Thessaloniki, September 11, 2011


Statement of the Deputy Prime Minister and Finance Minister of the Hellenic Republic, following the informal Cabinet Meeting in Thessaloniki

left-red-arrowGood afternoon. A very critical and long Cabinet meeting came to an end a while ago. This is the second crucial Cabinet meeting since Tuesday, when we announced the decision to drastically speed up the structural changes for the new single payroll and grading system of the public sector employees, which will be applied in the wider public sector, for the labor reserve, for the restructuring of public organizations, for the liberalization of the labor market and for the enhancement of our national competitiveness.

The Prime Minister asked the Cabinet today to address a very critical situation that has developed in recent days in the Eurozone, in Europe and the global markets. There is no doubt that the lack of comprehensive institutions of economic governance at European and international level, acts as a catalyst and influences political and institutional developments, particularly in the European Union, which is at a threshold in the historical and institutional process of European integration.

This is our continent’s big problem, this is the big problem of the Eurozone which has the might of the common currency, the euro, an equally important to the dollar currency in international markets, but does not have the appropriate institutional and political support, since the Eurozone is a union of states that operates as an enlarged cooperation scheme within the European Union and it is not a mature integrated federal union like the U.S.

What happened in these recent days? We must clarify -this is the unanimous assessment of the Cabinet- that what we must face now has nothing to do with Troika’s visit and the so-called fifth review of Greece's support program provided by our institutional partners from the European Union, the European Central Bank and the International Monetary Fund.

The departure of the heads of the Troika last week, on September 2, was well planned and agreed, as I have stretched repeatedly and as the Troika itself has said in its relevant statements. Their absence for a few days  was due to our need to process not only assess of the current budget for 2011, but also of the new draft budget for 2012, in the context of the medium-term fiscal adjustment program.

We never ceased to be in contact with the Troika, the European Commission and Commissioner Olli Rehn, with whom we have exchanged many phone calls and had long talks all these days, most recently this morning. There is no problem with our agreement with the European Commission and the Troika. This is something easy, something that has never created any problem whatsoever. But there are some things that have occurred in the meantime and have changed the landscape.

And this is not the Troika, but the attitude of some very important member-states that play a decisive role in the affairs of the Eurozone. You see, every country, every government, every parliament, every political system, every society in the Eurozone have their own problems and their own priorities: these might be a bad election result at a regional level, a disagreement between parties in a coalition government, pressure from the national media, or a problem in the financial system of any given country. Then, all that, of course, swell, become bigger problems, not just national, but European problems and problems of the Eurozone.

I remind you that in the last few days we had multiple press reports, leaks and comments in relation to the alleged existence of a plan B to address the imminent -we have heard that too many times- bankruptcy of Greece through the weekend. The German government has denied such rumors. I myself, speaking for the Greek government, had to make a strong and clear statement that these are, unfortunately, games of bad taste, which are repeated over and over again. It is an organized speculation that is not targeting just Greece, but the heart of the euro, the Eurozone as a whole.

We had had, we still have and unfortunately we will be having such phenomena, because the notorious markets move with greater ease and greater speed, they are rampant, while the states and international organizations obey rules and answer to the citizens.

That grey atmosphere exists, however, and we should react to it all together as a nation, as a society, not just the Government, not just the state, but Greece as our common home, our country.

Last week, Finance Ministers of the 7 richest countries in the world, the G7, met in Marseilles. Again, there were leaks, rumors, alleged dialogues over Greece.

Greece, is a middle-sized European country, a country which belongs to the 27 strongest economies in the world despite the crisis and despite the recession. It is a country that has achieved a lot in recent decades thanks to its citizens and their work. But Greece is not the center of Europe. Greece is too small to be the catalyst for the future of the Eurozone.

We represent approximately 2% of Eurozone’s GDP, we have a little less than 3% of Eurozone’s public debt. There are other countries that have 25% of the Euro Area’s public debt alone. There are countries that can influence the GDP of the Eurozone and its macroeconomic performance.

But this is not Greece’s case and it is not possible for us to let our country become a pretext or a scapegoat for developments that are out of our hands, but are based on us and work against us. Therefore we must not allow others to use us as a pretext.

The question is very simple: We have a big recession, a recession which is far bigger than what the troika had predicted last May, a recession much greater than that upon which the mid-term program was designed in early June, a recession that is up to 5.3%. This recession, of course, must be stopped and must be halted.

Our discussions with the Troika are always focused on this: why do we have more recession, what can we do to help our country grow, how can we stop the recession?

This is always our first concern and our first priority. Because "recession" means unemployment, because "recession" means disinvestment, because "recession" means lower income, because "recession" means insecurity.

It is indeed very important to discuss how we can escalate to adjusting our goals, whether we can move a little faster or a little slower with a difference of 0.5% or 0.7% of Greek GDP.

