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Address by Greek
Prime Minister George Papandreou (Brookings Institution)
Washington,
DC... March 8, 2010
Fifty-three years ago this week, on March 12, 1947, President Truman
rose before a special joint session of Congress.
He was there to warn America of a looming new crisis. A crisis that
revolved in part around Greece, but was in essence a European crisis.
One that directly affected America’s interests.
In that speech, President Truman introduced a vision and laid down the
sturdy foundation for policies and institutions—such as the Marshall
Plan and the Bretton Woods arrangements.
—that enabled our two continents to rise above the crisis and build an
unprecedented era of shared peace and prosperity.
Today, I have come to Washington this week to speak about another
crisis in Europe.
This crisis, too, revolves in part around Greece.
This crisis, too, very much involves America’s interests.
And as in 1947, if we act with sufficient foresight, I believe this
crisis also contains opportunities to strengthen our respective
countries and our shared interests for decades to come.
What is this crisis?
I would call it a crisis in global governance.
As we basked in the triumph that the end of the Cold War
symbolized for the West, we forgot three important elements.
First of all, the world's problems were not over.
No, history had not ended. New conflicts, new issues, and new
complexities of a globalizing world arose.
Secondly, we underestimated our own dogmatism.
While those on the other side of the Iron Curtain worshipped state-run
economies as a god, we had created our own god. The free market.
And gods are not to be tampered with. They rule.
Forgetting that, in democratic politics, god is the people. Both the
state and the market are there to serve them.
Thirdly, we neglected our transatlantic relationship.
Either by paying lip service to it as something 'matter of fact'.
Or as something irrelevant to the new challenges of the times.
So off we went with our respective narrow politics, as the world
was changing and as the balance of power was shifting.
That has undermined the extent to which our common values remain a
dominant force in the shaping of this new globalizing economy and
society.
Values such as democracy, the protection of human rights, the rule of
law.
The core of the crisis is that today the international community seems
impotent. Impotent to deal with the complexities of an interdependent
market. Or the new threats of global warming and competition for energy
resources.
Or the spread of violence, terrorism, and the proliferation of nuclear
weapons.
Or our inability to solve protracted conflicts such as the one in the
Middle East.
My conclusion is that cooperation between Europe and the US must be
reviltalized.
To empower our countries, societies and citizens so we deal with these
issues effectively and democratically.
How does this relate to my country, Greece?
You are all aware of the financial crisis Greece has faced in recent
months—the crisis that confronted me when I became Prime Minister last
October.
After we took office, we discovered that the budget deficit was
actually double—double—what our predecessors had told us, European
authorities, and the Greek people.
Our announcement of this discovery rocked investor confidence—not only
regarding the finances of Greece, but also the soundness of the
currency we share with our European neighbours.
All of you understand that this crisis, like Wall Street’s original
crisis in 2008, risks spreading more widely. Many worry it could
reignite the global financial crisis—and produce a Crisis 2.0.
That is why, in the past five days, I met with Chancellor Merkel and
President Sarkozy, and previously visited with Gordon Brown and Jose
Luis Zapatero, to convey my ideas on how to resolve this on-going
crisis and how to prevent it from spreading.
And that is why I will meet tomorrow with President Obama—not only as a
Greek leader, but also as a European leader—to discuss the important
role I believe the United States can play to ensure that Greece,
Europe, and America remain strong, healthy partners.
I want to describe for you the steps we and our European partners are
taking to address this crisis, and the lessons that it holds for
Europe’s and America’s shared efforts to build a far stronger economic
order for generations to come.
I stood for election last fall before a country that was demanding deep
changes. During the preceding five years, our public had grown
increasingly alienated as Greece’s national deficit ballooned, wasteful
expenditure mushroomed, and our GDP shrank.
During our election campaign, we promised to tackle head-on the chronic
problems at the heart of Greece’s economic woes—structural problems
that Greek politicians had avoided addressing for far too long.
Our goal was – and remains – to transform Greece into a thriving
economy driven by green technology and investment in our natural and
human resources.
So when my party won a resounding electoral majority, we knew our
mandate—like the mandate of your own new President—was to bring deep
changes, even at a time of great economic challenge.
Now, I am used to change. I was born in Minnesota and raised in
California, before eventually moving to Athens.
And then, when my family was forced to flee Greece during the
dictatorship, we lived in exile in Canada, and then Sweden.
And throughout my political career, I have often taken office during
times of crisis. I became Education Minister during a teachers' strike.
I became Foreign Minister just as Greece was entering one of its most
fraught stand-offs with Turkey. I took over as leader of my party in
2004, just a few weeks before an election that we were certain to lose.
And now I have become Prime Minister during the gravest economic crisis
Greece has faced since the Second World War.
So confronting upheaval and the need for big changes has been an
integral part of my life. Even so, that does not make change any easier.
