Greece’s crisis is an institutional one
IT could be months, it could be years but this is a historical period which would be the true challenge to see if the European experiment can succeed or will fail" Former Greek Prime Minister George Papandreou was voted into office in 2009 and within a short period he was forced to seek international bailouts of 250 billion euros and embark on an austerity program to fend of a debt crisis. In an exclusive interview The Hindu, Mr. Papandreou talked about how the Greek debt crisis unfolded, the current situation of the country's economy and the eurozone's economic problems. Edited excerpts. How severe is the eurozone's debt crisis now?
Europe is still battling between recession, deflation and very slow growth. There has been a gap between the more competitive economies and high-surplus economies. For example: Germany has bigger surplus than China which it should invest even if it invests just only in its own infrastructure which would create more stimulus, more jobs which allows for more consumption and that will help the European economy. In the view of the markets the crisis has been mitigated if not completely solved. However if you look at the debt of certain countries, for example Greece, if you don't have growth in Europe we are getting into a spiral of cutting, further recession, more cuts… and that just means that the debt is just growing. foods which are based on our traditions. That is becoming a niche in many parts of the world. And if you combine that with health and tourism, culture…renewable energy… we have a lot of sun, wind and geothermal. We are No. 1 in Europe in exports of fisheries. Greece has a very educated younger generation. Many of them have left for other countries but if investment comes, they could return.
In Europe, we started the quantitative easing (QE) seven years after the crisis. There are two basic issues in Europe. First of all, Europe is at a turning point as far as its own basic structure is concerned. Secondly, there is a problem with the architecture of having a common currency with different economic policies and different levels of economies. We were a less competitive, less developed economy, than say Germany, and this meant that with common currencies we could not keep up. That was a structural problem. Is it right to say that your fiscal policies were not integrated?
That's right. This means that we have reached a crossroad where we say either we go into a deeper integration or we start feeling the pressures of splintering and going our own way. Some countries were worried to pull their own resources, I would say pool their risks in a common European Union, which then moves toward a banking union. That means then that whether you have your money in a Greek bank or an Italian bank or a German or French bank your euros are equally valuable and equally guaranteed. We haven't reached there but we have done the first few stages, which is the monetary, the resolution mechanism. Now we have to get the guarantee. Guarantee, of course, means pooling risk.
An insurance company pools risks of thousands of people to give insurance to people who need it and that creates a sense of security. However, some countries say why should we put in our own capacity in pooling this risk, particularly, if we see ourselves as very separate nations. That's the first problem. Second problem is the sense of can we become one family. Q: At the height of the crisis, Greek people couldn't withdraw their savings from their bank accounts, firms couldn't make payments…
When the crisis began in 2009-10, I took the measures in order to avoid a run on the banks and therefore a need for capital controls. Unluckily, every government tried to do their own thing. I do hope now we are moving to a final stage of stabilisation and moving out of this crisis. Greece has made the deepest and quickest fiscal adjustment of any OECD country ever and that has taken a toll on not only the Greek economy but Greek families. 25% loss of GDP in these years, which is a huge loss but of course, has meant that moving away from a more nationalist based outlook of each other's interests.