Monday, March 5, 2012
Interview with Bloomberg’s Nicole Itano
Bloomberg: Thank you very much for joining us Mr. Venizelos
Venizelos: It is my pleasure, thank you very much for coming to Athens.
Bloomberg: I’d just like to start with… you have launched an unprecedented debt swap, the largest in history. Why should investors –particularly in the United States– participate?
Venizelos: Because it is the best offer. And this is the best offer because it is the only one, the only existing offer. This offer is the result of a very long and difficult negotiation with our institutional partners, with the so-called official sector and also the result of a very long and difficult consultation in detail with the representatives of the private sector, with the IIF, Mr. Charles Dallara, and also Mr. Jean Lemière, the co-chairman of the steering committee of the creditors committee.
After this very long experience of negotiations and consultations, we finally have this offer, this financial engineering. My impression is that everybody understands very well how attractive and how important is this offer because we have four very important and unique elements and incentives:
- We have a co-financing scheme for the private sector on the same level with the public, the official sector, pari-pasu.
- We also have English law as governing law.
- We have a sweetener in cash equivalent of 30 billion euro.
- And we also have the so-called GDP warrant. And this GDP warrant is also a declaration of good faith for the perspectives of the Greek economy.
Bloomberg: Now you say that this is the only offer? What happens if it fails? Does it mean that Greece will simply default on its bonds and not pay them?
Venizelos: This is the decision of the last Eurogroup. We have the endorsement of our institutional partners, especially on the concrete offer, the concrete scheme of the PSI. The market knows very well the situation, it knows very well Greece’s funding needs and also the fiscal and financial possibilities and capabilities of Greece.
Bloomberg: So you are saying Greece has no money to pay this for if this bond swap…
Venizelos: I prefer to avoid a simple and direct answer. My wording is different: the market, the professional market, understands very well the situation, the possibilities, the balance of forces and so I am very optimistic for the acceptance of the Greek offer.
Bloomberg: Do you have any hard evidence about what participation would be in the debt swap?
Venizelos: This it the critical week. We now wait for the participation, first of all, for the Greek community of bond holders. And I am very optimistic because we have some indications, not proof. So we send a very clear message. We repeat our offer. I have a feeling that the market understands very well the situation and the two very important and positive statements: one for the Board of Directors of the IIF and the other one from the creditor committee are two very important indications for a successful PSI.
Bloomberg: You said “very strong indications”. Can you tell us what those indications are? Conversations you have had with banks, with investors?
Venizelos: Yes, of course. But I must always make the distinction between declarations or moral commitments and a real legal commitment. So I am waiting for the final, official participation. Now is the appropriate momentum to send our message about the attractiveness of this offer and also about the real possibilities of the Greek economy to pay the so-called holdout.
Bloomberg: There has been a little bit of confusion I think among investors about the CACs. At what stage, at what percentage involvement would you activate those? Is it 75%, anything less than 90%?
Venizelos: According to the new national legislation in CACs, we need a quorum of 50% and a super majority of 2/3 of participants for the activation of CACs. This is a very simple and very practical rule, according to the legislation in different other legal orders, for example the English.
Bloomberg: Jean-Claude Juncker recently said, a few days ago I think that, “if this plan fails, there is a Plan B”. What is that “Plan B?”
Venizelos: For me, we only have a “Plan A”. Our target, our commitment and our ambition is to fully implement the “Plan A.” This “Plan A” is very well done and the result of a very long and professional elaboration on the fields of the official and the private sectors.
Bloomberg: But is there a “Plan B?”
Venizelos: It is not possible to open a discussion on a “Plan B” before the full implementation of the “Plan A.” The acceptance and full implementation of the existing plan, the so-called “Plan A” is the best solution for Greece, for Eurozone and also for creditors and holders.
Bloomberg: But Greece is up against the clock to a certain degree. You have this major bond redemption later this month, on the 20th. If there is a delay or a problem with the bond swap, what happens then? Will Europe still step-in and give you part of the bailout funds to be able to meet that redemption?
Venizelos This is a very good question, but one for next week not this week. This is the week for the implementation of our offer. I am very optimistic and from this point of view I prefer to avoid any other discussion.
Bloomberg: Right now, at this moment, what is your expectation for participation? Are you still hoping, expecting a 90%?
Venizelos: My expectation and also the expectation of the official sector – because we have the endorsement and active participation of our institutional partners – is to achieve the highest participation, almost a universal participation. This is our target and this is our need.
Bloomberg: There has been some statements from retail groups, consumer groups, in Italy and Germany over the past few days suggesting to retail investors that they not participate. Is this a concern for you and how many bonds do they hold?
Venizelos: Every bond holder has the possibility to participate of not participate. This is a free option, a free decision. For me and also for the Greek bondholders community the best solution is the participation because without participation it is not possible to achieve the same package. The package is very balanced, very attractive, and very good.