Yet the enormity of Greece’s deficit made the imperative of deep
changes absolute.
And now the changes are under way.
To restore confidence in our country and stability to our economy, we
pledged to bring the 12.7% deficit down to 8% this year, and to
EU-mandated levels of 3% by 2012.
To meet those targets, the Parliament has adopted the toughest
austerity meaures in Greece's modern history. The third round of those
measures passed just last week.
We know Greece faced not only a fiscal deficit, but also a credibility
deficit, as a result of the fabricated budget figures our predecessors
had published.
The EU was understandably sceptical about our promises to rein in the
deficit and crack down on corruption.
But we are demonstrating Greece’s decisiveness.
Public sector salaries have been cut, retirement ages raised and taxes
have increased.
These are painful choices that come with high political and social
costs.
We take them not only to rescue our own economy and prove our own
credibility. We do so also because we are part of a genuine community,
the European Union.
All of these measures reflect our commitment to protect the stability
of our common currency.
This medicine may be bitter, but it is only an immediate remedy. We
must also cure the core problems that have prevented Greece from
reaching its great economic potential for far too long.
So I have told the people of Greece that 2010 must be and will be a
year of drastic reforms across all levels of government: changes to our
tax system, our social security system, our public administration, our
education system, and our development model.
At the top of the list is tax evasion.
To give you just one measure of the scope of that problem: Fewer than
5,000 Greeks declare incomes of 100,000 euro or more. That pattern ends
now.
We will be prosecuting offenders—no matter how rich or powerful—to show
that we mean business.
The rule of law means that the law applies to all.
Such changes will bring in billions in unpaid taxes, and help underpin
our return to fiscal health.
We are also tacking the challenge of corruption head on.
Within the first weeks of my administration, I dismissed a deputy
minister and friend who was trading in minor favors for voters.
Corruption is hardly unique to Greece.
But it is a problem we are determined to address as part of our broader
reforms.
To usher in a new norm of transparency, we are televising our cabinet
meetings; we have launched an open, online application process for
public-sector jobs, and passed a law so that every government expense
will be published online—a first in Europe.
We post all our proposals on the web to allow for deliberation and
participation – in a Web 2.0 application – which empowers our citizens,
puts a check on lawmakers, and strengthens the quality of our policies.
These are among the changes my government has made and will pursue in
response to this crisis.
I am confident that Greece will very soon be a paradigm for open
government, a leader in green development – as Greece has great,
untapped potential for renewable energy – and a real magnet for
new business investment.
But there are two other seminal points I want to stress today—ones that
touch on our longer-term challenges, and our shared responsibilities
for building a stronger global economy.
The first point is that while we must all respond with urgency today,
we must also plan for the long term. The architects of the post-war
recovery of Europe and the trans-Atlantic community—leaders like
Adenauer, Schuman, and Truman—had an eye on what made sense, not only
for next week, but for next year, and the next generation.
So it must be today. The crises the world has faced over the past few
years should alert us to the fact that we need more cooperation,
regulation and foresight.
My own people understand this. The majority of Greeks recognize that
the very difficult changes I have enacted are in their own long-term
interest.
This is why Greek public support for my government’s reforms is higher
than many observers expected.
I see this every day. People stop me on the street to say they are
willing to make sacrifices if it can help our country. Others have
volunteered to give their pension back to the state. One of them is the
well-known singer Nana Mouskouri – who spoke about the Greek ‘filotimo’
– a word that is difficult to translate – but means a sense of pride in
giving to the common good.
Europe needs to recognise that the measures we have put in place, and
those still to come, need time to take effect.
Countries are not like financial markets. Social change cannot be
executed as swiftly as credit default swaps.
You cannot sell short on social commitments and political
responsibilities.
Although there are great risks in the current crisis, there are equally
real risks in unrealistic expectations and inflammatory impatience. It
is dangerous to push people too hard, too fast.
Greece already has some of the lowest wages in Europe. The average wage
in Greece is just under $24,000, compared to just over $40,000 in the
US.
We intend to reform our economy with the help of our citizens, not in
spite of them.
Europe needs to join us in taking a longer view. Savage budget cuts
will not necessarily lead to sustainable economic growth.
If we’re not careful, higher taxes coupled with lower revenue could
actually slow down our recovery.
And that would be unjust. It could also trigger severe social unrest.
Deflation is a genuine risk, too, if we don’t take parallel measures to
kick-start productivity and create jobs.
This is not about asking Europe to rush to the aid of a reckless
country.
On the contrary, standing by Greece, as it makes deep and responsible
reforms, is in the interests of Europe as a whole.
The price of not acting together will be higher taxes, higher
unemployment, and a slower economic recovery for all of Europe.
Greece may be doing all the right things to revive our economy.
But not everyone may want us to succeed.
