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In the most critical phase of negotiations with creditors, Finance Minister Yiannis Stournaras revealed his cards. He ruled out tax increases and new cuts in wages and basic pensions and sent a clear message that raising unreasonable demands is to the advantage of nobody. Stournaras asked Europe for a debt solution, even at an extraordinary meeting of Eurogroup on the day when this year's primary budget surplus is certified in April 2014. The Minister believes that the opinion of some countries, which would like it if no such decision existed before the European elections in May 2014 is unjust. According to him, the government would complete the term of office, and when asked whether he is interested in the political scene, he said that it was too early. He revealed all of this in an interview with journalists Eleftheria Arlapanou and Mara Vourgana for Saturday's issue of Imerisia newspaper.

What do you think will happen when this programme ends: a new loan with a new memorandum, access to markets, or a combination of both?

First, the existing programme still provides money and we believe that it can cover our financial needs for the period 2014 - 2015. Furthermore, our goal is to gradually bring Greece back to markets in 2014.

Don’t you rule out the possibility of a new loan?

For the moment, I do not exclude anything. And nothing should be excluded.

However, will we manage to withstand a third memorandum politically and socially?

This is not a memorandum in the sense that there are no further steps which can be taken. Let me clarify, there are steps which we can take, such as restructuring - for example, the opening of markets and removal of barriers in order to enter various industries. It is not desirable, however, to take additional fiscal measures. Currently, according to estimations by the IMF, the European Central Bank and the European Commission, the cyclically adjusted surplus is between 4 % - 6 % of GDP. Now, if someone asks why it is cyclically adjusted, they should refer to the latest IMF report, which says that this is the criterion that must be borne in mind if a decision is taken as to whether further fiscal measures will be needed.

However, the Troika has reportedly called for additional fiscal measures for 2014; it is also being heard that 2 billion euro would be required, and we are arguing that this amount is less and trying to overcome the difference somehow. Eventually, what steps will you take in 2014?

The last time leaders of the Troika left, there were different opinions on the financial shortfall in 2014. Our argument is that in July they themselves found that there was no budget gap. Since then, things have been going well, and not worse. Some variations in government subsectors exist, such as measures which we have not taken. For example, we could not enforce the payment of 0.2 per thousand of the turnover of companies, and we did not take measures in order to reduce the salaries and pensions of police officers. First, of course, we should rule out any tax increases. But we need to apply targeted cost reductions in the public sector or structural measures. Thus, the draft budget that we submitted also foresees this.

Will further cuts in wages and pensions be avoided?

Yes, we will avoid cutting wages and basic pensions.

But will there be a reduction of additional incomes?

Only what is foreseen in laws that have been adopted and refer to the consolidation of the social security system.

We say that we must find equivalent measures related to the shortage created by our decision. What is its amount?

According to our previous forecasts, the budget gap for 2014 amounts to about 600 to 700 million euro mainly due to untaken measures and variations in government subsectors. But we should not forget that these assessments are made on the basis of data at any particular time. Over time, we have new information and forecasts are updated.

It is heard, however, that the Troika claims that it amounts to at least 2 billion euro?

The Troika claims that the amount is much higher. But in conversations that we had, their arguments were not strong. I want to remind you that every time the Troika comes, it always presents a great fiscal gap, and eventually we find the "golden mean."

But there is a political debate that if the Troika insists on fiscal measures in 2014, we will "respond" at the ballot box. Do you think that such a decision is appropriate at this stage?

We have been negotiating with the Troika for a year and a half. There are always solutions. Therefore, I think that this will happen now. Offering irrational positions now is to nobody’s advantage.

Let’s get back to the issue of the conflict with the Troika.

Let’s not call it a conflict; I prefer the word negotiation... They represent creditors, I represent the Greek government. So far, negotiations are not bad. And I hope that this will continue.

Regarding the rhetoric of Jörg Asmussen, who initially raised the bar of the shortage to 5-6 billion euro in 2014, while the core assessment, as far as I know, is about 4.5 billion euro, and ruled out the option for the conversion of bonds held by the ECB and central banks of the Eurozone (ANFAs) - what do you think this rigid position is due to?

