Christina Papaconstantinou – Secretary General of the Greek Ministry of Finance. Photo supplied.
In Sydney for the G20, the Greek Secretary General for Finance says the economic tide is finally turning in Greece after four years of reform.
With Greece holding the presidency of the EU and Australia chairing the G20, this year the two nations find themselves presiding over the world’s most powerful international inter-governmental institutions – giving each a unique opportunity to influence global economic policies.
In Sydney today – to attend the first ministerial-level G20 meeting under Australia’s presidency – Greece, which holds the current rotating European Union Presidency will be represented by Ms Christina Papaconstantinou, Secretary General of the Greek Ministry of Finance.
A former lawyer, Ms Papaconstantinou was previously Greece’s Secretary General for Fiscal Policy and President of the Public Debt Management Office. On the eve of the meeting which prepares the ground for the G20 Leaders Summit in Brisbane in November, Neos Kosmos conducted an exclusive interview with Greece’s top civil servant with responsibility for finance. We began with the situation in Greece.
Secretary General – the Greek Government says that the economic tide in Greece is finally turning, but what is the real evidence of recovery? Is Greece finally ready to come off life-support?
Greece will no longer require financial assistance from its eurozone partners and the IMF – life-support as you call it – when the Greek state will be able to finance its funding needs from private capital markets.
For private investors to invest in Greek government bonds at an interest rate that is affordable for Greece, they need to feel confident that the causes of the crisis in Greece – loss of fiscal discipline and competitiveness – have been addressed in a sustainable way and that Greece is credit-worthy again. The fact that Greece in 2013 will have a surplus in both the primary fiscal balance (revenues minus expenditures excluding interest) and in the current account – just four years since having record deficits in both above 10 per cent of GDP – is in and of itself evidence of the unprecedented and very real progress Greece has made in a very short time.
Moreover, this progress has also led to a surge in interest from private investors recently and we plan to start borrowing from these investors in the following months, initially for small amounts, with a view to gradually building up our credibility again.
Once the Greek state accesses private markets, a virtuous cycle will be unleashed that will boost liquidity in the real economy, which is the most cited constraint by private enterprises right now.
The increase in liquidity will consolidate the nascent recovery we are seeing in late 2013. Just to name a a few, the economic sentiment indicator has reached one of the highest levels of the last five years, the Purchase Managers Index in January 2014 indicated expansion for the first time since August 2009, and retail sales increased in November for the first time after almost four years.
I am confident that by this time next year, the combined impact of improved liquidity and the implementation of our structural reforms will ensure that Greek citizens will feel the recovery – which is the most important sign that the tide is finally turning.
What are the measurable outcomes of the structural reforms and fiscal consolidation within the Greek economy over the past four years?
Greece has realised an impressive adjustment in its twin deficits, the primary fiscal deficit, and the current account deficit. For the first time after many decades, by the end of 2013, the twin deficits have not only been eliminated but they have also turned into surpluses.
On the fiscal front, over 85 per cent of the required fiscal adjustment needed to reduce debt to sustainable levels by 2020 has been completed. In particular, since 2009 Greece’s primary deficit has declined by more than 10 per cent of GDP, and it now seems that the target set for 2013 in the 2014 Budget for a primary surplus of 0.4 per cent of GDP will be over performed. Furthermore, it is estimated that since 2009, the cyclically adjusted primary balance has improved by more than 20 per cent of GDP. The improvement in competitiveness has also been remarkable. Over the last four years, the cumulative loss in cost competitiveness since Greece’s entry in the Eurozone (2001-2009) has been fully recovered. This development is also reflected in the current account balance. The current account deficit stood at 2.4 per cent of GDP in 2012 from 14.9 per cent of GDP in 2008. It is now projected that by the end of 2013 there will be a current account surplus.
Greece has implemented structural reforms in many fields of economic activity, including reforms in the labour market, the pension and health system, and tax administration. These reforms helped to close the competitiveness gap and create a favourable environment for business and foreign investment. Since 2009 Greece has lost 25 per cent of its GDP. What must Greece do to change this decline?
The crisis was the result of very high twin deficits – a primary fiscal deficit and current account deficit, and the loss of competitiveness, which led to Greece’s exclusion from the international capital markets.
The substantial financial support Greece received from its eurozone partners and the IMF was followed by fiscal and structural reforms that had to be implemented in order for the country to return to a sustainable growth path.
The unprecedented adjustment Greece has realised over the past years has come at a very high socio-economic cost. However, the signs of macroeconomic recovery now become visible.
In 2013 GDP declined by 3.7 per cent; this fall – which was the result of a continuous deceleration in the rate of decline of GDP throughout the year – was milder than originally projected. Furthermore, unemployment now seems to be stabilised.
In 2014 Greece is expected to exit the deep recession it experienced over the last six years, whereas in the years to follow Greece will grow at robust rates. The new growth model for the Greek economy currently developed will be more extrovert. It will be based on investment, innovation, exports and foreign direct investment, while the implementation of structural reforms will continue. What benefits for Greece come with your presidency of the EU? What opportunities are there and what are the challenges?
Our first major priority is the promotion of growth – in order to boost employment and cohesion. A second priority relates to further integration of the Economic and Monetary Union, including the establishment of a banking union, in order to safeguard confidence in the European economy.