Bloomberg: Are there specific segments of people who hold bonds that you are more worried about? Retail bond holders, hedge funds, banks outside of Europe? Are there areas of concern there?
Venizelos: We understand very well the fragmentation or stratification of the market. For us, the bondholder is a unique personality and thus we must organize an equal treatment for everybody.
Bloomberg: Finally, on this topic: Credit Default Swaps. Do you expect this deal to trigger CDS and are your worried if it does?
Venizelos: The triggering of CDS’s is not a problem for the Greek or the European economy. It is not my job to give an answer. As I understand, ISDA knows very well the situation and I can express my satisfaction for the first reaction, for the first decision by the determination committee of ISDA.
Bloomberg: Is it a goal of yours and your European partners to try and avoid triggering the CDS?
Venizelos: Of course, if we can avoid the triggering of CDS’s, this is the best solution. This is why we repeat our offer and also our target to achieve near universal participation. With a near universal participation it is not necessary to activate the CACs. But this clause exists in our legal order and we are ready to implement the legislation if necessary.
Bloomberg: Can we talk a little bit about growth because of course this debt swap reduces Greece’s debt/GDP ratio but ultimately Greece has to return to growth. You haven’t released the GDP estimates for this year. The most recent we have had is from the European Commission who expects the economy to shirk by 4.4% this year. Do you agree with that analysis?
Venizelos: Without doubt, we have a cumulative recession of about 20% of GDP. This is a unique negative phenomenon for a peace period. But on the other hand, we now have before us the breakthrough after the PSI and after the implementation of the new program for the support of the Greek economy, our target is to achieve a positive growth and according to the assessment and assumption of the new programme, next year, 2013, is the first year of growth. Greece is now - after the approval of the new programme and after the implementation and completion of the PSI - ready to come back to growth.
Bloomberg: Is that realistic?
E. Venizelos: It is absolutely necessary and this is why we must prepare ourselves and organize a kind of national movement in order to achieve our target to come back to growth.
Bloomberg: You said earlier today in an interview with Antenna TV here in Greece that the current debt/GDP ratio was 170% or about 170%. My reading of the papers, of the documentation at the recent troika report and this new bailout is based on: they were predicting that it would peak at 168% in 2013 so you have already exceeded what they said the peak was. Does this mean there is going to have to be some kind of re-evaluation?
Venizelos: No, no. I absolutely agree with the last assumptions and predictions of our institutional partners and especially with the assumptions and predictions of the IMF. For us, the target is very clear: a debt/GDP ratio of 120% by 2020. This is an achievable target and now, after the finalization of this long and difficult procedure and after the launching of the new programme, we are ready to achieve our target. Greece, after this very bad historical experience of fiscal and social crisis is again ready to win a European position as a member-state of the Eurozone without the negative parameters of this crisis.
Bloomberg: Throughout this entire crisis, if proved that every analysis, every debt/GDP and deficit and growth prediction has been too optimistic. That the debt has gone faster than expected, the deficit is…
Venizelos: I do not agree. The so-called Debt Sustainability Analysis prepared by the IMF and the other institutional partners of the so-called troika, is very tough and also very reserved. I am more optimistic than the main parameters of this DSA. But we accept with pleasure a more conservative approach, because my target, the target of our nation and our government is to achieve these critical figures of debt/GDP ratio of 120% by 2020. This is a realistic – not optimistic - and achievable target.
Bloomberg: There has been some discussion though that Greece might need a third bailout after the second bailout. Do you think that’s the case?
Venizelos: Not at all. Because after the implementation of the PSI and after this radical reduction of our public debt we will have a new era before us. I am indeed very optimistic because the Greek economy with the necessary flexibility is always more adaptable than the theoretical models.
Bloomberg: Are you convinced that Greece’s European partners would back Greece in a third bailout if it became necessary?
Venizelos: This is explicitly a specific chapter of the last decision of the Eurogroup.
Bloomberg: You said a few weeks ago that there were people or institutions within Europe that wanted Greece out of the euro. Is that still the case and who are those?
Venizelos: This was a comment before the last decision of the approval of the new program and the approval of the final scheme of the PSI.
Bloomberg: So, you’re saying that this is no longer the case?
Venizelos: For me the result is the critical point.
Bloomberg: But do you think there’s a weariness with Greece, a Greek fatigue that is growing that people and some countries are tired of bailing Greece out?
Venizelos: I accept that this phenomenon of the so-called “Greek fatigue” is a parameter but finally for our European partners Greece is an integral part of the European community and family. Without Greece it is not possible to preserve the integrity of the European phenomenon.
Bloomberg: A couple of days ago Jean Claude Juncker said that one of the goals was to make sure that Greece didn’t feel humiliated in this process but I think there has been quite a sense of humiliation here in Greece. Do you feel that Greece has been humiliated through this process? Has its sovereignty not respected?
Venizelos: We are always waiting from the part of our European partners to respect the dignity of our people. Greece is a historical nation and the dignity of our people is for us the first and most important value.
