Statement of Government Policy to the Hellenic Parliament

Honourable Speaker of the House, Honourable Members of Parliament,

The decision – arising from the deliberations chaired by the President of the Republic – of the leaders of the three parties supporting and participating in the present government represents a major step towards establishing the consensus and common purpose required to save the country: after a long and tense period of friction and uncertainty, the agreement between the three parties – Pasok, New Democracy and Laos – to form a unity government with a clear mission and mandate is of crucial importance for the attainment of key national objectives. Indeed, it sets the basis for:

- restoring the international credibility of the country,
- strengthening national and social cohesion, and
- meeting the obligations that Greece has undertaken in order to exit the crisis and revive the economy.

I am fully conscious of the honour that has been bestowed on me, as well as the responsibility that I now shoulder. I thank the President of the Republic for asking me to form a government, and I thank also the chairmen of the three participating parties for the trust they have placed in me.
The new unity government – and I personally – undertake the task we have been charged with at this crucial moment for four key reasons:

- Because Greece’s participation in the eurozone is at stake;
- Because by staying in the eurozone we safeguard monetary stability, we lay the foundations for sustainable economic growth, and we enhance social justice;
- Because young people must be given the chance to live and prosper in their home country, within an environment of stability, favourable job prospects, and equal treatment for all;
- Because I believe that, united, we can and will succeed.

How, then, are we to do this?

- By securing the solidarity of the European peoples and international organizations who have faith in our efforts, as demonstrated by the financial rescue package and technical assistance they have provided us;
- By implementing the policies and reforms required to restore the country to fiscal health and regain competitiveness;
- By mobilizing the Greek people in the national effort.

The very substantial sacrifices made by the Greek people must not be squandered. Two keys to winning the battle are: first, the truth and, second, restoration of confidence. By truth, I mean the truth about our current situation and where we are heading. And by confidence, I mean the confidence in our ability to overcome our problems. To secure the confidence of the international community we have to regain confidence in our own abilities.

The fiscal crisis that took hold of Greece two years ago has escalated and spread. It has evolved into:

- a banking, an economic, and a social crisis;
- a crisis of confidence among the Greek public in the ability of economic policy to address the country’s problems and map out a brighter future;
- a crisis of confidence among our European partners in the will and ability of Greece to push through fiscal reforms and restore its economy to health.

And all this is occurring despite the notable progress in restoring fiscal balance and the significant improvement in competitiveness posted since early 2010. Specifically, the general government deficit fell from 15.7% of GDP in 2009 to 10.6% of GDP in 2010, and is expected to decline further to 9% of GDP by the end of this year. Further, the international competitiveness of the Greek economy has improved significantly, as shown by the evolution of unit labour costs and, more generally, the cost of production, as well as a reading of other indicators that capture the qualitative and other components of competitiveness.

Yet despite the reduction in the fiscal deficit, the public debt is increasing because the general government deficit has not been sufficiently reined in.

Sufficient primary surpluses to help reduce the debt and reverse its upward trajectory have not been generated. The process of fiscal consolidation, cost cutting and increasing taxes, and the limited liquidity of the economy have all served to deepen – beyond the levels initially forecast – the recession that first gripped the economy at the end of 2008, due in part to the global financial crisis.

As a result, we have seen been a sharp rise in unemployment and additional difficulties in meeting budget targets. In response to these developments additional austerity measures were implemented to reduce the budget deficit. Social cohesion has been put under pressure. The Greek public has become increasingly dismayed and frustrated by the fact that, despite their sacrifices, the prospect of an effective exit from the crisis looks ever more remote.

In addition, high public debt (and expectations that it will climb yet further), the shortfalls in the fiscal targets and the delays in pushing through structural reforms mean that the day when Greece can raise funds from the global money markets to cover government borrowing requirements has been deferred to an even later date. Accordingly, if reform and restructuring of the economy are to continue, it is essential first to secure further rescue packages for Greece from its European partners and the IMF and, second, to implement a new economic adjustment programme that addresses the country’s fiscal problems more effectively and at a faster pace, while aiming at restoring, and then improving, our competitiveness.

