June 11, 2012

Papandreou Says Greece Will Stay in Eurozone

Greek exit means hyperinflation, 20% lowering of GDP, former prime minister says

Former Prime Minister George Papandreou of Greece spoke with Bloomberg TV’s Sara Eisen, saying that Greece has “a few weeks” before its government runs out of money and that this is a “make-or-break” period.

George Papandreou, former Greek prime ministerPapandreou went on to say “I did all that I could do” and that the “personal costs” were “worth it” to serve his country.

Papandreou on whether Greece will leave the euro:

“Despite the fact that many economist say if you leave the euro, you will be more competitive, you can devalue, a Greek exit would not only be bad for Greece, you'd have hyperinflation, 20% lowering of the GDP. Greece has become the precedent, a test case.”

On whether Greece is better off in the euro:

“Absolutely … I think now is the point where we have to look at ourselves in the mirror and look at reality and say this is the point where we have to make this decision, if we don't, I believe we will have a small window of time over the next few months, maybe if we have that and even that … before we see a splintering of the euro. This is a make-or-break period.”

On austerity measures:

“We can have some modifications to the program. I would say yes to fiscal responsibility, which would also include a growth strategy not only for Greece, but for Europe because Europe is in a wider recession, many parts of Europe are in a wider recession, but also types of structural changes we need to become competitive. Now whether we can stretch out the fiscal adjustment for another year or so will take a little bit of pain out.”

On what will happen to Europe if Spain falls:

“We have reached the limit of patching things up. We have to make major decisions to create confidence in the market. Will we as politicians make decisions in time to calm the markets before they go haywire and create problems for Spain or any other part of Europe, that is the challenge and we have been behind the curve most of the last two years. I hope we have come to the realization that we can't be behind the curve this time.”

On how long the Greek government has before it runs out of money:

“I think we have a few weeks, and that's why it would be imperative that we first of all have a government and second we take necessary measures and show we are credible, we have signed up to this agreement, we may want some modifications, but we want to show we are credible when we sign as a government as Greeks with our partners. This is a make-or-break period.” 

On Europe’s crisis:

“In Europe we let things linger…we have to move in to for example a banking union, with a common insurance for a credit, a fund for recap of banks and restructuring banks, we have to move into fiscal union for monitoring fiscal responsibility of each country, we have to move into economic union for more tax harmonization, a social union where we should have a common policy on employment as far as benefits are concerned. For example, I've been an advocate of a European voucher where a young unemployed person can take it from Greece and go to Germany, somewhere else, to any school or training center, and to eventually employment. We need a more democratic Europe, too. This has to be a citizens project, not just a project of economic or political elite.”

On how severe capital flight is from Greek banks:

“That's been one of the problems, that combined with the banking system not only in Greece but in Europe has been somewhat worried over the last three four years to lend out—worried about their accounts to hold on to what they have has not been conducive to growth. It's getting worse.”

On whether Germany is standing in the way:

“I wouldn’t say Germany is standing in the way. I think Germany is right now at a point where it is doing well, feeling quite confident, its economy is booming, it went through ten years of change.”

On whether Alexis Tsipras is dangerous:

“I would take his words with a grain of salt and would say that what he would do if he's part of a coalition or even if he is No. 1 party, we would have to see once he is in government. My hope would be that whoever is in government acts responsibly, honors a very difficult negotiation we had over last two years where we came out with the biggest bailout program in history, the biggest haircut also in mankind's history with a tough program of adjustment.”

On whether the personal costs were worth it to serve Greece:

“I think it's worth it. I believe in politics we are not permanent fixtures in power, either we serve countries in best of ways and that could be a personal cost or I would not want to be in politics, I'd be on a Greek island enjoying myself. I felt this is what I had to do for my country.”

On whether he’s transferring his own money out of Greek banks:

“No I'm not. I'm voting for Greece, not that I have a lot of money, anyway.”

From a transcript by Bloomberg TV.

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