Russian agency RIA-NOVOSTI | Prime Minister’s interview
Moscow, 15 February 2010
Question RIA-NOVOSTI: Mister prime minister, what is the goal of your upcoming visit to Russia and what issues will you discuss in Moscow?
George A. Papandreou: We intend to strengthen our ties with Russia by increasing our bilateral contacts, beyond our strong foundations of cooperation in the energy and economic sectors while both issues will be high on the agenda. There is scope to deepen economic relations in sectors such as tourism, shipping, and manufacturing. We are also working together to designate the Year of Russia in Greece and Greece in Russia, ahead of the 2014 Sochi Olympics.
We will also discuss regional issues of particular interest to our two countries, including the Balkans, Turkey, and developments in Cyprus, especially in light of Russia’s role as a permanent member of the UN Security Council. And of course we will discuss Russia’s relations with NATO, the EU and the OSCE. Last year, under the Greek Chairmanship of the OSCE, we launched the Corfu Process, which is the main forum for discussion of Russian proposals to revamp European security policy. Greece is in the OSCE Troika and we want to see this initiative move ahead.
Question RIA-NOVOSTI: Your government has said it will promote joint energy projects, such as the Burgas-Alexandroupolis oil pipeline and the South Stream gas pipeline. Will you discuss in Moscow any particular terms of their implementation?
George A. Papandreou: Prospects for the joint construction of both the Burgas-Alexandroupolis and South Stream pipelines are very promising. A secure supply of energy resources is a major priority for Europe.
The PASOK government launched the Burgas-Alexandroupolis pipeline and we intend to finish it. The institutional framework, including studies on the environmental impact and the Passage Agreement, should be finalized within the next six months. Construction will begin immediately after that.
Regarding the South Stream natural gas pipeline, the process of setting up a Greek-Russian company to build the Greek section is almost complete, as is the feasibility study. Greece is working with all our European partners affected by the pipeline to ensure that South Stream is incorporated into the EU’s Trans European Networks.
Question RIA-NOVOSTI: Economic ties between the two countries and bilateral trade have suffered a negative impact over the world crisis. Certainly, they go beyond energy. What other spheres of economic cooperation will you discuss in Moscow?
George A. Papandreou: In 2009, there was an 80% drop in bilateral trade and Greek exports to Russia fell by about 45%. My presence in Russia signals our government’s determination to reverse this trend. Many Greek companies across different sectors are already active in Russia. Our goal is to support their investments and to encourage greater investment of Russian businesses in Greece, particularly in the fields of energy, banking, shipping, transport, food and drink production, and technology. Ongoing discussions to establish a new cargo rail link between Thessaloniki and Moscow currently being developed will be a boost for bilateral trade, providing a cost-effective and environmentally friendly new means of transporting goods.
There is also potential for greater cooperation in tourism and we support acceleration of the Russia-EU dialogue on visas.
Question RIA-NOVOSTI: The European Union has approved the Program for Stability and Development, which was proposed by your government and which stipulates the decrease of budget deficit and debt. But international media have said the European Union can demand additional measures to be taken by Greece to reduce spending, for example, significant salary cuts. How will you persuade the society that unpleasant measures are needed, while many social groups, farmers in particular, reject the dialogue?
George A. Papandreou: The Greek people recognize that things need to change fundamentally. The course we have been on for the past five years under the previous government has led us to a dead-end, and now we must make swift and drastic reforms to correct it.
My government has acted boldly and decisively in combating our current economic crisis. We have redrafted the national tax law, casting a much wider tax net and closing the many tax loopholes that have led to billions in lost revenues each year. By cracking down on the use of tax havens and higher income brackets, we aim to put most of the new tax burden on those with means while providing support to those in greatest need. We have also controlled runaway public sector outlays by freezing the highest government wages and reducing government bonuses. We have called for a 1:5 ratio of public sector replacement, where only one new position opens for five government employees that leave the workforce. We have raised the retirement age to levels more consistent with European standards and our increasing life expectancy rate. We have also increased our government accountability by making our national statistics agency independent and by publishing all of our government expenses online.
Even though these measures call for sacrifices on everybody’s part, we continue to have high approval ratings and the support of the majority of the Greek people. There will be difficult days ahead, but this fact alone illustrates how committed the Greek people are towards reforming this country.
