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Victoria Mindova

It is obvious that Greece’s return to economic growth goes through the private capital investment in ports, airports and other public infrastructure organisations, said the Minister of Finance Georgios Papaconstantinou. He spoke at the business forum organised by the The Financial Times newspaper, which brought together Greek and foreign experts in the banking and insurance sectors, government officials and investment experts from around the world. The Greek Minister of Finance stressed that the country could unleash its enormous investment potential through privatisation in the energy, gambling and a range of other sectors. The privatisation program will have a double impact because it not only will help to quickly return to positive economic growth, but will be positive for the efforts to reduce the foreign debt.

Papaconstantinou stressed that the government plans measures much larger than the 15 billion euros needed for reducing the deficit. The reason is that the additional efforts have to cover the rising costs in the payment of the current obligations to the foreign debt and the high interest rates. "Only the interest rates have increased by eight billion euros, which obliges us to consider not only the deficit reduction, but the costs of the foreign debt." He stressed that to achieve the objectives, the government has reduced the cost of salaries in the public sector, streamlined the operation of public institutions, allocated the social benefits more equitably and tries to reduce the widely spread tax unfairness. The Minister promised that there will be neither horizontal increases in the tax rates, nor general reductions in salaries, known from 2010.
 
Georgios Papaconstantinou stressed, however, that the changes require the support of the whole society. "We are in the middle of the recession," said the Minister of Finance. He stated that when the country is at the bottom, usually everything is seen in the worst light. However, he played his role of a politician and reiterated that the economic crisis is not something unknown to date, and Greece has the power to recover. Papaconstantinou gave the example of the recession across the euro area, which followed the financial collapse in the U.S. in 2008. Today, the area registers positive growth. As for Greece, he said: "If we look at the last quarter of 2010, we will see that it is the worst since the beginning of the program, but the first quarter of 2011 has already improved." Following this line of thought, the Minister explained that the first positive growth in the country could be expected after the last three months of 2011.

"The first necessary condition to talk about positive economic growth is confidence. There will be no confidence on the other hand until we reduce the deficit," Papaconstantinou stated explicitly. He said that this is the main and indispensable objective of the government and a detailed plan for its achievement will be presented in mid-May, when the mid-term plan for financial recovery will be announced. According to him, Greece will implement strictly the outlined measures and there is no risk of debt restructuring. "If all these measures, which we apply, will not lead to economic growth, why do we take them?" he asked rhetorically. Papaconstantinou explained that to reduce the deficit and reach the formation of primary budget surpluses ingredients are necessary which will stop the speculation about debt restructuring.
 
The economic advisers to the three major Greek banks also supported the idea that debt restructuring is a topic outside the agenda of the socialist government. They were adamant that the debt reform should neither be discussed, nor applied for such a development would cause much greater harm than benefits to Greece and Europe as a whole. The chief economist of Eurobank EFG Gikas Hardouvelis said that if the debt was to be restructured, it had to be done until May 2010 when Greece signed the Memorandum of financial support. The economic experts from Alpha Bank, National Bank of Greece and Eurobank EFG supported the idea that the first priority of the government today is to strictly implement the recovery plan.

Michalis Mazourakis, chief economist at Alfa Bank was clear that the issue of debt restructuring is beyond any logic. Like the President of the European Council Herman van Rompuy, he said: "I have not met anyone who could tell me the advantages of a similar scenario." He stressed that the compliance with the program for fiscal consolidation and the implementation of the structural changes will be the way out of the current crisis. Michalis Mazourakis referred to the last year report of the International Monetary Fund, under which even if half of the foreign debt of Greece disappears as if by magic or is cnacelled, the country will still need at least 3% of primary budget surpluses, so that the foreign debt to the GDP ratio be stable and the debt be repaid easily. "So, whatever we do concerning the foreign debt, its restructuring will not solve our problems, and the implementation of the recovery program is obligatory. Otherwise, we could not form primary budget surpluses," said Mazourakis. He added: "I do not want the "I do not pay" slogan to spread throughout Greece and to become something general, instead of a peripheral movement what it is now."