SPEECH

BY

PRIME MINISTER

GEORGE A. PAPANDREOU

SYMPOSIUM "NEW WORLD, NEW CAPITALISM"

IN PARIS

(6 January 2011)

Thank you, Minister Besson. Your Excellency, Mr. Prime Minister, Mr. Fillon, Madam Christine Lagarde, ladies and gentlemen, dear friends, and there are many friends here: I see Joe and Jeffrey and Kemal,

I’d like to thank you for honouring me with this invitation to speak to such a distinguished audience. I assume that this is in recognition not of some academic work I have done on the title of the topic, but because of the scars I and my country bear, having made enormous efforts to survive in this new world of new capitalism.

So let me talk to you of my experience, and I hope this will help our discourse today. I will speak of the myths that surround our crisis. But before I begin, I’d simply like to make a statement that yes, Europe has been going through a crisis, but despite all the doomsayers about Europe and the euro, it is my true belief, and from my experience this past year, that we not only have the capacity but we also have the will not only to survive but to prosper and work together.

So my comments are here in fact to open up further the debate of how we can further strengthen this community of values, our family that is called the European Union.

Myth number one: The crisis in Greece was one of debt and deficit. Too much spending, too much leisure, too much profligacy. And therefore the pain of austerity is now the cure, the catharsis, to a Greek term.

No, debt was just the tip of the iceberg, the symptom rather than the underlying cause. The real problem was one of governance, lack of monitoring, lack of transparency, bad allocation of funds rather than the lack of funds, unequal distribution of money rather than profligate spending by all, clientelism rather than meritocracy, graft rather than the rule of law, unequal privileges rather than a sense of justice for all.

And this, for example, fuelled tax evasion, where the grey economy some international bodies say could account to 35-40% of Greek GDP, compared to a possible 15% in Germany.

However, in other ways the Greek crisis underlines the nature of the crisis in the US, the financial markets, where lack of transparency, lack of monitoring, fraudulent allocation of triple-A bonds, the, in reality, toxic bonds, corrupt practices were at the core of the freefall of the US and then the world economy.

It shows the lack of the necessary governance structures, or even more so the capture of our democratic governance structures, by very strong special interests. It also highlighted a deep injustice: the privatisation of profit and the socialisation of losses and debt.

Ireland is a case in point, although with its own intrinsic problems it is in essence paying for, the people of Ireland are paying for the toxic practices of an international financial system.

And this is a politically unsustainable practice in our democracies. Again, one that challenges us to look at our governance structures and make sure that they are transparent, democratically responsible and just.

So yes, we have had to make sacrifices in Greece, to deal with the symptom of debt and deficit, cutting wages in the public sector, revamping our pension system, hiking taxes, putting an excise on profitable businesses, cutting spending in most areas, from defence to transport, merging or privatising public companies.

This has allowed us to achieve the very difficult goal of cutting our deficit by more than 6% this year, an achievement few believed we could have accomplished. But we have done so.

However, our real task, the task of my government today, is to make deeper changes, create a society of transparency and good governance. Rather than dispensing privileges for the few and for special interests, we want to guarantee basic rights for all, justice, equality, welfare and jobs, and at the same time create the conditions for sustainable growth in a country which has great potential, comparative advantages in so many areas, from agriculture to tourism, to clean energy, shipping, and of course culture.

And we are doing so by major reforms, tax reforms, reforms in transparency by bringing all our funding in the public sector online – today everything is online – fighting corruption in the health sector, opening up professions. These are just some of the few things we have done and are continuing to do.

A second myth is that the markets will solve the problems. We simply have to take the necessary measures, as countries, and if we had taken all the necessary measures, everything would be on track.

Well, we are on track, and Greece has been successful in accomplishing its goals this last year. And this is not my assessment; this is the Commission’s, the ECB’s and the IMF’s combined assessment.

And yet not only Greece but others in the eurozone are being pressured towards exclusion from the markets, with inordinately high spreads or terms of lending.

Markets are not some divine entity, nor are they the devil. They are made up of human beings, heads of corporations, hedge funds, banks, enterprises and consumers. So we must very simply understand that there are different interests at play.

And our governance challenge here is whether we organise these interests in a way we regulate, so that markets work for the common good, or they become increasingly a tool for the concentration of power and privilege of the few.

I say this because today we are faced with a huge concentration of financial power. For example, according to a recent article in the New York Times, only a handful of nine anonymous people, as they say, more or less control various derivative markets.

And more and more analysts are telling us that the core problem of the recent Great Recession, as with the Great Depression, is inequality: Bob Reich, Joe Stiglitz, Paul Krugman, to mention some. The huge inequalities in our societies and between countries and continents are also the underlying cause for much suffering, crime, corruption, even the undermining of our democratic institutions, as this concentrates power in the hands of the few.

On the other hand, equality. The societies that are more equal are healthier, more robust, more cohesive, more competitive, more happy. So in our new globalised capitalist world, we must strive for governance to regulate and harness the positive power of markets, in a way that also brings justice and equality to our societies.

