Wednesday, January 11, 2012
Keynote speech of Deputy Prime Minister and Finance Minister of Greece, Mr. Evangelos Venizelos at the official dinner closing the 1st Economic Forum Greece-UAE 2012
Excellencies, ladies and gentlemen, dear friends,
First of all, I would like to warmly thank the organizers of this meeting, primarily my dear colleague and friend, Theodore Pangalos, who invited me to address tonight’s event.
I had the opportunity to meet His Highness the Foreign Minister, with whom we overviewed our bilateral relations and the situation in the wider region. For Greece, the United Arab Emirates is a point of reference in the Gulf Area. It is a country with which we maintain close and sincere ties of friendship as well as strategic cooperation.
As Minister of Defense, I also had the chance and the opportunity to handle the involvement of Abu Dhabi Mar and Privinvest of Mr. Safa’s family in one of the most important production units of our country, the Hellenic Shipyards of Skaramagas.
Excellencies, ladies and gentlemen, as you know, for over two and a half years Greece has been going through an acute phase of fiscal and financial crisis that keeps recycling itself internationally from 2008 onwards. Unfortunately, our country’s poor fiscal condition, high public debt and high fiscal deficits crossed paths with the crisis in the financial sector as well as the crisis in the very model of growth, as is reflected by poor competitiveness -compared to EU standards- and the very high current account deficit.
Since May 2010, Greek economy has been following a special adjustment and support program in collaboration with our European partners, the Euro Area, the European Commission, the European Central Bank and the International Monetary Fund. The pillars of this adjustment program are:
a. the drastic reduction of the fiscal deficit aiming at having primary surpluses, and
b. the immediate and intensive implementation of structural reforms that will strengthen the Greek economy’s competitiveness, liberalize the market, transform Greece into an investment-friendly country and enable it to use its major comparative advantages: its keystone position in very important sectors such as tourism and shipping, its primary sector and the strong intellectual capital.
The main obstacle that always exists in the implementation of such adjustment programs is that the reduction of fiscal deficit on a very short period of time, and during a recession, recycles the problem itself and intensifies recession. This is our country’s major problem: in 2009 we had a primary deficit of EUR24 billion and two years later, by 2011, we had it reduced by approximately EUR20 billion, in two years! But this process took place under conditions of cumulative and deep recession, which is now entering its fourth year and surpasses 15% of Greek GDP. So this also means high unemployment rates and a reduction in the liquidity levels, which leads to a need for radical changes in the Greek banking sector and for a brave recapitalization of Greek banks in order for them to enter strong to the new era.
On the other hand, the structural reforms program is of vital importance and of an urgent need for the country.
Despite the problems and the insecurity in Greece and the entire Euro Area, Greece is still one of the 30 largest economies in the world, in absolute numbers, a country with great growth potential, part of the European Union and the Euro Area’s hard core and a country which has an irrevocable desire to remain faithful in its European prospect and status.
Perhaps our main problem is the international and European environment of economic and financial uncertainty and insecurity. Unfortunately, while the Euro Area uses the second most powerful currency in the world and is the most powerful area of economic activity, it does not possess the institutional framework that would allow it to take prompt, final and convincing decisions. Europe, neither by itself nor in cooperation with the United States, ever managed to formulate the necessary institutions of global economic governance.
In reality, what is taking place is an asymmetrical warfare between states, international organizations and the organized market entities on the one hand and the speculative aspects of the market on the other hand. That is why the European Union and the Euro Area in particular are forced to discuss over and over again the same topics, to confirm, complement and specify decisions that are taken at the highest political level possible but, in the end, those decisions are evaluated by the markets and their reactions.
And this is reasonable, because now there is a structural relation based on the high borrowing needs of the states, and in this particular case of the Euro Area states. When the borrowing needs of the Euro Area member-states for 2012 exceed EUR1.6 trillion, it is only logical to have this asymmetrical relationship between countries and markets.
In reality, history poses the exact same question that markets do: Right now, the European Union has a strong currency that needs institutions of political support, which can exercise complete monetary, fiscal and financial policies. Will it take then the next step in completing its integration process? That is the message conveyed by the last EU Council decision of December 9, 2011, through its new Fiscal Compact and through the need to boost the capacity of the Euro Area to intervene with the use of new financial mechanisms –such as EFSF now and ESM later- under a much more active and better-targeted cooperation between the Euro Area and the IMF.
