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Victoria Mindova

Repayment of the loan under the Memorandum for financial assistance between Greece and the euro zone countries and the International Monetary Fund should be delayed by a period of at least seven years. This offers the professor of economics and chief economist at Eurobank Gikas Hardouvelis in connection with the Greek economic crisis. "In the last fifteen years the economic growth in Greece had been above the average for the eurozone," said the economist during a discussion organized by the German Center for Financial Research. This has enabled the country to create a relatively high standard for its citizens. Nevertheless, this economic growth was based on services (almost 80% of the GDP), which over time have lost their competitiveness. At the same time the level of the deficit had been growing gradually and its lowest level was reached in the period before the entry of Greece into the eurozone. The reason for this is that the government at that time had tightened the belt of the economy and significantly reduced the deficit, mainly by collecting taxes.

Due to the loss of competitiveness and many other factors, after the entry of Greece into the eurozone, its deficit is growing because it doesn’t take in time the initiative to reduce somewhat the costs when revenues in the budget decrease. Gikas Hardouvelis stressed that the budget revenues in the last 25 years have been in about 45% of the GDP, but in 2008 and 2009 budget expenditures have grown high above expected. Once the rating agencies warned of unhealthy fiscal policy in the country, international markets began to show greater distrust of the state of Greece, which in turn lead to increasing of the interest rates on government loans and forced the government and the eurozone resort to rescue mechanism.

Fiscal imbalances in many eurozone countries is due to the lack of control and discipline of those countries in recent years. This view was shared not only by Hardouvelis, but also by the chairman of the Central Bank of Cyprus and a member of the board of directors of the European Central Bank Athanasios Orfanidis. According to him key elements in progressing and stabilization are the improvement of the control over the countries that have a high deficit and foreign debt, as well as the development of a reliable mechanism to impose sanctions. Last but not least Orfanidis includes the improvement of the cooperation between the member states of the eurozone, to ensure the macroeconomic stability and to provide equal quality of life for all citizens in it. He acknowledged that there was a political dilemma that stands before the government, but the path of fiscal consolidation and reforms is the right choice.

Hardouvelis gave a positive assessment to the structural changes in Greece and insisted that the implementation of the reforms in the economy should continue because it is the only way for the rehabilitation of the country and the return of the positive economic growth. Risks the government is facing are to find the right formula and one or more sectors that will help the country regain its competitiveness. Hardouvelis also noted that until a few months ago the biggest problem was whether the Government will be able to cope with a reduction in budget spendings - a problem that government has coped with much better than initial expectations. Now the ball is in the hands of the private sector and whether it will be able to pay the expected and imposed taxes to reach the goal set in the financial plan from the beginning of the year.

"In a strange way, we invented a new eurozone," said at the conference the Minister of Finance George Papaconstantinou. With the emergence of the Greek crisis, he said the eurozone has found new tools to cope with financial imbalances in the Member States. One of these tools is the package of 110 billion euros for Greece as well as the new type of sovereign bonds, which the ECB invented for accumulation of funds. The Minister said that the EU countries were late in providing assistance and stressed that the delays could have dire consequences and that lesson was learned after the Greek experience with the crisis. If aid was granted earlier today turmoil could have been lighter and called the eurozone a strange animal that develops, but in its own way. With regard to the gaps in the collection of tax revenue, he said that Greece could manage and by the end of the year the task of reducing the deficit and restructuring the economy will be executed.

"We will liberalize the market and protests will not stop us," said decisively in relation to the public discontent which arose because of the liberation of the market of transport services, energy and forthcoming privatizations. Finance Minister send a signal also to the skeptics about the euro - idea and stressed that the eurozone has always found ways to protect itself, its failure is not possible and will not be allowed.