mr. Lucas Papademos promised to EU and IMF that he would take austerity measures with all efforts. This statement just provoked anti-austerity protests again. Would it be possible that what previously happened with Mr. George Papandreou’s government may be repeated with Mr. Lucas Papademos?

As I mentioned, the Greek Prime Minister, Mr. Lucas Papademos, is leading a new Government which enjoys wide political and social confidence.

In politics we must learn from the past and then try to foresee the future of the country through past experiences. The Hellenic Government has been formed by consensus and its mandate is to fulfill certain obligations before calling elections. I see no reason for elections to be called, before these targets have been attained.

No realistic alternative political proposals have been put forward. The few radical initiatives that have been tabled by the communists and other small left wing parties are rejected by the majority of the population.  The Greek electorate considers the radical leftist schemes to propose a complete change of society in the direction of the old soviet model as both unrealistic and outdated.

Apart from this fact, I feel obliged to underline that according to all public opinion polls, more than 60% of the electorate stands against early elections. Despite this, the so called anti-austerity protestors, in smaller numbers today, continue their demonstrations against the austerity program.  Furthermore, extremists infiltrating the demonstrations destroy the center of Athens and severely damage the Greek economy and specifically the tourist sector.

The possibility of a new political crisis which could bring down the Government cannot be excluded in a society facing austerity. Nevertheless, I would like to underline that we are ready to confront the economic and social challenges and bring Greece back to the markets. Mr. Lucas Papademos’ Government has both the decisiveness and the experience to tackle the European and domestic political and economic transformations.

In democratic systems, problems are solved according to the constitutions by elections. Politicians and political parties looking for credibility and confidence in their constituencies merely should choose the appropriate time to call elections, thus avoiding disorder in the state and in the society.

The Government’s mandate is to apply provisions of the memorandum and the agreements signed with the Troika and our European partners. Elections will be announced by the Prime Minister after the fulfillment of these conditions.

- Nowadays, a lot of Chinese people claim that China should not be involved in rescuing Europe. One reason is that they believe Europe is definitely capable of saving itself. Another reason has to do with the fact that Chinese people are not willing to pay money for mistakes made by other in another continent. What are your view on this?

A vast country like China, with a healthy economy, cannot be absent from global economic developments. Today we can no longer isolate economies or turn our backs to world problems.

In our globalized society, sooner or later we are all affected by the rise or decline of a regional economy. The liaison and interconnection of international and supranational economic formations or states, such as the European Union, China, Russia or the USA, are influencing the growth of other economies in the world.

No one can escape this reality without sacrificing the prosperity of its population.

Chinese leaders and the people of China do have the wisdom to understand correctly this reality. The evidence of that understanding is the Chinese effort to establish close cooperation with partners and to finance developing programs.

- It is said that the choice for EU is either deeper integration or collapse. In your views, what do you expect to happen to EU in the coming New Year or what you think it should happen?

Our common European experience is a slow but steady and gradual development towards deeper integration. This way is safest, not only for Europe and its 27 member states, but also for the world. 

A potential collapse of Europe would undoubtedly bring the world economy and many countries, irrespectively to their current growth, to the disaster. Predictions of the economic and political consequences of such a disaster are impossible to formulate realistically, but the situation would be calamitous.

- Some European politicians outlined a fiscal federation, with tough rules for backsliders, in return for the European Central Bank becoming a real central bank, and acting as a “lender of last resort”, should this be absolutely necessary. Do you think it is possible to put this idea into practice, given the obvious economic gaps between different European countries?

This question touches upon the principals and values of European integration. Moving towards a common economic and monetary zone we are obliged to create the appropriate financial and monetary mechanism for the new era.  Taking into account the reality of diverse economies in the European Union, the necessity of a federal financial institution is obvious.

Here, I should also point out that the main objective of the European Integration focuses on harmonizing diversities and inequalities among European members, in an effort to lead member States to the highest level of European standards concerning welfare and social enhancement.

-  Maybe the welfare state system is not to be blamed for the crisis, but cutting welfare measures to a certain extent has been a prevalent option in many European countries by now, as one solution to the crisis. Do you think this would fundamentally undermine the Europe’s consensus on the welfare state system in the future?

The welfare state cannot be blamed for the economic crises in Europe. Welfare is a priority for all European governments and efforts in this direction cannot be singled out.  Crisis is obviously caused by mismanagement, political ineptness, human indifference and erratic decisions concerning the economy.

