[Quatremer] Why are the negotiations dragging on for ever?
[Arthuis] It has to be understood that the negotiations would have been held regardless of the government that emerged from the 25 January election: If Greece wants to get at the 7.2 billion euros that the euro area and the IMF have promised, it has to undertake to bring in more reforms. Conservative Antonis Samaras's previous majority had already failed to reach agreement with its creditors, and it was partly owing to that breakdown that an early general election was called.
However, Alexis Tsipras's government is persisting in rejecting some of the reforms that are being demanded, the most painful ones, as it wants to implement the platform on which it was elected. The problem is that it utterly lacks the means to do so: It has to realize that it is not up to the Europeans to bankroll the Greek state's public spending by unconditionally lending it unlimited money. Indeed, reducing the retirement age to 60, despite the fact that their system is already in deficit, means having the Greeks' pensions funded by the other Europeans, some of whom have to work until age 67 or more. It is unacceptable! First and foremost, Tsipras has to realize that these reforms are not being demanded to punish or humiliate Greece, as some people see it: It is a matter of putting the country back on a lasting path to growth. When that time comes, he will find he has budget margins that will enable him to do more for his people. The Greek prime minister is beginning to realize that is the way he has to go, but it is a laborious process, and it poses a threat to the whole of the euro area.
[Quatremer] Some people are asserting that it is the euro area that is to blame for the Greek problems...
[Arthuis] There is no malevolent hounding in what is happening: Regardless of the euro area, the Greek budget has to be balanced, as the markets are refusing to lend it money. This is being dubbed an austerity policy, but that makes no sense. When a business is on the verge of bankruptcy, measures are taken to turn it around, cuttings its outgoings and manpower in particular... The upshot of this adjustment has undoubtedly been a 30 per cent drop in its GDP, which is back at the level where it stood in the first few years of the century, but the period from 2001 to 2008 was a bubble: The state funded wage increases, civil service hirings, public works, and so on on credit.
Had Greece stayed outside the euro area, it would simply not have experienced that bubble, and its GDP would be no higher than it is now. We have to be aware that if Greece were to exit the euro now, it would meet the same fate that Argentina has met since 2002, when the fixed dollar-peso parity was broken and default ensued, but without that country's raw materials and export capacity...
[Quatremer] What way out of this Greek conundrum is there?
[Arthuis] Reality is beginning to be taken on board in Athens. The Greeks have stopped paying their property taxes, as Syriza had rashly promised that it would repeal them. The government accounts have deteriorated to the point where the government will have a hard job maintaining a primary balance, net of debt maintenance. The capital flight is taking on alarming proportions and economic growth, which was supposed to rise to 2.4 per cent in 2015, is now close to zero. I take the view that a deal will be struck in the end. One will have to be reached, because it is also partly our fault if the Greeks have come to this pass.
[Arthuis] It was irresponsible of the Europeans to admit the country to the single currency in 2001, which they did largely because they could not slam the door to the euro area in Plato's face! That was a major political blunder, as everyone knew Greece was not a country in proper working order and that it was lying about the real state of its accounts. Once it was in, a close eye could have been kept on it, as one does with milk coming up to the boil,, but this was not done on the pretext of respect for national sovereignty. That blindness is partly explained by the fact that it suited the European countries, France and Germany in particular: They were exporting massively to Greece without worrying about how that spending would feature in its government accounts. If it was excessively indebted, which is what brought it to default, it is because there were excessive creditors on the other side... So there was no choice but to help Greece, both to avert systemic repercussions on the rest of the euro area, and also so that the private creditors (banks, insurance companies, corporations - Liberation editors note] would not be left to handle a default on their own. In practice, the banks' problem was taken over by the states.
[Quatremer] Will Greece repay its debt?
[Arthuis] We have to be realistic. Its creditors will already have posted the sums owed to them in their loss accounts by 2023, the year in which Greece is supposed to start repaying interest to the European Stability Mechanism and the euro area states. We must not labour under illusions about the Greeks' - and, indeed, other countries' - ability to repay what they owe. What is going on now is an implicit restructuring.
[Quatremer] No one is admitting it for the time being...
[Arthuis] Because we have to keep a means of putting pressure on Greece. It has to shoulder its responsibilities and modernize its state. The euro area members, too, have to learn their lessons from the crisis. The Stability and Growth Pact is not a policy. It is merely a joint ownership regulation. This reveals the urgency of real economic and financial governance headed up by a full-time, free president above suspicion of conflicts of interest, backed up by a proper European Treasury, pending a euro area budget and chamber. Such an embryo of European federalism does, of course imply a revision of the treaties.
Source: Liberation, Paris, in French 11 May 15
Text of report by French newspaper Liberation on 11 May
[Interview With European Parliament Budget Committee Chair Jean Arthuis by Jean Quatremer in Brussels; date not given: "'The Greek Debt Is Undergoing Implicit Restructuring'"]