Bloomberg: Are there red lines that Greece would not be willing to cross?
Venizelos: It is not my mission now to send such a message. But everybody understands in Europe that we have our own dignity and we expect from the part of our institutional partners to respect the institutional dignity and the national pride of Greece.
Bloomberg: I’d like to ask a little bit about the political situation here because that has been one of the big concerns of Greece’s European partners. Will Greece actually make good on its promises for reforms, for keeping its fiscal house in order. Elections will be coming up soon. Do we have a date yet for those elections?
Venizelos: Elections is something natural and absolutely linked with a democratic regime. But now for us the next parliamentary elections are a great opportunity for a new legitimacy. On the other hand, we understand very well that we have some national commitments and we are ready to implement and fulfill our commitments.
Bloomberg: With those elections, it looks if you look at Poland, whatever government comes out… will that be a coalition government?
Venizelos: It is very easy for me to present some not very obvious parameters for the Greek electoral system. It is not possible, according to the Greek electoral system, to “avoid” – if I can use this term - a strong and stable government. It is absolutely certain that we are ready to take the responsibilities for the future of the country. The country needs a very strong political direction.
Bloomberg: So what would you tell or what have you been telling your European partners who are concerned about the possibility of a weak or fragmented government here after elections?
Venizelos: Within the frame of the Greek political spectrum and according to the main rules of the Greek electoral system the appointment of a strong a stable government is something absolutely certain. We are ready to take our responsibilities and fulfill our commitments and our obligations before our partners.
Bloomberg: Is there a cross-party consensus then that shows that Greece is on the right path?
Venizelos: This is our national obligation. The political consensus is the so-called “derivative” of the national responsibility. And we have the necessary national responsibility to take not only a loan from our institutional partners but also the conditionality and the commitments linked to this loan.
Bloomberg: Will you be running for leader of PASOK?
Venizelos: I prefer to avoid this kind of discussion during this week of the PSI because I am here as the representative of the Greek government and I speak with you on behalf not only of my party but also on behalf of the Greek parliament, the Greek government, the Greek political system. I am here in order to represent the Greek nation, the Greek people and not only my socialist party.
Bloomberg: People are watching Greece outside of Greece often see pictures on the streets of violent protests, of riots and think that the Greek people are losing faith with their government, losing faith with this program…
Venizelos: Yes, because we have many sacrifices. This program is a program of very strong and maybe violent transformation of the Greek economy and the Greek society. But thanks to the sacrifices of our people we are now ready to implement a new program and also to complete the PSI procedure. This is something very important. And it is a great occasion for me during this interview to express my appreciation for the Greek citizens because without the support and the sacrifices of our people it would not be possible for us to achieve our national target, to establish Greece as a European country with the necessary fiscal, financial and economic sovereignty.
Bloomberg: Are ordinary Greeks losing faith or are they willing to stick with their government through this?
Venizelos: According to the last polls, the big majority of the public opinion here in Greece is absolutely positive for the European future of the country. And also the big majority accepts that the new support program is absolutely necessary for the future of our country.
Bloomberg: Do Greeks understand what default would actually mean? Have you spelled that out to them? Do they understand this?
Venizelos: This is my principle argument. Our main target, our strategic target, is to avoid this experience, to avoid the experience of a default. And therefore we have before us a unique strategy: to implement the program and finalize the PSI procedure.
Bloomberg: What would a chaotic default mean for ordinary Greeks?
Venizelos: It is very difficult to present a description of this phenomenon and thus my target is to avoid the default.
Bloomberg: In your speeches to Greeks you have often called on the experience of Argentina, saying that Greece does not want to repeat the experience of Argentina. One aspect of that has also been the lawsuits following the default. Do you feel or are you worried about legal action being taken against Greece because of this debt swap, particularly if CACs are enforced?
Venizelos: This is a question about a possible liability. My opinion and my legal opinion also, not only my political opinion, is that this procedure is absolutely safe for Greece and also for our institutional partners. In any case, here in Greece we have an independent judicial system.
Bloomberg: As Europe has gone through this process with Greece, they have been trying to do two things which just sometimes seem a little contradictory: on one hand saving Greece and on the other hand creating a firewall to protect the rest of Europe if Greece isn’t able to avoid a chaotic default. Do you see a contradiction there?
Venizelos: Greece is a test-case for the Eurozone and because of that I am very optimistic. I know very well that for Eurozone Greece is not only a problem but also the beginning of a solution strategy.
Bloomberg: Are you confident then that if this debt swap goes ahead successfully that the worst is over for Greece?
Venizelos: Yes, of course. This is something very important and this is why I insist and I repeat once again how important is for us to finalize this procedure.
Bloomberg: So you are optimistic that things will get better once this debt swap has been…
Venizelos: It is my political and national obligation to be optimistic. But also on a professional basis I can repeat that our offer is very attractive and based on the criteria of the market I understand very wall that the reaction, the response of the market will be very positive.
Bloomberg: Thank you very much. -