Exclusive: Greek PM Says He Will Not Default On Debts, Will Reform Tax
Codes, Slash Deficits
December 3, 2009 - 14:00:00 ET
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RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE
FINIGHAN, CNN INT`L. ANCHOR, QUEST MEANS BUSINESS: We won`t default. The
prime minister of Greece tells CNN in an exclusive interview, they don`t
need an EU bailout.
Getting America back to work, U.S. President Barack Obama turns his
attention to the U.S. economy.
And bank bonus battle. The U.K. government finds itself caught between a
rock and hard place.
Hello, I`m Adrian Finighan, in for Richard Quest. This is QUEST MEANS
A very good evening to you. Greece is at the center of speculation over
its solvency. Some fear it could become the Dubai of the Aegean. Like
Dubai, there are fears that the nation could have trouble repaying its
Well, the Greek budget deficit is expected to swell to some 12.7 percent
this year. That is way above European Union guidelines of 3 percent. The
government newly elected in October needs to implement major structural
reforms and reduce public spending. Now, in January Greece will put
forward a plan to shrink the budget gap to 9.1 percent next year.
Policymakers plan to achieve this by widening the tax base and making
According to Reuters.com, Euro Zone ministers will then set a deadline
for Greece to bring the deficit below the EU ceiling of 3 percent of GDP.
Now, it has been a pretty rocky year for investors in Greece. Come over
here. I want to show you something. Here is how the benchmark Greek
index has been performing over the past 12 months. The Athens composite
has gained 33 percent since January. Now you can see how stocks rallied
in October, following the election of a new government. And then,
towards the end of November, there was a sharp fall, when Dubai World
announced that it wanted to delay repaying its debts. The index dropped
more than 6 percent on the day that Dubai told the world about its
Well, the prime minister of Greece, George Papandreou, has inherited an
economy which is facing its worst recession in 16 years. And CNN`s John
Defterios, at "MARKETPLACE MIDDLE EAST", spoke to him earlier
today. He asked whether it is fair to link Greece with Dubai?
GEORGE PAPANDREOU, PRIME MINISTER OF GREECE: I think not. First of all,
there is a jittery situation around the world, because of the economic
crisis, now for a whole year. And obviously, when you have something
like a Dubai, it does create ripples throughout the world.
But Greece is very different from Dubai. We are a sovereign state, we
are a member of the European Union. We are a member the Euro Zone. And
certainly, we are determined, as a government, shore in our deficit and
our debt. And we have already made the first steps. We are a responsible
JOHN DEFTERIOS, CNN INT`L. ANCHOR, "MARKETPLACE MIDDLE EAST":
How would you classify the risk then, of Greece defaulting on the debt?
That is the big question mark, as you know, right now.
PAPANDREOU: There is zero risk of defaulting. And first of all, because
as I said, we are a responsible country, a country with great potential.
We are taking all measures and determined to shore up whatever deficit
problems we have. That we also have the backing and the recognition of
the European Union, high officials. Only recently, beyond the program we
have on our budget for next, year and our plan to revamp the Greek
economy, to make it an economy which is not wasteful, but also an
economy which is vibrant and moving into a new era of green development.
DEFTERIOS: Would you say that the ECB may need to step in? Would you say
that an ECB bailout, in fact, may be necessary because of the budget you
have been left to clean up?
PAPANDREOU: No, we have a good cooperation with the ECB, as with the
European Commission. They have made very important statements recently,
saying that there is not possibility of a default of the Greek economy.
And they have approved our basic plan, moving forward and not only for
2009, but we have important changes to make concerning the revamping of
the tax system. We have wide tax evasion. We also have a lot of waste. I
would say clientalism (ph) and corruption. These are some of the basic
platforms on which we came into power, by the will of the Greek people,
who want change -want these changes. So we are determined and we have
the backing of our citizens.
DEFTERIOS: You alluded to your initial budget, some would say that
budget is too reliant on tax collection, and not enough on budget cuts?
PAPANDREOU: Well, we are doing both. As I said, there is a huge tax
evasion. And so we can broaden the tax base. That, I think, is very
important. We will, at the same time, in 2010, be brining in a revamping
of the whole tax system, making it more just, more transparent. And as
you know, when you have lack of credibility in a tax system that fuels
DEFTERIOS: In fact, you are left with a budget deficit of 12. 7 percent,
the highest within the EU by a long shot. You are projecting just over 9
percent by the end of 2010. Is that realistic, considering what you have
PAPANDREOU: Well, if we could do more, we would be able to -we`d like to
even get it lower. But that percentage we can get. And we are determined
to make any necessary changes, even during the year, to make sure that
we have at least that, 3 to 4 points lowering of the budget, of the
DEFTERIOS: You made a move, a bold move, to freeze public wages during
this crisis. But the left wing of your party, the populous end of your
party, is rejecting that move. How do you modernize the party when you
have a budget crisis of this magnitude?
