Friday, July 1, 2011

Greek finance minister aims return to growth in 2012

by Dina Kyriakidou

ATHENS, July 1 (Reuters) - Greece's economy will slump further before starting to expand again next year thanks to fast injections of EU funds and reforms to spur growth, new Finance Minister Evangelos Venizelos told Reuters on Friday.

In his first interview to international media since being appointed last month, Venizelos pledged to accelerate efforts to sell off state companies and crack down on tax evasion, saying violent anti-austerity protests masked a high level of political consensus on the need to reform and keep Greece in the euro zone.

He said the economy would shrink by 3.9 percent this year but would need to return to growth if Greece was to make progress cutting its enormous public debt.

"This is our obligation, our hope and our target: to return to growth next year. Because without growth it is not possible to achieve our strategic targets," he said.

The comments came a day after the Greek parliament approved the second of two sweeping austerity bills that cleared the way for the European Union and International Monetary Fund to release a 12 billion euro ($17 billion) loan tranche Athens urgently needs to stave off bankruptcy.

Venizelos, a ruling party heavyweight who has held several portfolios and prepared the successful 2004 Olympics, said his dual role as deputy Prime Minister would give him the authority to push the measures through and put Greece back on track to meet targets set in a 110 billion euro EU/IMF bailout.

He said his top priorities were to reform an inefficient tax system and launch an ambitious privatisation plan slated to rake in 50 billion euros by 2015.

"The Prime Minister and I can coordinate the system in a fast and efficient way," he said."Implementation is difficult, of course. This is why we cannot waste a single hour. I have instructed my staff that each day must count for a month."

Privatisations and Taxes

Venizelos was picked in a cabinet reshuffle on June 17 to replace George Papaconstantinou, who lost the post after missing key revenue targets due to persistent tax evasion and was slow to launch crucial privatisations.

"We will set up immediately the sovereign fund for privatisations to achieve the target set for this year and until 2015. The 2011 target is feasible because it involves assets that are not burdened with complicated legal issues," he said.

According to the bailout plan, Greece must raise 5 billion euros from state selloffs this year and another 10 billion in 2012. So far, no privatisations have been completed during the socialists' 19 months in power.

Many economists have questioned whether the privatisation target is realistic, given fierce opposition by Greek unions, which have held rolling strikes to protest the sale of state companies including electricity group PPC (DEH).

But Venizelos said a series of public utilities, ports, banks and other state assets slated for sale this year would go fast and he was already preparing the ground for more complicated privatisations down the line.

"The participation of the Greek shipping community in the privatisation effort may be decisive. I will meet their representatives next week to discuss their problems and their concerns," he said, raising hopes Greece wealthy shipowners may be interested in some of the assets.

Failure to battle rampant tax evasion has been blamed for missing revenue targets, requiring a fresh wave of unpopular measures to plug the hole. Venizelos said a new tax law addressing such weaknesses will be in place in a few weeks.

This would include steps such as giving authorities access to bank transactions and setting more rigorous criteria for capturing undeclared income.

"We can't be asking the Swiss for data while we can't access our own," he said.

The state would cooperate with private auditing companies and other countries for the first time and any changes would be fiscally neutral.

"We want to further increase our revenues and cut spending to be comfortably within our targets. We want this tax law reform to boost simplicity, stability and justice and to boost economic growth," he said.

Seeking growth

Venizelos said gross domestic product would contract by 3.9 percent this year, more sharply than the previous government forecast of 3.5 percent shrinkage, and unemployment would reach 16-17 percent this year.

"Every unemployed person is unemployed 100 percent. The pro-growth measures will make Greece business-friendly and benefit workers," he said.

Greece was at an advanced stage of agreeing to frontload available EU funds while easing rules which require matching funds from national governments to get quick money injected into the slumping economy, he said, while measures were taken to cut red tape.

International banks and insurers were discussing ways to roll over Greek debt and help avert sovereign default, in a debt crisis that has shaken the euro.

Venizelos welcomed plans to help Greece, saying the size of a second bailout package would be determined to a large extent by the size of the private sector involvement and the country's borrowing needs. Athens has been shut out of international bond markets for over a year.

"We salute the willingness of banks and the private sector to participate voluntarily in a way that must be safe and in no way trigger a credit event or a selective default," he said.

Despite violent anti-austerity riots this week, the minister downplayed fears that lack of wider political consensus and social unrest would derail Greek efforts to meet targets set by its international lenders.

The main conservative opposition New Democracy party, which opposes the bailout deal, voted for some parts of a 5-year austerity plan dictating 28 billion euros worth of tax hikes and spending cuts which prompted violent street protests.

"The impression abroad of total lack of consensus is somewhat unjustified because our differences are minimal and there is wide agreement on the fundamental issues," he said.

He said he would work with New Democracy to appoint a 5-member board to the privatisation agency and he hoped to cooperate on tax reforms and the fight against tax evasion.

Most political parties agreed it was critical for Greece to remain in the euro, to reform its lumbering state system, make the economy competitive and get a modern tax system.

As for the thousands that have taken to the streets to oppose austerity, he says the reaction is not that vehement considering the shock society has suffered from the crisis.

"Our single top priority is to regain the country's credibility abroad and the people's trust at home," he said. "We are paying a huge political cost but we have a mission to save the country and both the Prime Minister and I are determined to carry it out," Venizelos said.

* Relative link: Greek finance minister aims return to growth in 2012, (Reuters. 01.07.2011)


2011-07-01. Venizelos interview with Reuters (excerpts) from Evangelos Venizelos on Vimeo.


Tags: Interviews