And this ties in with the third myth, that member states in the European Union can, with the appropriate austerity measures and reforms, accomplish their mission alone. If each and every country is fiscally responsible, then the problem will vanish. No need for stronger governance structures in the European Union. No need for solidarity, particularly to countries that have not been responsible in their practices.

But this myth avoids three basic problems. First, the recent global crisis revealed some of the missing bricks in the architecture of our common currency, an architecture of having a common currency without at the same time having a common treasury, an attempt to replace the latter with coordinated fiscal and, to a certain extent, structural policies which haven’t worked as efficiently as we would have liked. At the same time, fiscal expansion had been used to combat the weak demand that accompanied the financial crisis.

Secondly, the problems are much wider, much more diverse than simply fiscal consolidation at the national level. Let me just mention a few:

High anxiety, insecurity in the markets; insecurity in our populations; prophecies of doom; market worries about future debt, competitiveness, growth potential of the European Union economies; credit rating agencies that are accountable to no one yet their behind-closed-doors actions can profoundly distort and affect national and global economies. And we see that today concerning many EU economies.

Tax evasion but also particularly tax havens. Yes, we the governments are in need to collect revenue, and we do so. Yet big interests can escape through tax havens, which are helped by the financial system. This is both untenable and unjust to our societies, when we are trying to put our house in order. It is robbery of our growth potential and our potential to invest in the welfare of our citizens.

Again, we can only solve these problems by close cooperation, stronger regulation and economic governance, not by going alone but through greater European integration.

Finally, we know that Europe is challenged today by a waning competitiveness and comparatively slow growth. We are facing an historical shift in the world economy towards Asia and other emerging economies. And this is a fact, an irreversible fact.

We are challenged by a competitiveness that is not always based on quality but often on inequality. Cheap labour, lack of collective bargaining, lack of democratic or social rights, ease of downgrading the environment: these may in the short run give a comparative advantage to some countries. Yet this is not the model we can or should emulate.

Our response must be one of quality of products, of massive investment in the new prospect of green and clean development. And this means investment in education, investment in innovation, investment in infrastructure from communication and transportation to energy, investment in social welfare of our citizens.

I say this also to highlight the fact that yes, we were in need of solidarity, we in Greece and in Ireland recently, to deal with the very hostile markets that gave us no time to make the necessary changes.

This is why we in the European Union set up the ESFS and the financial mechanism for countries in need, to give the time to these countries to make the necessary reforms.

The European Union, with whatever difficulties and delays, did step up to the challenge. And I believe that this will has been complemented in recent decisions, when we say we will do everything necessary to achieve stability in the European Union and the eurozone.

And here let me take the opportunity to extend my thanks for the support that the French government, Mr. Fillon, has demonstrated, and the warm solidarity we have received from the French people. This is highly appreciated in Greece and by the Greek people.

But my point is a broader one. We must not misinterpret this as some form of charity, not only because we will be paying back in full – and that despite all the doomsayers – but because the challenge is a much wider one. It is a European one, a threefold challenge.

One, of stabilisation in a world of uncertainty. Yes, these mechanisms are a form of stabilisation – not simply solidarity, of stabilisation for all in Europe.

Secondly, regulation of our financial system, making it more transparent and fair, and again investing in the real economy.

Thirdly, a growth scenario for jobs, competitiveness and green development.

So allow me to conclude with some more concrete proposals. The eurozone response has been so far threefold: embarking on a vigorous fiscal consolidation, improving surveillance through the new framework for economic governance, creating a financial stabilisation mechanism.

The results, however, are still not the desired ones, as the markets seem to continue to have doubts about our determination and resolution to deal with the crisis. And this is in contrast to our real intentions.

In order to produce a more credible strategy, we can deal with three further issues that have a direct impact on debt, sustainability of countries in trouble, and reverse the situation leading to an exit from the crisis.

First we need to take action that will break the procyclical influence of the credit rating agencies for countries in trouble. Especially for countries that are benefiting from the European crisis support mechanism, as their economy is frequently scrutinised by our institutions, their reports could be used in conjunction, or even instead of the CRA reports in cases of collateral assessments. More generally, the regulatory framework of these agencies has to improve.

Second, the characteristics, scope and lending terms of the European stabilisation mechanisms have to improve further and become more effective in dealing with debt sustainability and market imperfections. We have to think again about the seniority or not of the European stability mechanism loans.

The loans themselves should be given at rates and duration that fit better to the characteristics of advanced countries, which cannot experience growth rates similar to those of emerging economies, with which the IMF lending terms are more aligned.

I fully realise that in no case we should allow for moral hazard problems. I am sure we can find other solutions to this problem, while at the same time raising a wall to face market aggression and give a helping hand to economies in trouble.

Third, we have to think more about growth, both at member state level and at the EU level. In this way, we will endeavour to improve further the prosperity of our citizens and find the resources that will reduce our debts much faster.

