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The European leaders add oil to the Greek fire instead of putting it out

06 April 2011 / 14:04:50  GRReporter
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Germany has sacrificed a lot for the euro. Why do you think it would like to leave the union?

I do not think it wants but that does not mean that it can not. If Spain gets into a financial collapse, I believe that Germany will seriously consider leaving the Euro zone. And while all the other countries know that Germany has this option, no matter how unacceptable it could be, it gives a big trump in the hands of Chancellor Merkel. Countries with stable economies such as Austria, Germany, Holland and Denmark have the option to withdraw if they consider that the situation is getting worse. Germany can not leave the union any longer if the plan for the Eurobonds and the European Central Bank, which we discussed, is enforced. As if California to decide to leave the United States. Whether it wants it or not, it can not leave the USA, because the federal debt is common and the proportion of that particular state in the total debt can not be calculated.

Do you think the reforms in the public sector are correct, given that the private sector took the burden of unemployment and of many of the difficulties?

The Greek State is extremely inefficient compared with other countries. Another problem is the revenues. They are less than expected. If, however, costs are referred to as a percentage of the GDP, we will see that there is no big difference compared to the same indicator in the UK or France.

So, I think that the main problem in Greece is related to the revenues and the poor management of the public sector rather than to the government expenditure. Another factor that contributes to this gap in the revenues is that the richest in Greece do not pay taxes or at least a substantial part of them. If we look at the tax returns of the Greeks to see how many the rich in the country are it will come out that there are almost none. However, if we look around us, we will see many wealthy people. So, they find a way not to pay their taxes - something that ordinary people on the payroll can not do. These people always pay their taxes whether they want it or not.

Regarding the public sector, I want to emphasize that the civil servants are permanently appointed in all countries in the world. Whenever there is a crisis the private sector is the one that suffers the heavy blow of unemployment.

There are over 800,000 civil servants in the narrow public sector. Isn’t this a large number for a country like Greece? And given that their wages are not low.

No, I do not think so. If you look at the statistics on the workforce in other European countries involved in the public sector, you will see that it is in the range of 20% -28% of the total number of workers in each country. In terms of salaries, I can say that, in fact, they are lower than the average value for the Euro zone countries. Of course, this is associated with the productivity of the public sector. In other words, the problem of the Greek public sector is not its volume, but that it has low revenues and that it is not productive.

The decision to dismiss civil servants to reduce the costs in the budget is wrong because the crisis is a free fall. The rule that if the one loses the other will gain, or if the state sector loses the private sector will gain, does not work in this case. Now the more the one loses the more the others lose.

Thus, if 200,000 people in the public sector are dismissed today this will have no positive impact on the private sector. Quite the opposite since the countries are not like the companies. The GDP is a product created by public and private spending. It is disastrous in times of recession when private investment is reduced to reduce the government one too. The time to reduce the state sector is not the time of recession but the time of economic growth. First, we have to deal with the crisis and then, to look at the reforms in the public sector.

At the last press conference the Troika of the International Monetary Fund, the European Central Bank and the European Commission announced that the government will carry out mass privatization, which will accumulate 50 billion euros by 2015 and will be able to cover part of its foreign debt. Do you think this plan is realistic and feasible?

I think that to collect as much money from privatization is more wishful thinking than reality. I do not think Greece avails so attractive assets so as to collect 50 billion euros. Moreover, there will be debt restructuring soon which is like we to haircut ourselves. I mean that if we end up selling any property in order to prepay part of the foreign debt and then to announce its haircut by 30% is just silly. I do not think that privatization should be carried out when there are talks about some kind of debt restructuring. Moreover, the crisis pushes the prices and we are at risk to sell for mere song assets that can be privatized under better conditions later.

Tags: EconomyMarketsForeign debtBank crisisYanis VaroufakisEuropean union
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