This brings me to my second point: the need to address the threat of
speculation and ill-regulated financial markets—a threat that imperils
not only Greece, but the entire global economy.
I see that threat every day as we manage this crisis, for the immediate
problem we face is not dealing with the recession, but in servicing our
debt.
Despite the deep reforms we are making, traders and speculators have
forced interest rates on Greek bonds to record highs.
Many believe there have been malicious rumours, endlessly repeated and
tactically amplified, that have been used to manipulate normal market
terms for our bonds.
Partly as a result, Greece currently has to borrow at rates almost
twice as high as other EU countries. So when we borrow 5 billion euros
for five years, we must pay about 725 million euros more in interest
than Germany does.
We will have a very hard time implementing our reform program if the
gains from our austerity measures are swallowed up by prohibitive
interest rates.
This whole affair has a horrible sense of déjà vu.
The same financial institutions that were bailed out with taxpayers’
money are now making a fortune from Greece’s misfortune—while those
same taxpayers are paying the price in deep cuts to their salaries and
social services.
Unprincipled speculators are making billions every day by betting on a
Greek default. All this may sound a bit familiar to American ears.
Yet unlike the bankers, Greece isn’t asking for a bailout—let alone a
bonus.
Indeed, we have slashed the salaries of every single government
official.
I myself have taken a significant pay cut.
And we have slashed bonuses in Greek banks by up to 90%.
The global economy is interdependent. We all suffer or advance
depending on how well we deal with these risks.
There are both immediate and long-term steps we can all take to
counteract the forces that are profiting off self-fulfilling bets on
failure.
In our modern global economy, and particularly in crises, expectations
play a powerful role. Many real numbers are shaped by what happens in
people’s minds—or ‘Animal Spirits,’ as Keynes called it.
This is why friends can and should help in a crisis.
To me this is a challenge to our democratic institutions.
An elected government, making huge changes with the consent of its
people, is being undermined by concentrated powers in an unregulated
market – powers which go beyond those of any individual government.
It is true that Greece accounts for just 2% of the European Union’s GDP.
But our economic conditions can have a far larger impact than that
figure implies.
An ongoing Euro crisis could cause a domino effect, driving up
borrowing costs for other countries with large deficits and causing
volatility in bond and currency rates across the world.
A small problem could be the tipping point in an already volatile
system.
We should remember that the Great Depression in the US was followed by
a second recession in 1937-38 that derailed the world’s recovery and
prolonged that crisis.
If the European crisis metastasizes, it could create a new global
financial crisis with implications as grave as the US-originated crisis
two years ago.
For America, a weak Euro means a rising dollar. That, in turn, means a
rising US trade deficit—which will not help America’s economy rebound.
If the EU—still America’s biggest trading partner—should falter, the
consequences here would be palpable.
That is why Europe and America must say “enough is enough” to those
speculators who only place value on immediate returns, with utter
disregard for the consequences on the larger economic system—not to
mention the human consequences of lost jobs, foreclosed homes, and
decimated pensions.
These market manipulations—which were at the heart of the banking
system’s collapse—are still legal practice.
It is hard to fathom that we have allowed this to happen.
It is common sense, enforced by insurance regulators, that a person is
not allowed to buy fire insurance on his neighbor’s house—and then burn
it down to collect on that insurance.
Yet that is exactly what is done in the market for credit default
swaps. It is the scourge that has led banks to foreclose on the homes
of millions of Americans.
It is the scourge that haunts Greece and all of us.
But if Europe and America jointly step in to shore up global financial
regulation—and to finally ensure enforcement of regulations—we can
curtail such activities.
It is an encouraging sign that the American authorities have ordered
some speculators not to destroy records of their trading in euros.
I would encourage US authorities to continue these investigations.
Since the 1980s, we have witnessed a succession of global financial
crises—the Third World debt collapse, the US Savings and Loan debacle,
the Asian financial crisis, the high-tech and housing bubbles, and now
the worst global recession since the 1930s.
Globalization—which promised so much, and opened so many doors to those
of us with the good fortune of advanced educations and careers—has also
brought new inequalities and new risks.
This crisis is an opportunity to correct many of the excesses of
globalization.
It calls for deep structural changes to our global institutions and our
system of global governance.
At the G20 and in Copenhagen, we fell short of our citizens’
expectations. We fell short of our own rhetoric.
We cannot afford to squander another opportunity to make the critical
changes that our current reality demands.
Decisive and collective action and regulation is urgently required if
global economic growth is to be sustainable.
We need global coordination of monetary policies.
If we let market forces alone dictate the terms, our economic recovery
will almost certainly slip into reverse.
I have just arrived from Paris. Before that, I was in Berlin and
Luxembourg.
Together with my European partners, we have taken a common initiative
to strengthen financial regulation, particularly vis a vis speculation.
We need clear rules on shorts, naked shorts, and credit default swaps.
