The recent upgrade in Greece’s credit rating by Moody‘s was “very good news” and a “positive signal” for the country that reflected its potential, provided that it puts in the hard work needed and continued to modernise, Jeroen Dijsselbloem said in an interview with the Athens-Macedonian News Agency (ANA), while attending the 4th Delphi Economic Forum held at the weekend.
The former Eurogroup president expressed his concern, however, that this progress might slow due to the fact that 2019 was an election year in Greece, while he also answered questions on whether primary surplus targets should be reduced, the impact of the Prespa Agreement and the government’s decision to increase the minimum wage.
Regarding events in Europe, Dijsselbloem noted a need to restore the prospects of the “other half” of Europe that was getting left behind, highlighting the danger of populism, and also the need to handle the problem of migration, which had become priority for all countries. On this issue in particular, he suggested that trying to get Eastern European countries to accept refugees was a “lost cause” and that a joint asylum policy should be agreed without them, with as many EU countries as possible.
“If Eastern Europe does not want to be part of that, fine. When we created the euro, not everyone is a part of the euro, and that’s also fine. But let’s have one asylum policy and let’s have a really European border control,” he said.
Sections of the interview are given below:
ANA: Moody’s on Friday announced that it has upgraded Greece’s credit rating by two notches, to B1. Do you think that it paves the way for Greece to return to the markets and issue a 10-year bond?
JD: That’s a very specific question. Let’s start with the good news. Because it’s very good news. The key issue for Greece is, I think, at the moment to get the confidence of investors that the trend is upwards, that the Greek economy is upwards and that the government will stay on a predictable and sound policy path. So this is really a very positive signal. Going to markets is a gradual process, it takes time, you need to build the whole curve, different maturities, and I am sure this positive signal is going to help form the whoe curve. So the expression ‘going to markets’ is not a one-moment event, Greece has already gone to markets a couple of times, so gradually they are placing bonds on the whole curve. So, yes, very positive.
ANA: Since August 2018, Greece is no longer in the bailout programme. What are the prospects for the Greek economy? Are you optimistic?
JD: Yes I am optimistic because I think there is a lot of potential but it really requires hard work. It’s not going to come by itself and I am a little worried that this year is an election year and it will be a lost year when nothing positive will happen. Positive in the terms of a further modernisation of the government’s work, the administration sector, improvements of the education system, improvements of the tax system. So I am concerned that 2019 in that respect is a lost year. Hopefully things stay positive and stable, economic growth continues.
Of course, there are issues that really worry me, like the issue of the minimum wage. I fully understand that people want to see an increase in their wage and minimum wages are low, but minimum wages in Greece are still higher than in all the neighbouring countries, so there is a big issue of labour market competition, and if you get rid of the [sub-minimum] wage for young people and at the same time increase the general minimum wage by 11 percent, then that’s really going to be a risk for youth unemployment.
If you look around Europe, in those countries that have a specific minimum wage for young people, the youth unemployment is actually lower than in those countries that don’t distinguish between young and old. So Greece now gets rid of the specific minimum wage for young people and for youth unemployment that’s bad news.
Also, to the outside world, if you increase the minimum wage by 11 percent in one grand swoop, the outside world thinks ‘OK, here we go again. Wages are out of control again and competitiveness out of the window.’ So, for international companies who are making the decision ‘do I put my factory in Greece or do I put it in Bulgaria, or do I put it in Serbia, these kind of signals are basically saying, ‘take your factory to Bulgaria’. That may be good news for Bulgaria but not or Greece. So, I’m critical of some of these aspects [but] underlying, I think the news is still positive. Things are going in the right direction and we should use this time to really push forward.
ANA: There is an agreement for Greece’s primary surplus to be 3.5 pct of GDP by 2022 and 2 pct of GDP by 2060. Do you think this should reduced?
JD: It is difficult for me to say because, in all honestly, we know that if you reduce the primary surplus there is a bigger issue of debt sustainability. So if Mr. Weber, who is the chief of the European Peoples’ Party, the Christian Democrats, comes to Greece and says ‘I think the primary surplus target of 3.5 percent should be brought down’ – by the way it was a German Christian-Democrat Wolfgang Schaueble who insisted on it, actually he wanted it for 10 years – if you say that, then you also have to provide more debt relief for Greece. So the question to this German politician, who was here to support his Christian-Democrat friends in Greece, the question in all honesty is: are you prepared to give more debt relief. If not, then Greece has a fiscal problem…3.5 percent is very high.
ANA: In terms of growth?
JD: Do you mean, if you bring it down, will it be good for growth? It very much depends what you do with the money. Basically, if you bring down your primary surplus you have more money to spend. Unless, of course, you spend it on reducing your debt. Is that the promise, is that the idea? So you have more money to spend and it depends what you spend it on. But I think, really, for growth in Greece the answer is not to spend more public money; the answer is to get more private money into the country. As you know, this is true of every country in Europe. The private economy is always bigger and stronger than the public economy. And certainly in the current situation, the scope for increasing public investments is limited, the scope for increasing private investments is unlimited if you do the right things. If you improve the investment climate, if you attract international companies to come to Greece and work in Greece, the scope for international investments is, in principle, unlimited.
ANA: What is the significance of the Prespa Agreement in attracting investments?
In the outside world – I know it is controversial or sensitive in Greece still – it is perceived as a fantastic deal and the two prime ministers have been praised everywhere internationally for showing leadership because these are such sensitive topics. With a great history and identity issue, especially in those kind of issues, it takes leadership to take a step forward, to say ‘the past is the past, we will become good neighbours and work together’. So I think it is really positive and that it contributes to the positive atmosphere around Greece at the moment.
So….I hope two things around the elections [in Greece]. One is that, in the runup to the elections, the politicians won’t start promising all these presents to the voters and I hope that the voters, if they get offered a present by a politician, they will say: ‘Who’s paying for this present, where is the money coming from?’ Voters in Greece really need to ask this question. So, in any policy debate, in any election campaign, if there are presents being given out the voter should say: “Hang on, before I accept your present, who’s paying for it?” The real answer will probably be that you’re paying for it. You, the electorate.
The second thing I hope that after the elections, whoever is in government, they really pick up the drive to modernise Greece, to modernise the way the government works, the tax system works, so the corporate sector can do their job, because a lot of work still needs to be done.