While restoring budgetary discipline is imperative, without a reasonably dynamic economy this goal cannot be achieved, let alone the goals of high employment and social peace. There is no room to provide economic stimulus at the level of national policies, as we have seen, but room does exist however at the level of the European Union.

And the European Union has great possibilities. If we compare it to the United States, which has a huge federal debt, there is no such debt at the EU level. We have to take a strong and visible initiative to open the growth chapter of the European Union anti-crisis policies. Without such a growth chapter, the reform of economic governance will be incomplete, and even the stability part is doomed to fail.

Markets will only calm down if they are convinced that the Union is capable to return to a path both of stability and of growth. Only by combining stability and growth, political and social stability can be secured.

Finally, we should use all the possible tools in a toolbox to make our efforts successful. And here there is an open discussion on a number of tools, and I’d like to mention them. The financial transaction tax, a tool which could give own resources to the European Union. Very important.

Tax on CO2 or the so-called greenhouse gases tax, another resource which would also help us move towards green development, but also create own resources for the European Union.

Thirdly, the Eurobonds. There is growing support for the issuance of Eurobonds, as an effective financial instrument that can help Europe achieve major policy objectives. Eurobonds will facilitate the financing of infrastructure projects, and other investments that can enhance growth, and particularly the green growth. Eurobonds will help reduce growing tensions in the sovereign bond markets, and persisting stresses in the banking systems and thus facilitate the adjustment efforts of countries aimed at restoring sound public finances.

In this way, Eurobonds will contribute to the financial stability and economic prosperity of the euro area as a whole. All euro area countries will be better off, economically and financially, if we succeed to resolve this crisis, safeguard financial stability in the euro area as a whole, and support our common currency, the euro.

Countries with fiscal problems and structural weakness, including my own, will have to continue to do their homework to restore sound public finances and improve competitiveness.

But Eurobonds certainly are not a substitute for this necessary adjustment we are making in each of our countries and in Greece. But it can serve as an effective complementary means to help resolve the euro area debt crisis and foster, used as a tool, for economic and green growth.

Ladies and gentlemen, for the past three years the global economy has been caught in the worst financial crisis since the Great Depression. Millions of lost jobs, trillions of euros’ worth of wealth have been destroyed, and economic growth across the world has ground to a halt, while our citizens have been burdened with massive new public debt and in some cases watched their democratic sovereignty being put at risk.

Here today we are meeting to take the next steps to bring forth a new world. Unlike so many meetings we have all attended in the past year, here today, instead of squabbling over who pays for what, who bails out whom, we must set out the design that will provide the collective action, the comprehensive action needed to restore the proper balance between markets and governments. And we owe this to our citizens, and that is the least we can do.

We also know that our political voice in Europe, whether it is in our own region or a wider region such as the Mediterranean, the Middle East, the Black Sea, the Caucasus or Africa, will be affected by these changes and these decisions.

And here France and Greece have been working and are working closely together on regional issues, such as in the Mediterranean. Here, instead of a top-down approach based on the dispensation of unilateral aid, the European Union is now building a much more equal partnership with our neighbours in the Mediterranean.

We have also taken an initiative, Greece with Turkey and other countries – and of course France is involved – in dealing with the Mediterranean climate change issue, and seeing this as a positive force for cooperation, dealing with conflicts such as the one in the Middle East – and we all want to see a peaceful settlement as soon as possible in the Middle East – but also seeing how green development can be an opportunity for jobs and growth in the Mediterranean and in Europe, while dealing with the environmental problem. And of course Jeffrey Sachs as been very helpful in helping us working on this issue.

So I am very confident that, working together, we can also become a catalyst not only for conflict resolution, but for a stronger voice for democracy, human rights, prosperity around our world.

So before I close, I would like to take this opportunity to thank our host country, France, not only for organising this event but again for the solidarity you have shown. And I wish you well in your role this year at the head of the G20.

You have a great challenge ahead of you, and global democratic governance will be on our agenda for years to come.

This is a challenge for the world. And we support French efforts to reform the global monetary system, to control the fluctuation of prices for essential commodities and staple foods, and of course to help in regulating our world economy.

And Europe can and must play its part. I, too, often believe that we do not understand or realise the real potential Europe has in this world. If we work together, if we believe in Europe, we can help make this world a better, more just, more democratic, more green place for our citizens around the globe.

Greece is going through a difficult crisis. But be sure we are making this crisis an opportunity for change and for prosperity for our people, for a very different Greece, one we are proud of.

My hope is that the Greek crisis will also become an opportunity for Europe and the world. Thank you very much.

page précédente

Envoyez un courrier électronique à grinfoamb.paris@wanadoo.fr pour toute question 

ou remarque concernant ce site Web 

Copyright ©Ambassade de Grèce - Bureau de Presse et de Communication, Paris, 1999

Conception : Georges Bounas - Réalisation : Marie Schoina

Dernière modification : vendredi 07 janvier 2011