Pasok Parliamentary Group: Summary of key points of Prime Minister’s speech

March 2, 2010
For many years, Greek politicians buried their head in the sand and avoided dealing with difficult structural and social problems. We are tackling those problems head-on.

The guiding principle of our government is transparency – to overcome our budget deficit but also to address our credibility deficit we inherited from the previous government, whose creative accounting has even called the credibility of the EU Commission into question.

In five months since taking office, our government has launched a raft of far-reaching reforms, regardless of the political cost of those decisions. To restore confidence among our EU partners, we have decided that further measures are essential.

Many people rightly wonder whether more taxes and less revenue will deepen
the recession. But the immediate problem we face is not dealing with the recession, but an inability to borrow more money to service our debt.

A few years ago, Greece borrowed at almost the same rates of interest as Germany. Today, when we borrow 5 billion we must pay about 750 million more interest than Germany. If Greece cannot borrow on the same terms as our European partners, the consequences will be catastrophic. It is our responsibility to avert that catastrophe. Some of the decisions we have to take might seem unfair. But we have no choice.

Greece is being held hostage by creditors and speculators. Unless both Greece and the EU take courageous decisions, the future of the European economy is at stake. Europe needs to show its solidarity with Greece: That alone will stop speculative attacks on the Greek economy and the Euro. But our European partners have to persuade their own citizens that Greece is a credible, responsible partner.

Greece can and must do everything we can to put our house in order. 2010 will be a year of drastic reforms across all levels of government: changes to our budget, our tax system, our social security system, our public administration, our development model. All these changes will have a dramatic impact in addressing chronic problems and entrenched mindsets.

I wish we had more time to demonstrate the impact of the reforms we have already implemented. To prove to our European partners and the markets that we mean business. Unfortunately, we cannot afford to wait for these policies to bear fruit because our creditors won’t give us time. The global recession – which has caused ballooning deficits in many countries – has put further pressure on Greece’s borrowing needs.

Greece’s national debt now stands at 300 billion.  The GDP is 240 billion. This year, the Treasury needs 100 billion to cover operational costs, pay pensions and public sector wages, and service the national debt. We will have to borrow about half that amount.

Between 2004-2009, revenues increased by 10 billion, while basic state expenditure increased by 23 billion.  Today, 52% of government revenue goes to public sector wages and pensions. In 2004, that figure was 45%. In 2004, 6 billion was allocated to supplementary payments to social security. Today that figure is 12 billion. The EU has lost faith in Greece’s promises to cut wasteful public spending because between 2006 and 2009 basic budget expenditure (before interest) increased by 50% – or 20 billion.

Clearly, this is not sustainable. The history of the last five years cannot be unwritten. Our European partners will not forget that history until we can prove that we can make difficult but essential decisions to pull our country out of this crisis.

The loss of revenue these new measures will bring must be counter-balanced by cutbacks in government expenditure so that we do not waste a single euro. We will kick-start productivity through structural reforms, public investments and incentives to stimulate growth. These measures are essential to ensure that unemployment does not rise as a result of our austerity measures. With wage earners paying a high price, we will be aggressive in cracking down on tax evaders and ensuring that the tax system does not favour the rich.

This crisis is an opportunity not only to break old habits, but to fundamentally change our country. Rebuilding Greece’s public administration is a matter of national survival. Greece’s problems are not just economic: the underlying political and social causes must be tackled so that these problems do not resurface. People are angry and want to see fundamental changes to our governance model and our public services. The majority of Greeks are not lazy, crooked, or corrupt. They work hard, pay their taxes, and respect the law. And they have said loud and clear: “enough is enough.”

We all have to make sacrifices. We must treat our country with the same respect as our household. Because Greece is our home and this is where we live.