Why Greece Isn’t Leaving Europe

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Sept. 14 2012 4:01 PM

“Everybody Knows We Are Serious”

An interview with Greek Prime Minister Antonis Samaras.

Greek prime minister Antonis Samaras in Athens on August 28.
Greek prime minister Antonis Samaras in Athens in August

Photo by Louisa Gouliamaki/AFP/Getty Images.

ATHENS, Greece—Antonis Samaras became Greece's prime minister just three months ago, but he has already become a veteran in a two-front war. Samaras is trying to keep his country in the eurozone by agreeing to major budget cuts demanded by the troika—the European Commission, the International Monetary Fund, and the European Central Bank. Internally, he faces the almost certain prospect of social unrest in opposition to the austerity measures, while externally, he must convince the rest of Europe that he's serious about change. Lally Weymouth talked to Samaras in Athens on Wednesday. Excerpts:

L.W: How did your meeting with European Central Bank President Mario Draghi go yesterday?

A.S.: We talked about the need for liquidity. It is a prerequisite for us to start the much expected recovery. Without liquidity, you cannot give money to small, medium, or large enterprises through the banks, and you cannot allow the system to breathe. And we need a lot of breaths at this point.

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L.W.: Did Draghi tell you anything specific?

A.S.: We proposed different things to him: The ECB provides liquidity, either through bonds or through the emergency liquidity assistance. Other countries have access to the markets, whereas Greece does not. Therefore, we have to get liquidity through the ECB.

L.W.: Did Draghi give you hope?

A.S.: Draghi, like everyone else, is talking about the need to first see the troika report.

L.W.: Reportedly, the troika is demanding that your government is going to have to come up with spending cuts of about 11 billion euros and additional tax revenue. Do you believe you can do this and get your coalition partners to agree? Can you get it passed by parliament?

A.S.: Our determination is given. It is 11.7 billion euros in expenditure cuts. All 11.7 billion has to do with making the government smaller and the whole system more efficient. Through cutting more expenditures, the economy becomes weaker because [there is] a GDP decrease. In the last five years, our GDP decreased by 20 percent. If we are to add this additional 11.7 billion, our GDP will decrease by about 25 percent. This is too big to swallow.

L.W.: But you are going to go through with the reforms?

A.S.: We have to make sure that we abide by what we have signed because we believe that what they call "Grexit" [a Greek exit from the eurozone] is not an option for us—it would be a catastrophe. In 2013, we are going to have a country in the sixth year of a recession with unemployment above 22 percent and rising. We are here to fulfill our obligations, to meet our targets. We only insist upon that missing ingredient, which is to bring recovery soon. How? Liquidity.

L.W.: If you get the troika money all at once, wouldn't you use it to recapitalize your banks?

A.S.: Yes, if we get the next tranche, which I hope will be in October, it will recapitalize the banks and provide us with more than $6 billion of arrears, which is money the government owes the private sector. This will enhance liquidity. But the IMF has already estimated that the next three years will find Greece still in a recession. We have to avoid this by any means. We have to make sure that instruments like the ones that can be put forward by the ECB will be activated for Greece.

L.W.: Like infrastructure funds?

A.S.: These are funds already earmarked for Greece that are still [frozen]. These funds and two other factors will serve as a fiscal stimulus. The first is we have to fight tax evasion. We have to reform the tax-collecting mechanism and to ensure there are harsh punishments for those who evade. The other element is privatization. … But we need to conclude this deal fast. The troika is in continuous talks with the minister of finance and other ministers. We have to get to that 11.7 billion and be sure that both agree on the numbers.

L.W.: Isn't the troika demanding that you pass the cuts through parliament?

A.S.: I have to pass it through parliament, and it will pass parliament because we all realize the No. 1 prerequisite for our future is to stay in the eurozone. But it is a four-year program, not something we can do today.

L.W.: But you asked for a two-year extension, didn't you?

A.S.: We are asking for enough time. Instead of the 11.7 billion euro package taking place over two years, it would be best if it were to take place over four years. Two years—up until 2014—has been accepted by the troika. We are talking about an extension to 2016.

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