Brussels, 16/05/2016 (Agence Europe) - Athens continues its efforts and keeps firmly in mind that achieving its budgetary objectives by the end of the year will allow it, on the one hand, to obtain a new reduction of its debt, and on the other hand, to calm its population by loosening the hold of austerity treatment. Greece's Finance Minister Yannis Stournaras believes that Europeans are now wiser and better equipped than at the beginning of the crisis. Nevertheless, in an interview with EUROPE, he warns against bail-in tools, aiming to protect the taxpayer from bank crises, which can upset the financial stability. (Interview conducted by Elodie Lamer).
Agence Europe - The goal is to achieve a primary surplus by the end of the year in order to get another debt restructuring. What kind of restructuring are you seeking?
Yannis Stournaras - The budget goal is a zero primary surplus this year. But we are going to intensify our efforts so that we produce a positive primary surplus in order to be able to activate the November agreement with the eurozone, regarding further reduction of public debt in Greece, through appropriate measures. In November, the debt reduction was achieved through a debt buyback but also through a reduction of interest rates. Now, a new debt buyback is not possible. The decision to reduce further the debt to GDP ratio is not specified in the November Eurogroup decision, but it can be done through further interest rate reductions. It is possible to bring them down further.
AE - Would you be satisfied with that?
YS - Yes.
AE - Are you going to push for an official sector involvement (OSI) to reduce the debt?
YS - This is something which may be discussed in the future but it is not specified in the November agreement which says that debt reduction will be achieved “by appropriate measures” and these will be defined when a primary surplus is achieved. I cannot say anything about that, it's too early.
AE - A primary surplus will also allow you to ease the austerity. What will be the priority?
YS - Indeed, another agreement with the troika says that if we overpass the target in the primary surplus, 70% of the excess can be used for social policy and the rest will be devoted to further debt reduction. Greece is in the 6th year of recession and in the 4th year of austerity. People are tired. There are many candidates for tax reduction, for social policy etc. Everybody cannot be satisfied but if we overpass the target then we can satisfy certain of these demands.
AE - 25,000 civil servants will enter a mobility scheme. What will happen to them?
YS - Mobility doesn't mean they will be fired. It means they can be transferred to areas in the public sector where there is an excess demand for human capital. 15,000 people will depart on a mandatory exit scheme but these can be substituted one to one by young people recruited from the market. When people leave service to get a pension, for five people leaving only one is replaced. The number of civil servants has already been reduced though the application of this rule. We are confident that from 2010 to 2015, the target set for a reduction of 150,000 civil servants will be overpassed. All these efforts are not only about numbers but also about quality and promotion of younger people.
AE - Is there a taboo against mandatory dismissals in the public sector in Greece?
YS - The three parties supporting the government now agree there will be 15,000 mandatory exits.
AE - How do you intend to improve tax collection?
YS - Tax evasion is a real problem in Greece. To a certain degree it has to do with tax administration but there are also structural reasons like the higher percentage of self employed in Greece compared with other eurozone countries. We have increased the number of audits and auditors and also penalties. Another reason for tax evasion is also the high tax rates. So, when the situation improves, we intend to bring them down.
AE - How do people cope with such a low minimum wage?
YS - With huge difficulty, because prices have not fallen correspondingly. Only in March and April this year inflation was negative for the first time since 1968. That's why we apply structural measures now to facilitate the reduction of prices.
AE - How do you intend to deal with such high unemployment?
YS - Unless growth revives, unemployment will continue to rise. We expect growth to become positive next year so we expect the unemployment rate to start falling in 2014. Apart from this, we have active policies for employment, financed by the European Social Fund. In addition, the structural changes in the economy will facilitate the transfer of personnel from declining industries to uprising industries.
AE - How can you give confidence back to people?
YS - People will be more confident when growth is revived, when unemployment starts falling and when Greece is firmly anchored in the eurozone. This uncertainty has caused a lot of trouble. Now it's firmly established that Greece will not leave the eurozone. We have signs that confidence is gaining ground: deposits are coming back, spreads have fallen, industrial production seems to stabilise.
AE - Are there other signs which show that the Greek recovery is on its way?
YS - More than 17 million tourists are expected to visit Greece this year. In a way, this might compensate the crisis in Cyprus which will have a negative impact on GDP growth. Apart from this, we're already observing recovery in the agricultural sector with a rise in exports and a reduction in imports.
AE - Where do we stand regarding the merger of NBG and Eurobank?
YS - A priority is to have the recapitalisation of NBG, as that of Eurobank is already done. The immediate priority is the recapitalisation of the four systemic banks and the restructuring of banks which are not viable. The four systemic banks will act as integrators for the smaller banks and, after we finish this phase of restructuring, we'll look into possible mergers and/or disposition of shares. The merger of NBG and Eurobank has now been frozen. In any case we are looking at things from a perspective that will maximise the stability of the banking system. We do not intend to create a public giant in the banking system.
AE - The troika is often criticised. Is it a good system to deal with the crisis?
YS - I don't know whether it's good or bad but it is necessary since the troika represents our lenders. We have a good working relationship with them. We don't agree with everything. For instance, I think that fiscal measures imposed on us were rather excessive relative to the targets set. Greece has rather paid a high price partly because of the pro-cyclicality of policies. We did not manage to convince the troika to take into account a more proper response of policies on growth and unemployment.
AE - Do you think the EU was too fast and too strong on fiscal consolidation?
YS - In the case of Greece, the fiscal effort was, in my view, rather too harsh. But I also fully recognise that Greece was on the verge of collapse. At the beginning of the crisis, the EU did not have any mechanism to deal with it. Now we're wiser and more well-equipped.
AE - Do you fear a contagion from the Cypriot crisis?
YS - Not anymore. We had some negative effects. We had some outflows in deposits from Cypriot bank branches around the time of the crisis but the situation has stabilised again.
AE - Even after the private sector involvement (PSI), the Greek debt is still forecast at 175% of GDP next year. Was it a good idea?
YS - The GDP growth rate has been negative for six years now and that increased the debt to GDP ratio a lot. It's not useful to criticise past decisions now. Perhaps there could have been better ways to achieve a reduction of debt. The debt buyback of December was perhaps a better way.
AE - Should Cyprus be given a compensation for the losses in that PSI?
YS - If we give compensation then there will be no PSI. Because if you give compensation to somebody, you should give it to everybody. If you open the Pandora box of compensation you don't know where it's going to end.
AE - Could Cyprus get €2 billion from the envelope of the Greek banks recapitalisation?
YS - Cyprus did not ask Greece for €2 billion. In any case Greece doesn't have this amount. This is very unfortunate but it is a fact.
AE - Is a banking union possible without a Treaty change?
YS - We should start immediately with the present Treaty and proceed to necessary Treaty changes in the long run if necessary.
AE - Are Greeks banks candidate for direct recapitalisation by the ESM?
YS - The recapitalisation of Greek banks will have been completed in a few weeks. However, when ESM recapitalisation capability is fully in place, I think it is fair that this can be applied retroactively.
AE - Do you think depositors should be bailed-in when a bank is resolved?
YS - As an economist, I am generally against the concept of bail-in of any depositor as this overturns the post-war consensus on financial stability. In any case, there should be absolute protection of insured depositors. Cyprus should be a lesson that should not be repeated. This is why we should proceed to a full banking union as soon as possible. The eurozone is exposed to further risks without a proper banking union.
AE - What will be your priorities in the Ecofin during the 2014 Greek presidency?
YS - Definitely unemployment and banking union. That's what comes to my mind for moment.