To conclude, despite significant progress, Greece today finds itself at a critical juncture. The choices we make about the course to be followed and the policies to be pursued will be crucial for the future prosperity of the Greek people. The two alternative directions that the country can take, i.e. to remain within the eurozone or to leave it, have been stated in no uncertain terms by our European partners, who have also stressed their readiness to continue supporting our country, provided of course that Greece itself wishes to continue the economic consolidation and restructuring process.

The decisions taken at the summit meeting of eurozone leaders on 26th October, and the commitments which, on the one hand, led to these decisions and, on the other, derive from these decisions, set out the actions required to ensure financing to Greece in the years ahead and the successful outcome of the economic recovery effort.

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The main task of this government, as agreed at the meeting of political leaders chaired by the President of the Republic on 10th November 2011, is the implementation of decisions taken by the eurozone summit on 26th October, and the implementation of the economic policy associated with these decisions. The government is called upon to guarantee that the respective commitments undertaken by the country are observed.

These commitments arise from the ongoing support programme; they also led to the more recent decision of 26th October, and derive from it, via the new rescue package and the involvement of the private sector (PSI) in the financing and long-term sustainability of the Greek sovereign debt. The Finance Ministry will manage the overall package of actions required for the implementation of our undertakings as per the adjustment programme.

More specifically, the decisions of 26th October concern:
1) additional financing for Greece totalling EUR 130 billion, covering our funding needs for the next three years, and
2) a new scheme for private sector involvement in the financing of the Greek state in the years ahead, leading to a significant decrease in the public debt, and a drastic reduction in the funding requirement for the public debt by 2020, while ensuring its long-term sustainability, bringing it to around 120% of GDP in 2020.

The sequence and timing of actions leading to the implementation of the decisions of 26th October are dependent on the agreements that associate our country with the eurozone member states and our institutional partners – the European Commission, the European Central Bank and the International Monetary Fund.

Once these decisions and the economic policy associated with them are implemented, Greece will be able to look to the future with greater optimism.
It is important to note that measures capable of leading to attainment of the fiscal targets set for the end of 2012 have already been taken and put into effect.
In the meantime, effective implementation of PSI means that:

- First, interest payments on the public debt will decline sharply in 2012, leading to further reductions in the fiscal deficit.
- Second, during the last two years of the new consolidation programme (2013 and 2014) under the Medium-Term Fiscal Strategy Programme, the need to take yet further measures will be reduced.

The task at hand for the present government is immense, given the brief term of life assigned to it. This is why we must get started immediately, and move at a rapid pace.

Our first priority is the immediate fulfilment of the conditions that will* enable timely disbursement of the sixth tranche of the original loan. The release of this tranche needs to be made no later than 15th December, in view of the government’s financial needs in the second half of the month. The legislative and administrative conditions for disbursement have been fulfilled by the country, thanks to the implementation, by the previous government, of all the required actions.

It remains for us to enact the undertakings that led to the decision of 26th October, and which derive from that decision.

The second priority for the new government is the completion of discussions with the troika on the new programme, on the basis of the fifth review of the original programme that was completed a few weeks ago. Following adoption of this new programme, the new loan agreement will be drawn up and then submitted to Parliament for ratification before the end of this year. The agreement must also be ratified by the parliaments of all those other member states whose various constitutions require such ratification.

Another urgent task for this government, of course, is the preparation of the budget for 2012 within the deadline set by the Constitution. Already, the budget is in its final stage of preparation by the economic team under Deputy Prime Minister and Minister of Finance, Mr. Evangelos Venizelos. The new draft budget will include an initial assessment of the beneficial impact of PSI.

The budget for 2012 shall be included in the revised Medium-Term Financial Strategy Programme, which comprises the cornerstone of both the existing and the new support programme.

Preparations for the planned bond swap under PSI are already under way so as to map out the financial and fiscal framework that needs to be in place by the time the new programme is approved and scheduled, and the holders of Greek sovereign debt are approached. Accordingly, we shall publish forthwith the global public announcement of the PSI, as per the Eurogroup decision of 7th November 2011.

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At the same time, we also need to ensure – in collaboration with the European Financial Stability Fund (EFSF) and the ECB – the liquidity of the Greek banking system during the implementation phase of the new PSI.
An immediate priority for this government is the approval of the bill ratifying legislation regulating issues related to Greek government guarantees to banks.