Another important priority concerns a comprehensive review of the immigration and border policies in order to reflect the needs of member states and, in particular, of those who share a disproportional part of the burden.
There is also a fourth, horizontal priority: the maritime policy of the EU. The sea lanes are extremely important to our trade. We will seek to step up efforts to bring in a more global approach to all maritime issues [and] security and energy aspects of the maritime policy.
With elections to the European Parliament imminent, how concerned are you that Eurosceptics will influence the situation? Is such scepticism dangerous for Greece and Europe?
Given the direct impact of decisions taken at European level, on people’s lives across Europe, this year European Parliament elections are a great challenge for our presidency.
The economic crisis in Europe, the high unemployment rates – especially among young people in the countries of Southern Europe, and the social insecurity, supported, among other things, perceptions that questioned our common European course.
For this reason, it is very important to hear from people across the Union about what they expect, and to make that clear at the upcoming elections. They will have a real choice on what kind of Europe they want.
As a member-state of the EU and the eurozone, Greece is representing a European Union that must show its commitment to great values, solidarity and the European welfare state. The value of the European model for prosperity and growth can reaffirm the European project in the hearts and minds of the people of Europe.
As president of ECOFIN – the EU Finance Ministers’ Council – what will be Greece’s input to the G20 Ministerial Conference? What do you hope the G20 under Australia’s presidency can achieve?
Our overarching goal [is] to foster growth, competitiveness and jobs, to ensure stability and prosperity for European citizens, as well as to restore confidence in the financial sector.
We intend to focus on further developing banking union as a prerequisite for more trust and reliability, as well as for increasing liquidity in European economy, and safeguarding its financial stability.
The Single Resolution Mechanism [a pan-European ‘resolution authority’ to manage future bail-outs] is, undoubtedly, a key element of the banking union, and as such, it is an overarching priority of the Greek presidency.
We will also work towards deepening further the integration of the European Monetary Union and strengthening the coordination of national economic and fiscal policies in order to preserve the integrity of the common currency and promote the necessary growth-enhancing reforms.
In addition, the Greek presidency will advance discussions for financing the economy, in particular SMEs’ facilitation of access to financing, aiming to enhance sustainable growth and promote the creation of new jobs.
Οn taxation policy, it is highly important to carry on with the appropriate actions, at the European level, against taxation practices that undermine citizens’ and investors’ confidence and encourage tax fraud and tax evasion.
The aim of the Australian presidency to strengthen global growth and foster employment is strongly supported by the EU. Growth in Europe has been accelerating during the last months due to the implementation of ambitious structural reforms and a sound fiscal policy.
We hope we can share our experience with our partners in G20 and we are confident that the Australian presidency will succeed in coordinating all G20 members to develop ambitious growth strategies during the Brisbane summit.
The Greek diaspora business community in Australia and the US have been vocal in wanting to support Greece during the economic crisis. What can be done to realise a more effective role for the diaspora in Greece’s economic future?
Greece’s economic recovery depends critically on expanding exports and private investment and we see the diaspora playing a vital role in boosting both. The crisis has been an opportunity for us to address the chronic ailments of the business environment in Greece – excessive bureaucracy, unnecessary administrative costs, an inefficient tax system – that discouraged many well-intentioned investors.
Since 2009 we have been working hard to improve the investment climate – as shown by the fact that Greece has risen 24 positions in the World Bank’s ‘Ease of Doing Business’ rankings, and in particular 97 positions in terms of the ease of starting a business and 70 positions in terms of protecting investors. While there is still much to do, it is evident from the extremely strong investor interest in a variety of sectors that Greece is already an attractive investment destination with opportunities in real estate, energy, trade/logistics, food processing and agriculture, IT and pharmaceuticals, as well as in our traditional champions of tourism and shipping.
To give you an example, Piraeus is now the fastest growing port in the world, growing by 112 per cent between 2011-13 in terms of containers handled. It is projected to become the largest port in the Mediterranean by 2016. The driver of this growth is the investment by Chinese company Cosco that manages two out of the three terminals at Pireaus and wants to make it the gateway of choice for Asian-European trade.
Given Australia’s close ties with Asia, there are ample opportunities for the Greek Australian diaspora to play a key intermediary role both as investor and facilitator of these trade links. The diaspora seeks an enabling environment in Greece to invest on a significant scale – how can this environment be created, what are the challenges? The Greek government plans to continue its efforts to improve the business environment. In April we plan to submit a bill to Parliament that will enable investors to establish new businesses within 24 hours.
The government is paving the way for stronger bilateral economic, commercial and administrative cooperation with the Australian government. For example, in 2013 the Hellenic Parliament approved the OECD’s Multilateral Convention of Mutual Administrative Assistance that enables the tax administrations of Australia and Greece to share information on taxpayers, to avoid double taxation.
We hope that this cooperation will provide a basis for the negotiation of a double taxation treaty for which the Hellenic Republic has made formal requests to the government of Australia.
In this increasingly favourable economic environment, we invite the Greek Australian diaspora to join these efforts in order to bridge Greece and Australia in a tight network of trade, business, and investment.
source: Neos Kosmos