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Yannis Stournaras: The joining of Bulgaria in the euro zone will be beneficial for everybody

22 January 2010 / 23:01:02  GRReporter
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Professor Yannis Stournaras is the director of the Foundation for economic and industrial researches. Before heading the foundation he has been a vice president of the National gas company (1994 – 1997), chief economic advisor of the Ministry of economy and finance (1994 – 2000), chairman and executive director of Emporiki Bank and vice president of the Association of the Greek banks. He has graduated “Economic theories and policies” at the Oxford University. Victoria Mindova spoke to professor Yannis Stournaras.

The assessment agency “Moody’s” predicts the “slow death” of the Greek economy and Financial Times talks about the “Greek tragedy”. As a whole the image of Greece through the eyes of the foreign markets is not too good. How did we get to this position?

- Everything started because in 2009 all of a sudden became clear that the national deficit is not 3% nor it is 5% of the GDP as the government had stated in the beginning of the year, but it is 12,7%. This was the beginning of the whole problem.

According to you can this be interpreted as a lack of trust on the part of the international appraisers in the powers of the government to deal with the economic situation in the country after the first 100 days of the PASOK government and how can we restore our lost positions?

- In the current situation the only thing which the international markets expect the Greek government to do is to immediately undertake the necessary measures, which should correspond to the seriousness of the problem (high national deficit and high foreign debt). These measures we are talking about are included in the Program for stability and development of the government and faced positive reactions of the European partners. Nevertheless the government has to act firmly and apply immediately all possible economic mechanisms to fight the crisis and along with that stabilize the competitiveness of the market. It has to act immediately – there is no time to waste.

You say that all economic mechanisms have to be put in action immediately. At the press conference after the ECOFIN meeting few days ago, the minister of finance Georgios Papakonstantinou said that if until June this year the national deficit hasn’t dropped to 10,7% of the GDP, the government will enforce additional cuts in the expenses. What do you think about this waiting?

- Two points decrease in the national deficit until June is a step in the right direction, however all economic mechanisms have to be put in action immediately. We have no time to wait for the results of the development of the Greek economy. It is necessary to apply all measures stipulated in the Program for stability and development including the additional once like increase of the excise duties of the fuels, freeing the “closed” sectors on the market etc. Like this we would find new sources of incomes, we will effectively decrase the value of the spread indexes and will secure a cheaper crediting and at the same time we will save some expenses of the public funds.

I would like you to explain us a little more detailed about the so called “closed” profession on the Greek market. Which are they and how will their freeing help for the rehabilitation of the financial equilibrium in the economy? 

- The closed professions are monopoly organizations of the market operating in contradiction to the principles of the market economy. The transportation of goods and the cabotage in the ferry boats are two examples of sectors from which the Greek economy is loosing billions of euro from unused incomes, duties and taxes. These sectors are currently closed for new entrepreneurs and there is no competition at all in the offered services.

Many international experts suggest a sharp cut in the expenses of the public sector in order for the country to deal with its dual problem – the high national deficit and the enormous foreign debt. Do you also share this opinion and why? 

- Yes this is absolutely true. The problem of the Greek economy grew in the last few years as a result of three new trends. The first two were related to the excessive increase of the expenses for salaries in the public sector (this includes the unsystematic hiring of and unreasonable increase of the salaries and the supplements for the public sector employees) and the expenses for pensions without the respective incomes in the social-security funds. The third is the long term lack of measures to fight tax frauds and the optimization of the control over the particular payment of the social security installments. The Foundation for economic and industrial researches presented to the government a set of suggestions on how could we efficiently deal with these problems. Some of the measures were included in the Program for stability and development of the new government. Unfortunately not all of our suggestions found their place in it. It is our recommendation for the governors to take into consideration all measures we have described. One of the examples is that the government has to finally present to the public what they intend to do to fight the problem with the social security funds.

Many economic experts are saying that in the period of recession in which is Greece right now, taxes have to be lowered in order to have some movement on the market. We are currently witnessing exactly the opposite event. What is your opinion about the income policy of the government and the tax reform as a whole?

Tags: SocietyPoliticsEconomy
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