I hope that there will be a positive response from this side of the
Atlantic to bring this initiative to the G20.
Some fear the word regulation. They claim regulation curtails our
freedoms.
That is like saying we should go without traffic lights as it slows
down our cars.
So let's make the markets work for us.
All of this is possible if we—Greece, Europe, America—have confidence
and trust in each other as partners.
There was a debate for some time about whether the EU would work, and
then whether it was better for it to be weak or strong. Even now, there
are debates about whether the new Europe is a force to be reckoned
with, its global role strengthened by our new President and High
Representative. Or whether it is a nonentity of a continent
disappearing off the map, as Time magazine would have us.
My view is that the world needs more Europe today, not less.
The EU is a hugely ambitious and complex project.
We are a political Union of 27 nations and a monetary union with 16
members.
Each of us brings our own experience and idiosyncrasies, even our own
language—imagine uniting America if a different tongue were spoken in
every state.
But sealing our fates together has undeniably been a catalyst for great
progress.
With a whole raft of global crises urgently calling for closer global
cooperation, we in the EU have pooled some of our national sovereignty
to become more effective in protecting our common interests.
Creating our common currency—a currency shared by 328 million Europeans
and backed by an economy larger than America’s—is perhaps Europe’s
greatest achievement.
The Euro has been called ''a post-modern or post-sovereign currency.''
Whatever we call it, we European leaders must show real leadership to
prevent unbridled market forces from hijacking this success story for
their own ends. I am confident that we will succeed, beacause we cannot
afford to fail.
There is reason to have confidence in Greece as well.
Nobody should underestimate our determination to overcome our current
challenges.
The truth is, if I had a Euro for every time outside observers have
underestimated Greece’s determination—well, our fiscal problems would
be solved.
A decade ago, when I launched the process of Greek-Turkish
rapprochement as Foreign Minister, everyone said it was doomed to
failure; but our countries are closer than they have been in
centuries—and there is no better symbol of that than the fact that my
good friend Kemal Dervis is moderating this discussion.
I look forward to Turkish Prime Minister Tayyip Erdogan's visit to
Athens in the coming months. I believe we can make new breakthroughs in
our relationship and become a symbol of stability in the eastern
Mediterranean and the Middle East.
Prior to the Athens Olympics, so many voices said Greece would fail—but
we pulled off one of the most secure and successful Games in history.
Today we will be using this legacy to revamp Athens and our public
administration.
And so we will overcome this new challenge.
And we will do it with the cooperation of our partners in Europe and
America who have stood with us on so many vital tests.
For this new crisis is a moment of great opportunity—for Greece, the
chance to modernize and revitalize its governance and development model.
For Europe, a chance to become more fully integrated. And for the
world, this is the moment to move toward greater democratic cooperation
at a time when, once again, the global power of poorly regulated
markets is proving dangerous for us all. Yet well-regulated markets can
truly lift our people to new heights.
At its heart, our very modern global economy faces a very ancient
challenge. Before the advent of democracy, Greece’s city-states were
ruled by rich and ruthless oligarchs who belonged to powerful,
interrelated clans—not altogether unlike the mergers between powerful
financial institutions that dominate today's global market.
Plato made a critical remark about a system controlled by the vested
interests of a minority elite: And he characterized such a system as
one where " 'just' or 'right' means nothing but what is in the interest
of the stronger party."
We have a shared responsibility to create rules and institutions that
can provide a more satisfying and sustainable answer.
So let me take you to the Parthenon as I finish my speech.
If one stands by the Parthenon and looks down on Athens, you will not
only see the new Acropolis Museum waiting for the return of the
Parthenon marbles.
To the other side, you will see the ancient market, or ''agora'' in
Greek. Agora in Greek has two meanings. It means marketplace, but it
also means public speaking. A place of politics.
The market is and must be part of the realm of our political decisions.
If you look over to a hill on the other side you will see the Pnyx.
There each and every citizen could stand on a rock, speak and be heard.
Politics in ancient Athens was participative. Everyone had the power to
be heard.
So we must use the new means we have in our globalized society to
empower our citizens and give them a real voice in politics.
As you look towards the sea, you will see islands of the Aegean. In
ancient Greece, every island was a country unto itself. A city
state. Yet they all were aligned to a common purpose: the protection of
democracy and common values.
So let us see our countries as a vast sea of diverse islands linked by
a common set of values.
This is what Europe is striving to be.
The ancient philosopher Isocrates said: ''being Greek is partaking in
Greek education.''
Meaning sharing in our common values.
Greece has long been America’s partner in values and in history.
We are determined to be an ever-stronger partner for the US in world
affairs—in commerce, in culture, in security.
Now, I ask you to stand with us and work with us again—as we each
confront our own challenges of change, and as we work together to
realize our shared interest in a strong Europe and a sound global
economic system.
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