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On the eve of the vote on the mid-term recovery program on which the future of the Greek economy directly depends, the President of the Bank of Greece George Provopoulos severely criticized the government in his interview for the Greek edition of Kathimerini. He noted that delaying the reforms and the failures in implementing the Memorandum are the reasons for the decline in confidence in the country and the current uncertainty. The top banker of Greece called on political and social forces to get to work and to support the necessary reforms. Provopoulos criticizes the final version of the mid-term recovery plan that by increasing taxes rather than cutting the budget spending would make taxpayers carry the burden of reforms.

 
Did the Memorandum fail or was it not properly implemented?

First, the aid contract prevented the failure that was inevitable in April 2010. On the other hand, important conditions were not implemented, which certainly affected the final results. How could we say that something has failed when it was not implemented in part? I would like to remind you, without ignoring or diminishing what has been done so far, that the state's role is not limited as much as needed, privatization has not begun, unnecessary and costly state institutions continue to exist and many legislative initiatives are not implemented and remain just on paper.

The delays and gaps in the program broke the confidence in the country, which has intensified the uncertainty and reinforced the distrust of the markets and of our partners (the creditors of Greece). We are running out of time. So, we should act immediately and with very fast pace. The adoption of the fiscal adjustment program is only the first step, but it is not enough. As I said at the start, we need serious restructuring reforms from the beginning of April as it will fill the gaps in the delayed recovery plan so far and will give new incentives. Now we should act to prove that Greece is not self-destructing. Let us leave the rhetoric and start the reforms.

Many are those arguing that the implementation of the program with extremely severe fiscal adjustments in times of recession would only intensify the problem. Do you agree with this statement?

The crisis we are experiencing today is a reflection of the collapse of an economic model that can not be supported any longer. This model is based on artificial prosperity through borrowing and is widely accepted by society. The price we are paying today is the price of action and inaction in many cases of the past. Fiscal consolidation is not the main cause of recession, although it has its contribution. In all cases, however, it is the main condition for restoring the confidence in the country and its returning to healthy growth. As international experience shows us, there can be no economic growth, while there are large public deficits and debts, coupled with low competitiveness.

We have to move quickly and decisively in a direction different from our old habits that resulted in high deficits, eternal debt and state system – they all brought us to the brink. Of course, to make this happen we should support them all - the political and social forces.

But how did we get to talking about unsustainable foreign debt?

We believed for many years in the illusion that the public sector may be the engine of social support. Thus, funds were constantly transferred to it over the years. They were spent and often were of almost no social use. I'll give you two examples. The first is that if there had been no appointments in the public sector in the period 2000-2010 and increase in the cost of salaries, today the level of debt would be 31 basis points lower. At the same time, if the share of tax revenue to GDP had not dropped and had remained at the 2000 level, then the debt would now be another 26 basis points lower. In other words, if we had applied reasonable and achievable fiscal policy during this period, the debt could now be less than 100% of the GDP.

The mid-term recovery program suggests that the deficit would be reduced by applying half of the measures on the revenue side and the other half on the expenditure side. Do you agree?

The Bank of Greece has stressed even in 2008 that the budget reduction should be based on a two-thirds reduction in spending and a third of broadening the tax base. Tax measures of increasing the values are largely keeping the economic policy now. Moreover, in my opinion, the mid-term recovery program does not give particular importance to the reduction of spending. The permanent tax burden on taxpayers has reached its limit. If further steps to reduce tax fraud and evasion are made there would be additional opportunities to reduce tax rates and to create conditions for economic growth. I would like to tell you what I said on another occasion: the management of tax unfairness is extremely important to increase the sense of fairness in society and reach a level of understanding concerning the recovery program.