Paul Buitink talks with George Papaconstantinou, author, professor and Greek Minister of Finance during the first bail out years 2009-2011.
Papaconstantinou was persona non grata in Greece for taking difficult measures and imposing austerity. 10 years later the Greeks have a more balanced view. Should he have arranged debt restructuring from the start? Papaconstantinou says it was impossible. The Greek banks would have been wiped out. When he started as a Minister the deficit turned out to be close to 16% instead of 6%. He agrees that the bailout money went primarily to German and French banks.
Debt to GDP is over 180% but there is no immediate problem due to low interest rates and long maturities of the debt. Debt restructuring should take place though in the future. Perhaps via the Paris Club rules. Nominal haircut is politically unfeasible, more reduction in net present value (NVP) is. You can call that voter deceit. Papaconstantinou expects new QE but Greece will probably not be part soon due to not being investment grade.
The new government, despite being the same party that fooled Greece in the past, has new leadership and takes promising steps. No people from the former leadership were ever tried and also in the new government there is clientelism. So the new government has two faces. After the crisis no real soul-searching has taken place. Papaconstantinou doubts whether lessons were learned.
Banks are still fragile. He blames Syriza. No political party wants Grexit at the moment. The country is in a post-bailout area but still suffers from the crisis, although things go better.
Other things discussed are negative interest rates, the Lagarde list, his new book Whatever it Takes about the future of the eurozone, Brexit and migration.
Publisher: Cafe Weltschmerz
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