Coun­try needs to take own­er­ship of the pro­gram

The Greek econ­omy will re­turn to a sus­tain­able course if the gov­ern­ment car­ries out the struc­tural re­forms in­cluded in the bailout agree­ment

Kathimerini English - - I N T E Rv I E W -

un­cer­tain. But I am quite con­fi­dent that, if there is strong com­mit­ment to the pro­gram, which aims at en­sur­ing eco­nomic growth, fis­cal sus­tain­abil­ity and fi­nan­cial sta­bil­ity while safe­guard­ing so­cial fair­ness, there is a good chance that this could hap­pen.

Achiev­ing a sus­tain­able, strong re­cov­ery re­quires fis­cal sus­tain­abil­ity, in a growth­friendly man­ner. This should come through re­duc­tions in un­pro­duc­tive gov­ern­ment spend­ing and through shift­ing the tax bur­den away from la­bor to taxes which are less detri­men­tal to growth, such as those on con­sump­tion or prop­erty. That is what both the the­ory and ev­i­dence sug­gest. In­deed, the fis­cal con­sol­i­da­tion strat­egy fore­seen in the third pro­gram re­lies heav­ily on mea­sures which are less detri­men­tal to growth, such as a re­form of the coun­try’s val­ued-added tax sys­tem and a re­duc­tion in mil­i­tary spend­ing and sub­si­dies. An im­por­tant is­sue is how Greece will cope with curb­ing tax eva­sion. In this re­gard, prop­erty taxes (if de­signed not to be re­gres­sive, for ex­am­ple, they ex­clude low-in­come hous­ing) are more eq­ui­table, also be­cause they are more dif­fi­cult to evade. In con­trast, taxes on la­bor should be re­duced. This is where in­cen­tives should be al­lowed to play freely. In other words, peo­ple should be able to find jobs and en­trepreneurs should be able to hire peo­ple. Well-de­signed taxes can ac­tu­ally sup­port em­ploy­ment, par­tic­u­larly youth em­ploy­ment. This would, in turn, have a pos­i­tive ef­fect on con­fi­dence and there­fore on con­sump­tion and in­vest­ment.

No. How­ever, what the whole ex­pe­ri­ence shows is that our Union is still im­per­fect and needs to be­come a “more per­fect union,” to bor­row a phrase from the con­sti­tu­tional tra­di­tion in the United States. A union where the cen­tral bank is called upon by cer­tain politi­cians to de­cide on the mem­ber­ship of cer­tain states can­not be right. The cen­tral bank should just do the work of a cen­tral bank, i.e. main­tain price sta­bil­ity over the medium term, and should not be called upon to take such de­ci­sions. That is why we have to move to­ward greater po­lit­i­cal in­te­gra­tion. Cer­tainly, we have been crit­i­cised for mak­ing al­legedly po­lit­i­cal de­ci­sions. Those on one side say that we should have cut ELA to the Greek bank­ing sec­tor much ear­lier – not only frozen, but cut it, and cut it to zero – and those on the other side say that we should have ex­tended ELA fur­ther, un­con­di­tion­ally, even if that would be a vi­o­la­tion of the Treaty. All in all, given these ex­treme crit­i­cisms, I think we have acted in an in­de­pen­dent and bal­anced way.

Well, I can only speak for the ECB and, ob­vi­ously, I am a bi­ased ob­server. The very na­ture of any cri­sis is that you are work­ing un­der in­tense pres­sure to come up with a so­lu­tion. What I can say with con­fi­dence is that the ECB has al­ways acted within its man­date and out­side of pol­i­tics.

‘Fight to main­tain the sta­bil­ity that you have re­built at great cost, and very soon you will see the ben­e­fits,’ is the mes­sage to the Greek peo­ple from Mario Draghi, pres­i­dent of the Euro­pean Cen­tral Bank.

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