Our efforts are undermined, says Greece minister

Greece Foreign Minister Stavros Lambrinidis said on Tuesday that Greece’s fiscal adjustments made since revealing its toxic combination of debt and deficits two years ago were being undermined by common misperceptions.

“Basically because some negative stereotypes were developed, it made it extremely difficult for a very successful, very proud people to move to the path of recovery as fast as we would have liked,” Lambrinidis said in a speech to the foreign policy association.

Greece earlier on Tuesday pledged to bring forward even more painful austerity measures, convincing international lenders to return to Athens early next week for talks that it hopes will secure the aid it needs to avert bankruptcy.

Lambrinidis painted a picture of a country that has admitted it made fiscal mistakes, lived beyond its means “for a few years”, and did not move quickly or comprehensively enough on reforms such as privatisation of state entities.

He also said the country has gone to extraordinary lengths to try to fix its problems, but at the same time lamented that the markets and pundits were not giving it credit for the changes it has made so far.

US perspective
Lambrinidis cited the 10% cut in public sector jobs in the last year and a cut in the primary government deficit from €24-billion to €1.5-billion.

He also tried, for a mostly American audience, to put the cuts in perspective.

“So, in one year, Greece managed to, with huge pain of its people, with major political costs of its government, to cut the deficit by as much as the whole defence budget in the US, if the US were to make an equivalent cut,” he said, referring to a €700-billion general deficit reduction.

“How did we reach this point? Why are the markets still not buying Greek bonds?” he said.

The fear of a Greek debt default has driven the cost of borrowing sharply higher and put the 10-year Greek sovereign bond yields 21.8% above benchmark German government debt.

Self-fulfilling prophecies
The three major credit rating agencies have all lowered Greece’s sovereign debt deep within junk status while analysts and investors predict a default is inevitable.

“The problem with that is, once you predict default it can become a self-fulfilling prophecy,” Lambrinidis said.

“So the mere prediction in the face of proven, undoubted, successful, major fiscal consolidation and structural reform changes, and yet the mere prediction of default kept the markets closed,” he said.

Having consistently watched Greece miss its targets, the International Monetary Fund and European Union made clear last week that their patience was running thin, and warned Athens to stop dithering or risk seeing its €110-billion ($150-billion) loan deal cut off.

Defiant to the last, Lambrinidis said: “The funny thing about this is, I’m still standing here and I’m still alive, as is my country.”

Years of pain lay ahead he said, “However, us, the eurozone and the euro will survive this crisis.” — Reuters

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Daniel Bases
Daniel Bases works from New York. U.S. Correspondent South China Morning Post @SCMPNews; @reuters @CNN alum; All things emerging markets; Knight-Bagehot alum. Views my own. RTs ≠ endorsements Daniel Bases has over 1317 followers on Twitter.
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