Alongside its core mission, under the Constitution the government is charged with formulating and running the general policy of the country in all spheres.

For example, the government will pursue the structural changes required to improve competitiveness and enhance the productive potential of the Greek economy.

The implementation of critical structural changes that are governed by national legislation needs to be rapid and effective. These changes include:

- the new uniform payroll frame;
- labour reserve measures;
- labour market reforms;
- the privatization programme;
- completion of measures to open up closed-shop professions;
- reforms in the workings of the judicial system;
- evaluation and restructuring of bodies, staff and services in public administration and the broader public sector;
- improving the business environment and enhancing healthy competition.

With regard to structural reforms in the labour market, the key priorities include: enhancing active employment policies; ensuring the sustainability of pension funds; supporting economically disadvantaged groups. No less than 24 new job creation schemes are scheduled for activation by the end of the year.

The new Single Agency for the Provision of Primary Healthcare is in the process of being launched. The crucial project of setting up the national electronic prescription system is moving ahead at a rapid pace.

The government is currently pursuing further reductions in the prices of medicines, reductions in pharmacy profits, and consolidation of the implementation of liberalized opening hours for pharmacies. An additional aim is to reduce the cost of procurement costs of hospitals, medicines and other materials compared with 2010.

The implementation of a national strategy to boost exports is particularly important and efforts are being made to accelerate it. A new bill has been drafted to streamline export procedures. Funds available for supporting the working capital needs of export businesses are being enhanced, at favourable interest rates. In addition, a further 20 plans to attract large foreign investments totalling EUR 5.5 billion are currently being evaluated under fast track procedures.

The restructuring and strengthening of the National Strategic Reference Framework (NSRF) so as to bring it into line with current needs and thereby channel funds more effectively to the country’s development priorities is another measure being promoted by the government. In the months ahead, substantial sums from the NSRF’s EUR 14 billion fund will be released to help finance the completion of major infrastructure projects and enhance the liquidity of businesses.

The privatization programme is progressing in line with the fifth review of the support programme. The challenge now is to attract investors.

It is particularly important that the country’s energy resources are put to good use. International tenders have been announced for conducting oil and gas exploration in the Ionian Sea and southern Crete. At the same time, the government is promoting plans to export the country’s solar energy resources to Northern Europe in line with the decision taken at the summit meeting of 26th October.

An action plan is currently being drawn up in collaboration with the new European Task Force for the reform of public administration and reductions in paperwork, both of which are essential if the country is to foster greater investment activity.

We shall focus on drastically reducing waste and closing down unnecessary bodies and agencies.

More efficient government administration and public services, greater transparency, equal treatment for all, and the strengthening of institutions are all of paramount importance. To this end, a bill is being drafted for the transformation of the Greek administrative model to that of a strategically focused and streamlined state. Also, a bill has been drafted for the reform of the disciplinary regime applicable to public service workers, and is now due to be submitted for discussion in Parliament.

Reforms will also be made across the entire spectrum of the administrative, civil and criminal justice systems. At the same time, alternative forms of dispute resolution will be strengthened so that the public will at last be able to find justice within a reasonable space of time.

Improving the educational system is essential if the country is to tap effectively its human and productive resources. Streamlining of the hundreds of regional administrative structures in primary and secondary education is already under way. Implementation of the Higher Education Act is a popular imperative, as reflected in the very broad support it received from the vast majority of MPs. The government will also take steps to restructure the country’s research profile.

Last, it is important that we implement forthwith the Lifelong Education programme.

In the area of tax policy and the management of public finance, the primary objective is the immediate and effective introduction of the new structures that have been decided, and the implementation of the findings of the reports prepared by technical experts of the IMF so as to tackle effectively tax evasion.

Honourable Members of Parliament,

It is my hope that the time during which this government is responsible for the management of public affairs will be more than a mere parenthesis. Rather, it is my hope that it serve as the bridge that facilitates the transition of our country to a state of fiscal balance and sustainable growth.

Our European partners and the international organizations that are supporting us have made it clear that the continued funding of Greece will depend on full implementation of the decisions of the eurozone summit of 26th October and the economic policies that go hand in hand with those decisions. To this end, they have asked for the commitment of the government and the leaders of the parties that form it.