PAPANDREOU: I`ve got the backing of the party. And not only the backing,
but that was the mandate which brought me to government, to power. And
we have a very substantial majority, both in parliament; also a wide
support, I would say beyond our party lines, in public opinion to make
these change and to take the necessary measures. Sometimes difficult,
but certainly just in making sure the Greek economy is on a viable and
productive and competitive path.
DEFTERIOS: As you know they markets in London and Europe, overall, got
quite excited when they heard that you may raise $40 billion in bonds
from Chinese investors to deal with this budget deficit. Can you confirm
the reports now?
PAPANDREOU: What I can confirm, only, is that obviously I think many
countries are looking to diversify their debt portfolio. But with whom,
and how, is simply speculation.
FINIGHAN: George Papandreou, the prime minister of Greece, speaking to
CNN`s John Defterios. John, of course, anchors, "MARKETPLACE MIDDLE
I know that wasn`t a Middle East story.
FINIGHAN: But it has been a crazy week for you. You got some good
stories on this week, what with Dubai. And now securing an interview
with the Greek prime minister.
A 12.7 percent budget deficit, this man has got quite a job. Of course,
this coming weekend, marks the start of the anniversary of the nasty
riots that they had in Greece last year, after the accidental shooting
of a 15-year-old protestors.
Is the economic crisis adding now to tensions as we approach that
DEFTERIOS: Yes, no doubt about it. In fact, I was on the phone with a
number of people in Athens that said that the tensions are there. And I
addressed that with the prime minister at the end of the interview. It
is a delicate balancing act. Because he has been in office less than two
months. He wants that freedom of speech, but one thing he did say is
that "we have to have equal rights of protection", quote,
unquote, "for all citizens."
There was scathing criticism of the previous government for letting
those riots carry on for a better part of three weeks, right into the
Christmas holidays, and the damage to businesses. So, he is basically
saying we can have the discussion, we can have the protest, but it has
to be civil. And leaving the door open to make sure all people are
protected in that process. It was really out of control, in a sense, for
a better part of 10 days to two weeks.
FINIGHAN: And there we see Mr. Papandreou, sleeves rolled up. This is
clearly a man who means business. He inherited a lot of these problems.
What is essential, now, for them to do going forward?
DEFTERIOS: I like to draw the comparison to Tony Blair. You know, when
he came into office in 1997. He had to modernize the party. And that is
a big question mark. It is something I posed to the prime minister
during the interview. Can he modernize the left half of the party to
along with real spending cuts? And that is what the market wants to see.
Adrian, he needs to raise about $40 to $45 billion in new debt. That is
only going to happen when the credibility comes back into the market. So,
number one, a credible budget; modernizing the parties, number two;
number three is dealing with unemployment. It is not higher than the EU
average, that is around 9 percent. But the youth unemployment is around
20 percent. And this is a big problem that he knows he needs to address.
And there are trying to, first, rebuild credibility.
I looked at a number at the end of 2008. The European Commission target
for the budget deficit at the end of 2008 was 2.5 percent. So, we have
gone from the 2.5 percent target to 12.7 percent, because the books were
FINIGHAN: And none of that, of course, I mean, all of the things that he
has to do, are likely to cause a fair bit of pain to ordinary voters.
The very people who brought him to power.
DEFTERIOS: Yes, but as he said during the interview, he came in with a
mandate to shore things up. There is a lot of discussion about
corruption there, during the interview, and tax evasion. Some believe he
is relying too much on tax collection. So he has to get the spending
He does need to modernize the party. And if he can deliver that, then
the fundraising and no need for ECB intervention, which is the key here.
If he can pull it off in the next two to three months.
FINIGHAN: All right, John. Many thanks. The John Defterios, host of
"MARKETPLACE MIDDLE EAST." You can see John on that very show.
Tomorrow, here on CNN at 19:45, right after "QUEST MEANS BUSINESS."
Now European stock markets ended the trading day on a pretty mixed note.
Investors here cautious following some new U.S. jobs data. We`ll have
more on that later in this hour.
In the meanwhile, let`s look at the closing numbers. Here in London, the
FTSE 100 fell by a .27 percent, with mining stocks among the worst
performers here. Over in Paris, the CAC Currant managed to stay in
positive ground, but only just. And in Frankfurt, the Xetra DAX slipped
by 0.20 of 1 percent. Dragged lower by Siemens, in particular. The
German engineering giant reporting $1.5 billion in losses for the fourth
And the European central bank has left interest rates unchanged today.
Policy makers voting to hold rates at a record low of 1 percent, just as
analysts had expected.
Now let`s get you up to date with what else is making news around the
world. Fionnuala Sweeney joins us live from the London newsroom.