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Greece’s recovery will take about 15 years, according to Papandreou’s adviser

30 November 2010 / 10:11:23  GRReporter
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Greece’s complete recovery will take about 15 years, the way ahead is long and the worst is yet to come. This is what the Prime Minister George Papandreou’s Advisor Tommaso Padoa-Schioppa, a former finance minister of Italy, stated at a conference on The Greek Economy-Rebuilding Greek Credibility, organized by the American-Hellenic Chamber of Commerce. The economist presented some of the advantages and the risks, which Greece takes with the fiscal consolidation implementation. Schioppa noted that the changes made to date have been difficult but mandatory. However, the return of confidence in the country is not a matter of months but years.

The opportunity that was given to Greece to extend the period for repayment of the financial support it receives from the International Monetary Fund, the European Central Bank and the European Commission turned out to be an advantage. Greece benefited indirectly from the development and improvement of the financial support system in the Eurozone after Ireland was included in a similar program with better terms. Another advantage, which indirectly benefits Greece in the difficult process of fiscal consolidation, is the Eurozone major countries understanding that the crisis for each country in Europe is individual, but the impact is applied across the EU as a whole.

Some of the risks the rescue program for the local economy implies are associated with a sense of drama that goes along with the changes and of public disagreement with the majority of reforms. This leads to the risk of delaying the planned changes, which may adversely affect the country. The process of restoring the confidence in the Greek economy is directly linked to the implementation of the measures set in the Memorandum of financial support the strict implementation of which is often questioned. Tommaso Schioppa gave as an example the forthcoming public administration reform and the reorganization of the unprofitable public enterprises to be implemented in 2011. Recovery measures in these sectors were late and the changes they will cause should be crucial so that they would have a genuine positive result in the long term.

The economist stated that the biggest challenge is the implementation of the reforms themselves as it is extremely difficult to change the habits of the administration of a country, referring not only to his observations in Greece, but his experience in the reform of the Italian public administration. Another problem, he added, is the lack of patience in the external environment, as Schioppa determined international markets.
On this point the member of the mission of the European Commission in Athens Peter Weiss said that the window of international markets opportunities is narrow and it could quickly close. Therefore, he urged policymakers not to hesitate but to implement the necessary financial and structural reforms with determination. Labour and energy market liberalization, removal of restrictions on private-sector pay, cuts in public administration, public enterprises and their costs are a substantial part of the measures that are required to rescue the local economy. The representative of the European Commission stressed that these reforms are key to the success of the economic restructuring of the country. He also added that there is strong belief that the crucial changes will have a very strong effect on the growth of the country.

Peter Weiss reminded once again in conclusion that the Memorandum of financial support and the program of fiscal and structural consolidation implied are applied to enable Greece to regain the confidence of international markets. He did not fail to note that the same program will help the Greeks themselves to regain their lost confidence in local institutions. The correct implementation of the reforms will give the basics but the Government should make additional efforts, beyond the obligations stipulated in the Memorandum, to build a new image of public institutions.

There is the common opinion that Greece should focus on the measures for economic development together with the stringent economic measures imposed by the fiscal consolidation. Tommaso Padoa-Schioppa said that economic growth is not easy and could not be ordered. It is the result of self-confidence, initiative and entrepreneurship developed in an appropriate competitive environment. There is no doubt that the economic upturn will come from the society and the private sectors, but reforms still lie ahead that need to recover the foundations of the Greek economy. That is why it is so important to show consistency in program implementation, insisted Tommaso Padoa-Schioppa.

The Finance Minister George Papakonstantinou said that economic growth depends directly on investments, new sources of funding and mostly on the return to world markets. He said that these markets will be opened for the country if they believe again in the country. This would happen when Greece handles its finances. He also added that there won’t be positive economic growth without fiscal consolidation, even forced consolidation, similar to that which is being applied now. The Finance Minister stressed that attempts to reduce the budget deficit and the extension of the repayment of the financial support under the Memorandum are measures towards restoring the positive economic growth.

According to Papakonstantinou, the Greek debt rescheduling by the Eurozone countries is a kind of reward for the diligence of the government and the country as a whole to handle the domestic economy. It allows the country to take a breath and it is a sign for the international markets that the Balkan country is willing to deal with its problems. He said that we proved so far that we are ready and will do everything to fulfill the planned despite the difficulties. The Ministry of Finance hopes that there will be light at the end of the tunnel in mid 2011 but Greece has to go through several hard months before that. "The light at the end of the tunnel" is most often interpreted as entering the international markets for long-term financing through government bonds (three to five years) that will have an interest significantly lower than that before Greece to sign the Memorandum in May 2010. George Papakonstantinou stressed that reducing the budget deficit from 36 billion euros to 22 billion euros a year is a serious job. Nobody believed that Greece will implement the program but regardless of this the objective has been achieved. "We did a lot, but the road ahead is still long," admitted the Finance Minister.

Tags: EconomyMarketsCrisisVictoria MindovaGreece
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