Reuters | Interview with Jen Rogers

PRIME MINISTER
PRESS OFFICE
Thursday, 23 September 2010

>> Watch the video of Prime Minister George A. Papandreou on Reuters channel.

MS. J. ROGERS : Greek Prime Minister George Papandreou just wrapped up his address to the Economic Club of New York, and he joins us now.

During your talk, you were talking about taxes and trying to get a handle on that. And you mentioned cutting taxes for some industries, trying to stimulate growth. Does that mean you’ll need to raise taxes in other areas beyond where they are now?

MR. G. PAPANDREOU: Yes, one of the problems of Greece has been tax evasion, so we want to broaden the tax base. That will bring in new revenues. But we also want to cut taxes in certain areas to bring in investment. And that’s what we’ll be doing also. That, I think, will be stimulating the interest for Greece, for investing in Greece.

MS. J. ROGERS: Is raising the VAT further on the table?

MR. G. PAPANDREOU: No, this is not so. There has been, of course, a discussion about possibly some products to be raised further, but we are seeing if we can find other ways of getting revenues rather than raising VAT further.

MS. J. ROGERS: So right now you can say no to raising the VAT?

MR. G. PAPANDREOU: Basically, yes. Basically, we can say no to raising the VAT and we are looking for other areas of revenue.

MS. J. ROGERS: You had some questions on the banking system, and you said that the banking system is healthy, but you have also encouraged consolidation. So when you think about consolidation now, what kind of mergers would you like to see this year?

MR. G. PAPANDREOU: Well, first of all, we have a bank system which is inherently healthy. We don’t have toxic assets. They have been hit, of course, by the question of the sovereign debt of Greece, and as Greece is moving out of this crisis that will of course affect even more positively the banks.

The banks have gone under a stress test, for the European stress test. We did fine, except for one bank. And now there is a lot of discussion between banks, and we’ve got some international consultants that have come in and are giving us advice on the kinds of mergers we want.

Basically we want banks which are strong, strong in the region. We have branches around the region: Turkey, the rest of the Balkans, Southeastern Europe, and they are thriving very well. So we basically will have a capability of being a stronger banking sector.

MS. J. ROGERS: So you do see mergers, then?

MR. G. PAPANDREOU: I do, yes.

MS. J. ROGERS: Then how many banks do you ideally want at the end of this process?

MR. G. PAPANDREOU: I wouldn’t want to put a number on this, but certainly stronger and bigger banks will be useful for Greece. I think we’ll have a strong public sector bank, and we’ll have two or three big private banks.

MS. J. ROGERS: So two or three big private banks?

MR. G. PAPANDREOU: Approximately.

MS. J. ROGERS: When are you going to return to the capital markets? You say, when people ask, “soon.” Is soon this year, in terms of bonds?

MR. G. PAPANDREOU: Well, this is a question which is raised all the time. We have a guarantee, if you like, right now, for three years, of loans. We have gone out to the markets for some T-bills and done very well. That’s a vote of confidence. The interest rate has been lower than what we are even getting through these loans, the EU-IMF loans. So that, I think, is a positive sign.

However, we will do so when we are sure that the markets will respond positively.

So I don’t want to put a date on it. I think, as we are making these changes and as the markets are seeing that we really are determined to make these changes, implement these changes and turn the economy around, then we’ll see more positive signs and then we’ll be able to go out in the markets.

MS. J. ROGERS: But with the positive response…

MR. G. PAPANDREOU: I would say that before 2011 obviously not.

MS. J. ROGERS: OK, so this year you don’t expect to tap the capital markets with bonds? But when you do, you could see that in 2011? And especially given the appetite that we have seen for high-yields, you could see early 2011? Can you give us any range there?

MR. G. PAPANDREOU: I can see it as soon as we see that the markets respond positively, but I don’t want to put a date on that, because I may prove to be wrong.

MS. J. ROGERS: OK, but we can rule out right now 2010?

MR. G. PAPANDREOU: Yes, that’s right.

MS. J. ROGERS: Have you had any more discussions with the IMF in case you are going to have to extend, you know, what they have given you so far? What about an extension on repayment or more funds? Have there been any conversations beyond what we know now to be the agreement?

MR. G. PAPANDREOU: No conversations on that. What we have been talking about is how we can make sure that this program is implemented well, so that in fact we get out to the capital markets as soon as possible. And once we’re out in the capital markets, then it’s become sort of a natural process of moving away from this IMF-EU package.

And that’s our goal. That’s our goal first of all because we are not in the package just to be in the package or be in the mechanism of support. We are there in order to make the big reforms. We want to use this crisis as an opportunity to make changes we hadn’t made for many years, for many decades, actually, in cutting down the deficit, making our economy more competitive, moving into areas where we have a comparative advantage, like tourism, green growth, green energy, shipping, agriculture or Mediterranean diet. These are areas where we think we can be very competitive.

And this is why we see this as a difficult period, a painful period, but also a period of opportunity.

MS. J. ROGERS: All right. Well, thank you for taking the time to talk with us and giving us the opportunity to ask you a couple of questions. Greek Prime Minister George Papandreou, thanks very much.

MR. G. PAPANDREOU: Thank you very much.

MS. J. ROGERS: I’m Jen Rogers. This is Reuters.