This requirement should not be interpreted as the demand of faceless powers and organizations. We need to appreciate its true dimensions. The commitment they are seeking is a requirement and expectation of the peoples and taxpayers of the states which, either directly or indirectly, support us, and who are undertaking the risks and contingent liabilities that will arise if we fail to deliver on fiscal consolidation and restructuring of the economy. The pursuit of policies that aim at achieving these ends is first and foremost in our own national interest; however, it is also an obligation towards those other peoples who are showing us solidarity.

Honourable Members of Parliament,

It is true that the crisis and concomitant austerity measures have deepened the recession and hit employment over and above the levels originally estimated. These undesirable developments, however, can be countered and gradually eliminated in three ways:

- By promoting the reforms I outlined above, so as to improve competitiveness, enhance the country’s productive potential, and support an outward-looking economy.
- By using more effectively Community funds through the NSRF.
- By fast-tracking investments in energy, and particularly renewable energy.

These actions will help to absorb unemployment. Furthermore, we must provide a strong safety net for those who are socially more vulnerable. We need to support them with policies and stronger social solidarity by every available means. I believe that in the storm of this crisis none of us should feel alone.

The Greek people know that the course we have to tread is uphill, and that our efforts will require persistence. The exit from the crisis, under the best possible terms, and a return to growth and full employment, will not be forthcoming without sacrifice and without the associated cost of adjustment. These costs and sacrifices, however, must 6 be distributed fairly. Broadening the tax base and eliminating tax evasion are not only fiscal consolidation measures; they are also measures of social justice.

I should stress that uur endeavour to achieve fiscal consolidation and economic restructuring is made easier – not harder – by Greece’s membership of the euro area, which serves as a guarantee for monetary stability and fosters the right conditions for sustainable economic growth. In addition, the single currency assists in the European integration process and reinforces cohesion and solidarity among European nations. Remaining in the euro is our only option. The Greek public are fully aware of the benefits arising from membership of the euro area – as evidenced by all the opinion polls.

Honourable Members of Parliament,

If we stick to our commitments and are systematic in our efforts throughout the term of this transitional government and the subsequent government that is elected by the Greek people, the positive results we are striving for will start to materialize.

There is no denying that the road ahead is far from easy. But the time will come when our current hardships will take a turn for the better. The time will come when economic recession will return to growth, when the state will function better, when our collective efforts and social solidarity will be rewarded. The agreement of 26th October provides us with the best opportunity to reverse the current adverse climate, at least insofar as our own actions can impact it.

This crisis can be turned into an opportunity. All that is needed is for us to try our best. I call upon all those who work in the public sector – everyone in the nation’s tax offices, schools, public services – to do their very best to prevent their sacrifices from going to waste; for their efforts are crucial to the success of our common endeavour. The contribution of each one of us may seem meagre; however, combined with the efforts of everyone else it amounts to immense social and economic progress.

In a spirit of common purpose and social unity it is possible to deal with the crisis at greater speed and at lower cost to all. We can prove that we are capable of changing the country and shaping a brighter future, especially for young people. It’s up to us. We have the potential. Together, conscious of the difficulties that lie ahead, but with a clear objective, in a spirit of determination and systematic endeavour, I believe that we can succeed.

Allow me, then, to conclude:

I undertake the office of head of government at this most difficult hour in the recent history of our country. I am fully conscious of the great responsibility this entails. However, I cannot carry out this mission alone.

Emergencies of the kind that Greece now faces can only be confronted effectively when all the nation’s forces and potential are united and work together. I believe that by giving this government a vote of confidence you will be joining in this effort.

I am sure that no one here wants to see our country defeated and leave the euro.

I take it that all those who support the government undertake responsibility for ensuring that Greece’s membership of the eurozone is not up for negotiation.

The country can be saved. It depends on us.

Let me be quite clear to you and the Greek people. As long as the Hellenic Parliament entrusts me with the office of Prime Minister I shall perform my duties solely in the interests of our country.

Honourable Members of Parliament,

I ask for your vote of confidence in the unity government.

Thank you.