The ECONOMIST’s 19th Roundtable with the Government of Greece
Athens, May 14-15 2015
• The background for the Roundtable, as former Italian prime minister Enrico Letta pointed out, was an improving euro-zone economy with a trio of favourable factors: quantitative easing (QE) from the European Central Bank (ECB), cheaper oil and a cheaper euro.
•However, the uncertainty over Greece is a big cloud on the European horizon, with a palpable risk of the country falling out of the euro zone – a 40% chance, reckons Joan Hoey of the Economist Intelligence Unit (EIU). Greece is back in recession, and growth for ecast for 2015 has been taken down to 0.5% by the European Commission and to zero by the EIU.
• Precisely because all eyes are on Greece there was very high interest in the Roundtable, with more than 600 people attending the session with finance minister Yanis Varoufakis and at the closing dinner with prime minister Alexis Tsipras.
• Mr Tsipras said his government came with “a new perception of how society and the economy can be organised”, and he gave an assessment of its first 100 days. Among the achievements he listed were first steps to “relieve the humanitarian crisis”, anti-tax-evasion measures, jobs restored to cleaning ladies at the finance ministry, a law to reopen public TV, moves towards raising the minimum wage and bringing the issue of wartime reparations from Germany into the limelight.
• As for the crucial matter of the negotiations, the prime minister said he was devoting much of his time to them personally. The partners should not imagine that “our red lines will fade”. Four key points for an agreement were: 1. Low primary surpluses as targets, especially for the first two years; 2. No obligation for new cuts on pensions and salaries; 3. A restructuring of public debt; 4. Solid packages of public investment. Common ground seems to have been identified, and Mr Tsipras expressed optimism that a deal was very close.
• Mr Varoufakis stressed that Greece would not do the sort of deal with its creditors that resulted in only a temporary fix; emphasising the need to be more realistic about the targets set, he said he would “never sign a deal that is not dynamically consistent”. Minister of state Nikos Pappas echoed this notion, saying that Greece wants to reach a deal that will lead to “solutions”, not just any kind of deal.
• According to Mr Varoufakis, Greek debt has to be “redesigned” (since “haircut” is a taboo word). Payments to the ECB should be deferred to the future and Greece integrated into the QE mechanism. There should be no change in VAT before the end of the summer.
• Both Mr Letta and Mr Varoufakis stressed that Grexit would be a disaster (Mr Letta called it a “catastrophe”, Mr Varoufakis said it would a “recipe for going back to the Neolithic age”, even if he might have preferred that Greece had stuck with the drachma rather than joining the euro in the first place). On the positive side, the finance minister believed that as soon as a deal is struck there would be a “torrent of investment” in Greece: “Greece is going to have a bonanza.”
• For the opposition New Democracy, former deputy finance minister Christos Staikouras, speaking at the opening dinner, said that in its four months in charge the Tsipras government had “lost time, confidence and allies”. By all sorts of measures (such as the primary budget surplus, payment arrears, non-performing loans, the investment climate, privatisation, education reforms), he said, Greece had started to go backwards rather than making progress.
• When it comes to reforms, based on the experience of other countries Alvaro Pereira of the OECD’s Economics Department stressed the need not just for passing laws but to have the ability to put them into practice: “implementation, implementation, implementation”. For a new government, front-loading of reforms is vital, and cross-party support helpful – Mexico provided a good example.
• The bankers were naturally concerned about the shortage of liquidity, but believed that much of the problem stemmed from the uncertainty over whether Greece would reach a deal with the institutions. As uncertainty comes down, liquidity would come back.
• Energy was a key theme of the conference, with much discussion of pipelines and the politics surrounding them. Greece’s energy minister, Panagiotis Lafazanis, set out a vision of Greece as “pluralistic energy hub” and a “pioneer in energy interconnections”: diversity of energy links would make the country truly independent in the energy sphere.
• Government ministers did not dispel entirely concerns that tourists to Greek islands would have to pay an 18% tax on hotel and restaurant bills–saying it would not happen this summer, but not ruling out the proposal altogether.
• For all the concerns over Greece, a bigger worry is the tension between Russia and the West: the possibility of nuclear war, said Laza Kekic, setting the scene for the session on security challenges for Europe, is greater than at any time since the Cuban missile crisis. Greece’s defence minister and leader of the Independent Greeks, Panos Kammenos, stressed that Greece’s role was to be a “pillar of stability” in a region of instability. He criticised the treatment of Greece by Germany (which wants to “impose its rule throughout Europe”) and expressed his displeasure with the West’s sanctions on Russia. Minister Kammenos revealed that he was going to the US soon and would propose the creation of a new NATO base on an Aegean island.
Sponsors and Supporters:
Platinum sponsors: Public Power Corporation (PPC), Greece, IGI Poseidon
Gold sponsors: National Bank of Greece, Amundi, Attica Bank, Edison, DEPA (Greek Public Gas Corporation), Panhellenic Union of Pharmaceutical Industry. Ethniki Asfalistiki, Elpedison
Silver sponsor: EY
Bronze sponsors: Onex, Consolidated Contractors Company (CCC), Intralot, Piraeus Port Authority, Trans Adriatic Pipeline, Export Credit Insurance Organization, DESFA
Sponsor: On Telecoms
Airline carrier: Aegean
International broadcast media: CNN International
Contributors: OTE, Cosmote, Fisikon, Metaxas & Associates
Supporting organisations: Greek National Tourism Organisation, Public Properties Company
Communication sponsors: Real FM, RealNews, Real.gr, Agora, enikos.gr, energypress.gr
Logistics supplier: DHL
IT sponsor: Sieben, Supporters: Pernod Ricard Hellas, Cellier
Supported by: British Hellenic Chamber of Commerce, CCI France Grece, Hellenic-German Chamber of Commerce and Industry, Greek-Italian Chamber of Commerce