The Greek case has its own peculiarities, based on the fact that –apart from the common European problems, namely the common problem of the fiscal deficit- we also have to deal with a very high public debt that goes beyond the Euro Area’s accepted levels and poses an historical burden for us.
I would be much happier as Minister of Finance, if the question of the reduction of public debt had been addressed right from the start, during the first phase of the implementation of the Greek economy’s fiscal adjustment program in the spring of 2010. But even now, at this late stage -following the interim decision of July 21 and after the final EU Council decision of October 26- we can proceed in a scheme that ensures the long-term viability and sustainability of the Greek public debt. This scheme limits Greek pubic debt at a level of 120 per cent of GDP until 2020, which is achievable by the double support and participation of the official and the private sectors – this is the famous PSI, the private sector involvement, on a voluntary basis.
Our discussions with the private sector regarding the PSI scheme have advanced and are now at a very good point. We are ready for a next meeting, maybe tomorrow morning, with our friend, Charles Dallara, from IIF. I would like to think that with the support of our institutional partners, this scheme will be completed and will confirm the basic parameters and the keystone objective of the EU Council decision of October 26 for a sustainable public debt in the long run, which will have been reduced by about EUR100 billion, or 47 per cent of GDP, and will be absolutely sustainable by 2020.
Of course, all that presupposes that we will successfully conclude our negotiations with our institutional partners -due to start on Monday- on the new support program of EUR130 billion for the Greek economy. Overall, the support program provided by our institutional partners reaches now EUR240 billion. This is the major, the most important support program in the world.
Greece now has the political and social requirements that allow it to prove its determination and capacity to implement this program and remain faithful to the commitments that we have undertaken. This will affect the business environment. It transforms Greece into an investment-friendly country because the fundamental structural reforms that we promote concern, first, the tax and judicial systems.
We want Greece to set a great example of a country respecting the rule of law; we want judicial institutions and institutions of mediation and arbitration to be efficient and to provide the necessary safety net to Greek and foreign business community and investors. Over the next few weeks we want to come up with a new, simple, fair, solid and easily understandable tax system, a competitive tax system that creates conditions for growth and social cohesion.
We are well aware that those are two major problems for any investments, along with the need to lift bureaucratic obstacles and to have a normal functioning level of public administration which for us always remains a challenge. But I do believe that important steps are taken, steps that must be accelerated and be more decisive.
Beyond fiscal adjustment and structural reforms, the support program has a third pillar, which is of great importance: the pillar of privatizations. We have established a special fund for privatizations that operates in cooperation with our institutional partners -the European Commission, the European Central Bank and the International Monetary Fund- and promotes a very drastic and bold privatization portfolio which at the same time is also a challenge for direct investment in Greece.
This portfolio is about real estate and tourism, energy, ports, airports, transportation, as well as the state natural-gas company, for example.
You had the opportunity to listen to a presentation by Mr. Dimitropoulos, the CEO of this Fund. As the Minister in charge for this process, I can guarantee you that there is a simple, safe and secure institutional framework. For us, privatizations are not a divestment process but a method for changing the model for growth so that we can achieve a smaller, more flexible and more effective state and, at the same time, enhance competitiveness and the functioning of the market by enhancing, in reality, employment in our country.
The period we are going through is full of challenges. For us, it is a defining period upon which depends the future of our country for the next generations. It is a period during which we are called to prove that the Greek nation maintains its historical capacities and virtues, it can face up dangers and turn them into opportunity.
For us, Greece’s close ties with the Arab world make up a solid parameter of our foreign and developmental policy. And this is not just rhetoric. I believe that this is a very attractive field for bilateral economic and political cooperation for our two countries.
Excellencies, ladies and gentlemen,
We fight to regain the lost ground of our national competitiveness and give Greece its economic dynamism and the place it deserves in history.
In this effort that requires very tough sacrifices of the Greek people, we need international allies. Undoubtedly, we have found such allies in the face of our partners in the Euro Area and the European Union. But they are not enough. Our traditional and historic friends must come by our side too; and we will always be by their side. And those friends are in the Arab world.
This is the message conveyed by the Greek government. This is a message conveyed by the Greek nation. A message that is clear, simple and honest.
I am certain, ladies and gentlemen, that our Arab friends, who know how to appreciate the honesty of intentions, of positions and of proposals, will answer that call. Thank you very much for your attention. -