Interview on CNBC

Building Council of European Union, Brussels, 11 December 2009

Interview with George A. Papandreou on CNBC

Journalist: Caroline Cimenti

Caroline Cimenti:   Prime Minister, it hasn’t been a very easy week for Greece. You had your credit rating downgraded earlier this week and you also have a 12% budget deficit against your GDP: total debt expected 125% of GDP next year. What are you going to do? What is your plan?

George A. Papandreou:   Well, first of all, as a new government, we have come in with a mandate for major change, a major change in our society and our economy and revamping our economy, modernising our public sector and turning Greece around to a more sustainable and competitive economy, because that’s one of the major problems we have, and particularly towards a green economy, which is, I think, one of our comparative advantages in Greece. We are a country, for example, that has the highest potential for wind energy.

But the immediate problem is that we need to deal with our debt and our deficit, and we are absolutely determined. Our first step has been a major budget cut; we’ll be cutting down by 4% for next year.

Caroline Cimenti:   How?

George A. Papandreou:   Well, doing it through a number of measures, and for example we have already cut down about 10% in the spending of our government, which is a very large percentage. Important rearrangements of the budget, so that it goes particularly to growth areas. And being much more thrifty in the way we use our money.

But there will be some more changes which will make this sustainable, so it’s not a one-off deal. For example, the problem in Greece, the basic problem in Greece, unluckily, is that we have systemic corruption, from the top to the bottom. We have a very clientelist manner in dealing with how we allot our money, which means political favours rather than putting the money into important areas of growth or education or social needs.
And that has created a huge wave of tax evasion. And that’s been one of Greece’s basic problems, and if we tackle this, and we have specific measures to tackle this, we will be able to turn our economy around.

Caroline Cimenti:   Now, let’s talk a little bit about trust. Last month you announced a budget that will try to get your budget deficit at 9% next year. But at the same time Greece has a legacy of missing targets. How are going to convince the analysts that they can trust in your government now?

George A. Papandreou:   Well, first of all we are a new government. And I understand that the previous government over the past six years has unluckily not lived up to what it had promised. But the Greek people have made a decision for a major change, and with a strong mandate.

So that’s, I think, the very first and a very important change, that we do have a strong mandate for change from the Greek people.

Secondly, we are absolutely aware of the problem. We are not hiding the problem in any way. And that’s why we said, let’s open up and see what the problem is. We have created a new statistical agency which is independent of the government, and that’s why we have been able to see what the actual problem is and the deficit that has ballooned. So we are ready to deal with the problem.

Thirdly, I have announced and I will be announcing further structural changes. Just giving an example, Greece has five levels of government. Next week I am announcing that we are cutting down these five levels to three levels. Now, that’s a major revolution for Greece.

Caroline Cimenti:   Which levels are you cutting down?

George A. Papandreou:   We have central government, we have regional government, we have a sub-regional government, even a sub-sub-regional government and a local government. So two levels will be cut completely, which means cutting down bureaucracy, spending, corruption, red tape. This is just one of the many measures we will be taking.

Changing the tax system, making it more transparent. A simple measure which we have already taken: putting all decisions, all decisions that have to do with money, public money, on the Web, so that we really are cutting down on corruption.

So these are some of the measures. Some of them are simple, some of them are difficult, but we are ready to take the difficult decisions.