In my opinion, it is due to a thesis of the ECB, which would like it if measures which are taken in order to cover the fiscal gap would not lead to new funding. Has something similar happened in the past? Has everybody complied with their commitments? I must lay down all possible arguments. If necessary, we will turn to examples of other countries that have implemented similar measures.

Will we insist on the conversion of ANFAs?

We insist that we should respect our commitments under the Treaty of November 2012.

Is our suggestion for the conversion of bonds issued in 2009 within the consolidation of banks contrary to this?

It is a reasonable measure. But yes - it seems to be contrary to the claims of the ECB.

Do you have any suggestions at this point regarding in which direction things are more likely to develop? After the meetings that you had with Mr. Wieser, is there any idea how the financial deficit will be overcome in 2014?

I have. For example, Eurogroup was wondering if there is a "cushion" from the Financial Stability Fund. What could be left in excess, for example ... It is also possible to resort to markets in the second half of 2014. We will put all this on the table; the final decision will be taken in December.

Elections for the European Parliament

We want an extraordinary Eurogroup in April

Regarding debt: first, we had the elections in Germany. Now we are waiting for the Germans to form a government, and it is heard that decisions will be taken after the European elections in May ...

The truth is that they say that, first, the achievement of a primary surplus this year must be ratified by Eurostat, and this will happen in April. We will insist that at the time when this happens, decisions on debt should be taken even at an extraordinary meeting of Eurogroup. Many Member States do not want to take these decisions before the European Parliament elections. But it is unfair to us.

And yet, we have to go to the European elections ...

That’s right.

Have we submitted proposals for a new debt reduction?

We have discussed it.

Can you give us a framework?

Look, right now there are two possibilities. One of them is nominal cuts, and the other is to reduce interest rates, and extend payments. Nominal cuts are excluded by all Member States, although we would like these and they would solve many problems for us. It takes two to tango. Many countries forget this and therefore governments fall. We will therefore resort to a decision that involves many years of extension and further reductions in interest rates...

Within 50 years, for example?

50 years are not an unthinkable term. Of course, there may be a reduction in interest rates. This means that the percentage of GDP of debt will not fall much. However, it will facilitate contributions that have to be paid each year. If this had been done from the beginning, many problems would have been solved. Essentially, this is equivalent to Eurobonds for Greece – let’s put it bluntly. That is, a bond with a very long period and lower interest rate equivalent to the cost of the loan of the European Stability Mechanism.

Are we talking about a 50-year period for the two loans of the first and second support package?

Yes, we are talking about both packages. The first one is easier, but the second one is not something that is ruled out. We can fight.

Some will hasten to say that we get crumbs because they refuse to reduce our debt...

Why crumbs? Last year we paid 12 billion euro for interest, and this year, 6 billion euro and we intend to further reduce this contribution. Are these crumbs? Is a Eurobond a crumb? Let me tell you something. Regarding complex issues such as the viability of the Greek debt, we should avoid unilateralism. Cutting the debt is not a panacea; it will not have the same result in all cases. Whether the debt is viable is determined by investors if the debtor pays the interest.

We are talking about partial access to the bond market. How many years are needed in order to get full access?

It is difficult to make such a forecast. Factors such as good climate, psychology, and recovery of liquidity mechanisms are important. We want to believe that if there are no negative events internationally and if we continue with our financial policy, this will happen within 2 years.

Why should markets now rely on Greece?

Because Greece has made huge advances. At the previous Eurogroup, I talked about the surplus. This should be our argument - this appropriate measure. From 2009 to 2013, GDP has improved by 19% as a result of the government policy. This shows our great efforts and sacrifices of Greek people in order to avoid bankruptcy. Markets recognize these efforts and reward us.

Many analysts believe, however, that in order for foreigners to start reinvesting their capital in Greece, they need to be sure that we will continue to adapt under the continuous supervision by the EU. Will we never escape from supervision?

The previous Eurogroup "blessed" Ireland and Portugal to leave the programme. The time will come, when the same will happen to us. Remember that if, for example, spreads of bonds are an indicator, today this indicator is where Italy’s indicator was last year. This shows roughly where we are.