If we really want to see the issue in strategic, national and patriotic terms, if we really want to finally take our head above water and breathe, if we want to relieve the country and the citizens, we should now take a very important decision. This decision was taken today by the Cabinet unanimously and in a very clear way.

Our immediate priority is to fully and completely fulfill our obligations towards our partners, namely the absolute achievement of the budgetary targets of both 2011 and 2012, which in absolute numbers lead to a deficit of € 17.1 billion for 2011 (including the cost of servicing the public debt), and to a deficit of € 14.9 billion for 2012 (also including the cost of servicing the debt).

This means -and all Greeks should listen to this- that we have to follow this path: Greece’s primary deficit in 2009 (the deficit before the interests we pay for the public debt, the annual deficit), was over € 24 billion. In 2010 this primary deficit was € 11.2 billion. That was a drastic reduction.

This year, as long as we achieve our objectives in full, the primary deficit will be only € 1.8 billion, less than 1% of GDP, just 0.8% of GDP. This means that if we also apply the 2012 objectives, we will have a primary surplus of € 3 billion in 2012, finally for the first time. This means that from March or April 2012 we will have come out to the surface of primary surpluses.

What does primary surplus mean? It is the balanced and positive annual management, subtracting the interest. This means that we are shielded politically, economically, diplomatically and financially against any bad development, because the Greek people, the Greek state will have much more revenue than expenses for the annual financial management.

This is and this should be the answer. This is a radical change of the situation. To do that, of course, we must meet our targets, as adapted by the medium-term program. The medium-term plan adopted on June 30 lowered the revenue target for 2011 compared with the budget. From € 55 billion we went down to a little more than € 54 billion.

But the truth is that there are delays. We need about 1% of GDP, or around € 2 billion plus, to achieve our goal according to our projection in the last quarter.

Why do we have delays? Honestly and openly, hand on heart, we are delayed because we lack a comprehensive and effective state apparatus, a tax administration that can run things and get results.

We already have introduced many changes. These changes will be completed by the National Tax System. In recent weeks, things have radically changed: you saw the lists of those owing money to the state, you saw bank secrecy lifted, you saw the tax certificate by private auditors and accountants, you saw the effort to mobilize the private sector in assisting the state in revenue collection.

But all those things will pay off in early 2012. Moreover, society reacts because there is hardship, because there is a recession and because of low income and unemployment. But society also reacts because there is fear, uncertainty and an organized, stubborn, grey economy and tax evasion.

All this has resulted in Greece missing these relatively small amounts from the deficit target, vital to us to reach a primary surplus in a few months. And today’s Cabinet decision means that we really need to make a national and collaborative effort to carry this burden and achieve the goals. And we will do this but not with additional fiscal burdens. There are no additional fiscal burdens. The total burden on society and the economy remains the same. However, we need a mechanism for substituting the reduced fiscal yields.

We must come up with something fair, socially acceptable, something that differentiates the rich from the middle class and the poor, something that can be applied immediately, that can pay off dividends quickly, that does not depend on the tax administration mechanism.

The only measure meeting all those qualities -a measure of direct, universal, application, although scaled in a fair way, with social features- is a special levy on real estate to be paid through the PPC (Public Power Corporation) bill. Its weighted average cost per square meter is approximately € 4. This means that in the poorer areas with low price bands, people will be asked to pay a mere € 0.50 per square meter. On the other hand, where we have luxury homes, for example in the northern suburbs of Athens, some will pay € 10 per sq.m.

We will use the model already provisioned by the law for the Real Estate Tax. The processing -which will be announced Tuesday by the General Secretariat of Information Systems in cooperation with the PPC- will have all the details. And that is because we will, naturally, take into account who’s long-term unemployed, who’s disabled, who has three or more children, who is under the auspices of PPC’s social tariff 1 and social tariff 2 pay scale.

We will be taking into account the changes that have naturally occurred in land valuation, because the so-called social, class division of space means a lot both for income stratification and for the functioning of our society. We also know that the vast majority of Greek capital is invested in real estate.

I remind you that neither the 2009 Property Tax nor the 2010 Single Real Estate tax have been collected yet, due to deficiencies in the tax administration system. So we have an additional reason to move towards this direction.

We will try to collect the special levy by the end of February of next year in order to register the fiscal effect in fiscal year’s 2011 State Budget. For 2012, the collection will be done in several installments so that society is able to afford this burden.

We are fully aware that everything falls together at once: The new tax statement will be threefold, there is the levy on illegally built homes and now there is this additional burden, which is scaled, however, as we’d like to think, in a fair way. We’ll make sure of that, so we have a complete internal justice and moral basis.

We know this very well. We know how heavy a burden this is. But we must act collectively. Pay attention: Now the timetable is very specific. The next two months, September and October -as I said yesterday in my speech before the Chambers- are two «damned months» because 16 Parliaments in the Eurozone member-states must vote to ratify the EFSF Treaty.

