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The state has proved fatal for Greek banks

19 November 2012 / 16:11:14  GRReporter
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Politicians originally considered some of those reforms as being easy-to-implement.   Yet they were not. The majority of ministers were reluctant to implement the reforms they had voted on. They did not issue the ministerial decrees, which were to repeal the old law and to introduce in practice the changes under the recovery plan. When I entered the Prime Minister’s office in November 2011, I found that only 22% of the laws that the Greek Parliament had voted during the year 2010, were actually fully implemented in November 2011, at least 11 months later.  In other words, many Greek politicians had tricked the supervisory Troika. They voted laws that were not enforced. This is why Greece lost all its credibility, despite the drastic fiscal measures it has taken over the past three years.  Now Europeans ignore the huge pain of the fiscal measures and only look at the failures in fully completing the structural reforms. Greece is going through the most severe fiscal adjustment programme a developed country undertook in the past 50 years.

Regarding structural reforms, no matter how much the Greeks were bound by the lenders to do, they should have done at least double that to begin restoring the economy. Fiscal measures should have followed those structural reforms. Yet, the opposite sequencing took place, first fiscal contraction and then reforms. So the economy is stuck.

Now, the majority of politicians see the problem, but do not have the ability or maturity to articulate a plan on how Greece can move forward. The dialogue about the three-year fiscal plan demonstrated this. No dialogue took place at all in the Greek Parliament. Although the majority of people are ready for the changes, our politicians remain permanently stuck to their past ways and methods. This connection with past habits, and the refusal to think out of the box in order to save the economy and society turns out to be the most conservative policy that is still being pursued in Greece, whether the extreme left or extreme right is following it.  I would dare say the Greeks are currently divided into two camps – those, who want to see the country creating wealth and jobs again and those, who insist that the country should remain in the past and want someone to pay them for that.

What is next for Greece?

We have a double task:  First, to carry the reforms and fix the supply side of the economy and second, to stop the recession, namely avoid the collapse of demand.  The task for Europeans is to provide much needed liquidity.  For Greeks, to implement the deep but necessary structural reforms, which the political system had not realized how important they were back in 2010. At the same time, we should not implement new policies that will continue to reduce market demand and deepen the recession in 2014 and 2015. Negative growth must stop. This is a difficult balance. The political system must put a large number of people to work really hard for the common good, just like Lucas Papademos’ government did with his office people - seven days a week, 16 hours a day.

How do you evaluate the activities of the three-party coalition government so far?

I think that today's government knows perfectly well what needs to be done, something that was not yet fully clear back in 2010. The government’s work will become apparent hereafter. Important steps have been made already. The Prime Minister has shown that he knows very well the problems of the Greek economy. He has undertaken to closely oversee the ministries. He understands the liquidity problems of companies.  He understands he has rebuild credibility for the country. He tries to facilitate private investment. He emphasizes public investment and the absorption of European Union structural funds. The government must also take the opportunity to present to the rest of Europe what Greece has achieved over the past three years in fiscal consolidation, in competitiveness, in structural reforms.  Greece is setting the stage for a healthy recovery.  


Tags: EconomyMarketsBanksHardouvelisEurobankGreeceCrisisRecapitalization
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