All econometric models in all economic systems are based on mathematical assumptions, where the human behavior cannot be adequately anticipated. Additionally economists, politicians and bankers easily adopted “plastic money for all incomes without conditions”. This choice was based on the persuasion that credit and plastic money could lead our societies to prosperity and also the economy to a perpetual path of smooth growth, against all the principals of economic theory.

Friedman and his monetarism gradually became the dominant economic theory in all capitals of the western world.  This unconditional borrowing of virtual money fueled the demand for greater consumption, especially of consumer goods, in an economy in disequilibrium. Thus, expenditure grew exponentially, whilst revenues remained stable or declined.

Subsequently, all factors undermined consumers’ behavior, damaged the banking system by expanding credit without preconditions and guarantees for borrowed money. A spurious reality prevailed in the world economy. Many European politicians recognized this problem accurately and on time.

For a considerable period I served as Minister of Foreign Affairs of my country and participated in numerous ministerial meetings in the European Council. Pertinently the galloping economic problems were highlighted by some ministers. References concerned not only the weakness, disequilibria and differences within the European economy, but also the absence of appropriate mechanisms which could safeguard the monetary Union.

Unfortunately, societies in our days cannot easily accept that prosperity remains bound to economic cycles.

We hope that emerging new markets and significant dynamic economies, like the Chinese, have learned from the international crises and will act promptly, aiming at a recovery of the international economy. Only initiatives taken collectively by all great and powerful economies of the world can reestablish stability and credibility in the markets.

Once again the world seeks security, as it did in the past, following the World Wars. Stability in the international economic and financial system is a vital necessity. We should work cautiously towards this, if we are really interested in confronting the world economic problems and the crises. We should appreciate that international institutions are still intact. They can fight against speculators and move methodically towards a new stability and sustainability of the economy.

- “Too quick enlargement is to blame for the euro zone’s problems”, do you agree with this idea?

Enlargement is a complex procedure. It is not only politics or merely economics. In our political environment where science, advanced technologies, markets and political changes are moving so fast, it would be unfair to blame decision makers for a fast track European integration.

Allow me to remind you that when enlargement was chosen, the international environment was totally different. However, rapid decisions do not leave adequate time or sufficient political space for adjustment to the realities or corrections of false estimations. This is my remark concerning “too quick European enlargement”.

- On one hand, Germany is blamed for deferring action to settle the crisis; on the other hand, Germany is considered as “indispensable” for the EU so as the latter survives this crisis. How do you consider the relationships among Germany, Greece and the whole EU?

Germany and France are the founders and the locomotive of European political and monetary integration. Both economies gain from the common market and the monetary Union. In the long run, all member states are acting together and are interdependent in this process. Consequently, it is unfair to single out one State and blame it as the unique responsible factor of common European policies. No one has an interest in violating mutual respect and disobeying the rules and discipline of the European Union.

Furthermore, merely blaming individual countries neglects the fact that common institutions such as the European Council, the European Parliament and the European Commission as well as European Authorities cooperate and survey the implementation of European decisions, directives and the absorption of European projects for development, urban planning, new technologies and reforms of the public sector on a constant basis.

Referring to your question on Greek-German relations, I would like to underline the excellent traditional links between the two countries. Political dialogue and even a critical exchange of ideas, cannot damage longstanding relationship among European partners and friends. Intergovernmental relationships are not always accurately mirrored by the international press and mass media, since state interests do not always coincide with the interests represented by the Press and its Tycoons.

- People say EU should forge ahead with crucial reforms. Could you describe what a “New European Union” should be in your opinion?

A New European Union should be a strong political and economic formation with appropriate mechanism to face challenges in our globalized economic and political system. In this Europe people should have opportunities to improve their standard of living, employment, education and social care.

In The New Europe, which will be a democratic expression of the European people, institutions should be progressive, democratically organized, aiming at a conversion of economies where burdens and benefits will be shared by all member states and where financial discipline is a common precaution and a challenge for unanimous solutions.

A synthesis of cultural and political experiences of all members will be an asset for a Union of European people and their nations. This idea probably sounds more federalist. However, we always keep in mind that the founders of the European Union overcame a difficult past after the Second World War and their successors constructed a political and monetary Union which even today, in the heart of the global economic crises, still represents a reliable and strong Union, asserting peace, political stability, intergovernmental cooperation and prosperity in the world.

Printed article: China Business News