It is also important to note that our work has been done in full consultation with all relevant stakeholders in the economy, from small business owners to trade unions. For the first time in history, the Greek people are sitting with us at the table as we set out to solve our problems together. This gives me confidence that the work we do will continue to be well-received by the Greek public. Reasonable policies built around consensus always have a higher rate of success.
Question RIA-NOVOSTI: Your program stipulates not only the reduction of spending, but also provides for a sharp rise in incomes in the period when the economy is suffering a recession. Possible tax hikes may increase tax evasion. How are you planning to counter this problem?
George A. Papandreou: I don’t believe in the Laffer-curve style argument that simply increasing taxes will inevitably lead to a widening of tax evasion, provided that we close the tax loopholes that have gone overlooked for decades. The new measures we are taking are not too hard – tax evasion has simply been too easy.
My government has cracked down on both these tax loopholes and the widespread corruption in tax collection, and this will guarantee a greater revenue stream – effective immediately. For example, we have called for the immediate repatriation and declaration, with six-month immunity, of Greek private funds held in offshore tax shelters. Many of our European neighbours have enacted similar policies with very quick and successful results. We have also expanded our base by imposing a tax on alcohol, cigarettes, and fuel, which will pour billions in additional revenues each year into government funds.
These measures have been supported by the Greek people, and are a necessary step in rebuilding our economy. One of the reasons PASOK won such a resounding victory in the elections was our pledge to target tax evasion and corruption, and this is exactly what we are doing.
Question RIA-NOVOSTI: Despite Greek and EU officials’ promises, international media reports, which say Greece is on the brink of bankruptcy and plans to ask assistance from the EU and even from third countries, continue to appear, has caused anxious reactions on the markets. What tactics will you choose to calm the markets?
George A. Papandreou: Greece has not approached the international community nor the European Union for economic assistance. Greece is committed to and capable of solving this problem on its own.
What we would like to see, and what we are now seeing to a greater extent, is the political support of European nations and their unwavering commitment to our union. Greece has been in the spotlight for the last few weeks but, as we all know now, this is a much larger problem directly involving Portugal, Spain, and the entire European economy.
We must understand what we are dealing with and what we are dealing with is a market of credit default swaps that is pushing artificial risk premiums onto European bonds. Similar forces toppled the global financial market just years ago and we, as Europeans, must be coordinated in our response. Recent discussions at the EU Summit last week reflect this principle.
Question RIA-NOVOSTI: Russian tourists traditionally consider Greece an nice country for summer vacations, and there are many grounds for this. At the same time, more and more Greeks are looking forward to visiting our country and see its beauty and its attractions with their own eyes. Do you believe that the EU cancellation of a visa regime for Russian citizens could play an important role for tourist exchange?
George A. Papandreou: Greece, as a country with traditional friendly ties with Russia, constantly takes efforts to help Russian citizens who would like to visit our country. As for the easing and accelerating the visa issuing process, we will reach this using clear orders which we give the authorities of our diplomatic and consulate missions in Russia, in particular, to provide all possible support to Russians who want to travel to Greece. We are also expanding and improving the Greek consulate’s presence in Russia.
To achieve this goal, general consulates in Moscow and St. Petersburg were relocated to new buildings, and Greek visa centers were established in four cities (Moscow, St. Petersburg, Yekaterinburg and Novosibirsk) in order to provide more quality services to Russians.
I would like to stress that Greek consulates in Russia issue visas within 48 hours, which puts our country at one of the first places in Russia as regards the speed of considering Schengen visa applications, if compared to other Schengen states. Usually, our consulate bodies issue more and more visas as years pass. For example, 228,793 visas were issued in 2007, a total of 307,796 in 2008, and 252,553 in 2009.
In regard to the additional easing of the visa regime, our country played a major role in the signing of an agreement on easing the visa regime between the EU and Russia, which has been in force since June 1, 2007. This agreement, on the one hand, eases the process of visa issuance for several groups of citizens (for example, businessmen, company representatives, journalists, scientists, researchers, members of government and parliament, participants of scientific, cultural events, cultural figures, participants of international sports competitions). On the other hand, the cost of a visa remains at the level of 35 euros, and not 60, while visas are free for some categories of applicants.
Moreover, our country uses every opportunity to support Russia’s request to the EU concerning the cancellation of obligatory visas for Russians. We are strongly convinced that it would significantly help the further strengthening of ties between citizens of EU member states and Russia.