What will be the price to pay to let us back to markets?

I do not want to make predictions. It is important to continue the efforts that we are making at the moment. Improving and correcting mistakes or speeding up issues that are delayed. For example, currently there is a big catalyst. These are the state properties. They can be used for the repayment of debt, attracting investment and creation of new jobs. We have not used this tool as we would like so far.

And how could we?

By acceleration of privatization of the state agency for private property and using properties of the state. The Prime Minister himself has made enormous efforts in order to coordinate this project and is now looking for ways in which we may use properties besides those of the Agency in order to repay the debt.

Which properties are we talking about?

Mainly about properties that are currently owned by the State Real Estate Company, as well as real estate of other ministries that have not even been transferred to it. For example, the Ministry of Defence.

And what will happen to them? Will they be sold or included in certain companies?

We are considering various options now, I cannot tell you the final decision - it is important to proceed with the description of this property. The size of this property does not matter now because it depends on the usage. The question now is to move on to solutions that do not lead to a new debt and new bonds, but to the development of land.

Will all revenues gained from it go towards the debt reduction?

Not necessarily. Projects with shareholders could be created and not by taking new loans in order to use the land.

Why are we proceeding to this – doesn’t the Agency for Private Public Property have enough properties that could be used for debt reduction and growth?

But it is not only that. There are significant properties outside the Agency, many ministries. The Agency has a specific programme for the privatization of about 23 billion euro by 2020.

And this new package can be used as part of a new solution for the debt?

It's not just the repayment of debt; the usage of properties generates investment, jobs, attracts foreign capital, and ultimately leads to a reduction of the debt or the deficit, or both. I have always said that we have a powerful tool in our hands – state-owned properties are an undeveloped sector which is often underestimated.

Is there a technical formula that can be adopted by all our partners and in Greece, by which a change in the regime, for example in the Agency for Private Public Property will automatically lead to a large reduction of the debt?

We are not talking about changes in the status of the Agency. Everything that is written about the SPV (the Special Purpose Vehicle - a company with special purpose entities) abroad, about management outside Greece, is in the realms of fantasy. We are examining new forms, but always under Greek control and in Greece. An SPV abroad cannot sell real estate in Greece.

However, privatization is delayed...

I do not think that we have significant delays. The state's natural gas company is the only delay, but as you know, this is not just our fault.

They criticize you for not paying great attention to the creation of a new development plan, with the assumption that the most important pledge is not the launch of the Memorandum, but the creation of development that will stand the test of time...

I was the first person who talked about a new model of development in 2008. Obviously Greece needs a new growth model which will not be funded by the government - an increase of exports and fewer imports. This will be the difference. Now, for some time, we have ordered the Foundation for Economic and Industrial Research, the Centre for Development and Economic Research and McKinsey to present which sectors will have a major role in the economy over the next ten years - sectors that will bring added value based on employment. A presentation will be made in a few weeks. We will have quantitative estimates of the growth that can occur over the next ten years if these sectors fail to exploit their comparative advantages. And the new ESPA programme will be based on these three studies.

Speaking of development, do you plan to provide new financial incentives in order to attract investors?

There is a team that deals with this issue. We want to attract capital and mainly rich people who have tax residence in Greece and are consistent with tax legislation.

Will a new bill be submitted?

We are trying to gather all provisions on tax relief in one frame in order to make tax laws clear for investors.

Are you worried by the trend of companies to leave the country and go to countries with lower taxes?

We have reduced tax rates for companies to 26% and this is the lowest compared to countries of the Organization for Economic Cooperation and Development. We are trying to simplify the tax system. With the code of the Income Tax Code and tax procedures, we have reduced tax provisions by 1/3. We foresee that companies will come back and will not leave Greece.

The Prime Minister announced the implementation of a new 15% single tax ratio (flat tax) for all companies. When will it be applied?

This is a medium term vision, we are not ready yet. When we are able stand on our own two feet financially and enter markets on our own, then we can proceed to horizontal cuts in taxes. But it is still very early.