If the EFSF Treaty is not ratified, Greece will not be able to get the loan. And it will not be able to provide the guarantees in order to complete the private sector participation, the PSI. Everything is being formulated right now –the balls are in the roulette- all issues: The official sector participation and the private sector participation -from which we have been receiving very positive messages since the day we have started getting back replies from abroad.

But all those things must be completed by October 31. And in October 31, if everything in our hands ultimately succeeds, if we silence those who doubt Greece’s and Greeks’ intentions and capabilities, then the crisis will deescalate and decongest. Money will flow into the market, we will have liquidity, the state will have money and thus banks will have larger liquidity and hence businesses will also do. So, that means there will be money for investments, money for jobs to fight unemployment –together with the € 3.5 billion for programs to fight unemployment through the Employment Agency.

You do realize, therefore, that we must meet the goal to convince both ourselves and others who watch us -and they do so in disbelief. There is a timeless and accumulated sense of disbelief, there are negative stereotypes against Greece and we cannot tolerate the reproduction, by anyone, of mocking or demeaning stereotypes for Greece and Greeks.

If, therefore, we want to give a convincing answer we must reenact the relevant law. But we also must do something more dynamic: to approve the 2012 State Budget bill earlier.

The decision by the Cabinet –unanimous of course- was to accelerate the parliamentary vote for the 2012 State Budget. The draft must be submitted on the first Monday of October, October 3. A sensible timeframe will be provisioned in order to discuss and process the draft in the Standing Finance Committee of Parliament. Immediately afterwards, the final draft will be submitted for a plenary vote, before October 31, if possible.

At the same time, the new National Tax System will be introduced for voting. In the new NTS, we will take an overall view of the problems in VAT collection and performance, of the Income Tax for Individuals and Legal Entities and of the relation between estate and income. And that’s because it is not acceptable having scientists or a businessmen declaring an annual income of less than € 10,000 when they owe tax services a few million euro each. Such persons must provide a credible explanation for this, explain to their fellow citizens why this has happened, explain it to society. And if such persons do not pay, either someone else does or the state borrows money and relies on its creditors.

Hence, our national sovereignty is reduced because some do not pay their taxes. Unfortunately, the proper path and reasoning is that simple.

Of course, we have to do more things to convey a message of an moral nature. It is the unanimous decision of the Cabinet to cut an entire month’s salary from all elected and revocable officers of the State: the President of the Hellenic Republic, the Prime Minister, the Speaker of the Parliament, members of the Cabinet, MPs, prefects, mayors, secretaries general, everyone. One additional monthly salary. 

It is also obvious that there are certain Greeks that have not participated in this collective effort as much as necessary and they must be called to do so. Following a proposal by the competent ministers in the Cabinet, the government will call –and I will personally do so under the Prime Minister’s directive- ship-owners to discuss how they can participate in this national fiscal effort in a practical and immediate way.

It is very important to convey a message that concerns not just Greece but Greeks everywhere. And the cosmopolitan Hellenism must be present in this effort. Because ship-owners have some special characteristics, we have to discuss with them how we will be able to work together and see a participation in the fiscal effort undertaken mainly by the low and middle-class incomes which we must protect and respect.

I also remind you what the Prime Minister said yesterday and what I also have repeatedly said: Our participation in the capital support of the banks, through the Financial Stability Fund, will take place through common stocks. So, we will look forward to gains, as was the case in the United States and the United Kingdom. It is not possible for the Greek people to assume commitments, to pay, to guarantee, to borrow and not to have some prospect for gains by the dramatic changes that have occurred in the banking sector. I remind you the major initiative to merge Alpha Bank and Eurobank, a prelude to other similar moves during this period. Therefore, you do realize that we are faced with some major decisions.

The Prime Minister has spoken with the leader of New Democracy, the main opposition party, Mr. Samaras, about these issues. He briefed him about the framework within which we are moving. Immediately after that, I had had -under the Prime Minister’s directive- a lengthy and detailed phone call with the leader of ND. I briefed him fully and in depth about all issues. I gave him all the information. The leader of the main opposition party has received the same briefing the members of Cabinet did. And this is because we need an honest cooperation between the Government and the Opposition. We need national engagement, we need to go beyond. This is not the time for party patriotisms and conventional behaviors. And I must say that the level of discussion between myself and Mr. Samaras has been exceptionally high.

I also put before him the government’s intention and proposal to accelerate the process of the 2012 State Budget vote and of the relevant laws. And we agreed to discuss this topic later, within the day.

Therefore you are fully briefed, as a prelude of the Prime Minister’s press conference which will not be a conventional one but one which will take a stand on some grand challenges that our country faces within Europe and the world.

Every Greek man and woman listening to this must know that in our minds and in our souls we have every family, every unemployed person, every businessman, every farmer, and every child that wants to find a different national mood and a country with open arms ready to provide them with opportunities.

The circumstances are tough. We can make them easier if we engage in a fast and radical effort. This will be a push forward. This push forward can pay off. The results that will be paid off lie in our hands.

Thank you. redsq

Tags: Statements