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Maria S. Topalova

The implementation of the vital structural reforms in Greece has been delayed because they had no political support, is the official position of the International Monetary Fund, expressed by the Deputy Director of the European Department and Mission Chief of Greece, Poul Thomsen. "I have always said that reforms have no chance without broad political support," he said at his first public appearance after the official release of the Fund’s report on the progress of Greece yesterday. Poul Thomsen spoke at the conference on The Time for Responsibility, Decisions & Action, organized by the Hellenic-American Chamber of Commerce.

If the structural reform had been implemented, it would have improved the business environment and Greece would have begun to recover. But this has not happened. He recalled that still a year ago, he had said that without structural reforms, the deficit would not fall below 10 percent. Poul Thomsen admitted that fiscal policy was concentrated on tax increase. Due to the refusal of many people to pay taxes, their increase was inevitable. He assessed that the limit of tax increase has been reached and it can no longer be relied on. Tax administration should be improved, which usually takes time, and in the case of Greece, it would take more time, stated the representative of the International Monetary Fund.

He stressed that the recession in Greece is deeper than the Fund had anticipated, but the international situation is much worse than in the period, when the programme for financial stabilization was made. Investor confidence has never returned, and the recession has grasped the entire eurozone. Indeed, exports are increasing, but we should not forget that it started from a very low level, recalled Poul Thomsen. The only advice he gave the Greek governors was crystal clear - if they cannot increase revenue, they should cut costs and aggressively proceed with the closure of state enterprises.

The head of the action group for Greece in the European Commission Horst Reichenbach said that the majority of Greek people are willing to continue to use the euro and therefore, the main task is to restore the competitiveness of the Greek economy. He defined exports as the good news for Greece in 2011 and urged the government to support it. According to him, the problems of Greece are two - the deficit, which raises debt, and labour costs, which make Greek manufacturing uncompetitive. "This must change," said Horst Reichenbach, while admitting that the income of Greek citizens has fallen by 14 per cent - i.e. twice more than the reduction in income in Ireland and Portugal.

Entirely different was the explanation for the crisis and therefore, for what should be done to emerge from the crisis of the former now Prime Minister and current president of PASOK and the Socialist International George Papandreou, who also made today his first public speech after withdrawing from power. He cited three reasons, "First – we inherited the state in a dramatically poor condition after the previous government of New Democracy. We were hanging on the brink of bankruptcy and therefore, we had to save the country by whatever means were at our disposal. The second reason is the failure of European institutions to manage the eurozone. The third is the inability of the eurozone to have established in a timely manner that the crisis is not only Greek, but that the crisis is European."

"European leaders failed to see the systemic cause for the crisis and to explain it to the citizens, and all wanted to lay the blame on Greece, which created a very bad image of our country in the world media," said the Socialist leader. Transferring the ball completely to the field of Europe, Papandreou did not fail to strike the global markets. "They do not work properly, and credit agencies follow the market, instead of advising it," he stated. Then he graciously said, "Today, markets demand Euro bonds, and when I suggested them a year ago, it was considered a leftist proposal."

George Papandreou spoke about the notorious involvement of private creditors in the "voluntary" Greek haircut. "PSI (an abbreviation for Private Sector Involvement) has scared private investors more and they are no longer willing to buy government bonds of eurozone countries. It was a very bad signal to the markets and I warned about that a year ago. There was a psychosis that Greece would go bankrupt, it would exit the eurozone. Investors are now waiting to see what is going to happen to Greece – is it going to default, is it going to exit the eurozone. Even ordinary depositors started to withdraw their deposits from the Greek banks," he recalled, but failed to note that these events happened during his administration.

He said that the biggest success of his ruling is that "all citizens have realized that major changes in the state are necessary as it cannot continue to exist as before." "Therefore, I proposed the referendum - to let people say whether they want these changes or not. Ultimately, the referendum was not held, because the agreement between the parties happened," George Papandreou concluded his speech to the banking and business elite of Greece.