Will those employed under a labour contract and pensioners who have borne the greatest burden of fiscal consolidation feel the reduction of the tax burden?

I would be lying if I told you that this would happen tomorrow or the day after.

Are you satisfied with the results of the reduction of the VAT on restaurants or will we go back to 23% as of 1 January 2014?

We will wait for data from those three months, so that we can be sure if we have succeeded.

What has caused the recovery of VAT revenues lately?

This is largely due to the recovery of tourism, and the fact that the recession is actually not as great as expected. We have also made a great effort and filled "holes" in the tax system. Now, with the improvement of the legal system, we need control in order to ensure that provisions are implemented. Currently, we have a lot more auditors than last year, after the merger of tax authorities. We are hiring new tax officials and planning to hire more than 1,500 auditors. The Ministry of Finance is the spear and the government has chosen to support it.

People who evade taxes are being arrested, but public funds get less money. Are you satisfied with the work of the tax mechanism and collection of taxes?

We are doing what we can. It is clear that we are not satisfied and therefore are altering the structure in order for services to become faster and more efficient.

Were you able to convince the Troika to accept the plan for the single tax on real estate and for the confirmation of revenue to be changed to 3.5 billion euro?

The Troika is not particularly happy with the confirmation of 3.5 billion euro. It accepts it, but wants an equivalent totalling 233 million euro included in the financial gap for 2014 and this gap must be foreseen. The plan for the new property taxes will be discussed in the coming days. The improvements resulted in a fiscal gap and there is no room for other changes. If we want more changes, we need to find an equivalent. However, the new tax is fairer than the previous one because property owners are granted relief in most categories. People are levied more, but with less taxes.

We see, however, that overdue liabilities to the state are increasing month after month and now total more than 61 billion euro. Aren’t you worried?

In the last quarter, revenues have been moving in a positive direction. This shows that people for the most part are disciplined even in times of crisis.

What will happen to receipts?

It was shown that the measure of receipts is not easy. Its repeal will relieve workers in the tax authorities. We are trying to find the appropriate measures, but we want to be consistent with our fiscal targets. We do not want to create further shortages. We strive for stimuli that will lead to an increase in terms of electronic money. Card payments will be supported. We want more electronic payments, particularly in occupations where there is tax evasion.

When will banks start to give money to the market?

Do not forget that the crisis started from the banks. If something consoles us at the moment, it is the fact that the M3 indicator is moving at positive levels because of the return of deposits from abroad. We are not yet at the levels at which we would like to be. There is 13-15 billion euro "under the mattress". Before the crisis, the cash that was circulating on the market amounted to 20 billion euro. When the crisis began, it reached 50 billion euro. It is now 33 billion euro. We also have 13 billion euro that have not yet been returned to banks and are not abroad...

People are afraid that deposits will be cut...

They won’t be cut.

Does criticism by some old cadres of New Democracy and MPs against you affect your relationship with the Prime Minister and other members of the government?

Not at all. I have excellent relations with members of the government and especially the Prime Minister.

Will the government complete the four year term?

Of course. We have much work ahead of us, but we are doing well and I do not see why not.

Will you be Minister of Finance in May?

Of course. We will have tough negotiations, and will take up the EU presidency...

But we may think that we do not know what will happen in June or July...

Of course, I'll be Minister. This is a very difficult position and requires great powers, but the challenge is great. And now that we are enjoying our first success, I see no reason to leave.

Are you interested in politics?

It's too early yet. Until the Greek Presidency and debt negotiations are over, I do not see anything else in front of me.

Many people characterize the movement registered on the Greek stock market as accidental. When will it return to developed markets and become the catalyst so that, major capital could settle on the Greek market?

While things are going well in the Greek economy, the improvement on the Athens Exchange is not accidental. Our goal is to continue this good work, so that quality capital can be invested. It is not an obstacle for us that investors who are interested mainly in emerging markets come to the Greek market. This fact has its advantages. They know, for example, that Greece is in the Eurozone, and therefore it is a developed economy by default. It is important to continue the good progress in the financial part, the development and privatization. The latter, in particular, is very important and can play a catalytic role.