tv State of the Greek Economy CSPAN April 20, 2015 2:00am-3:18am EDT
all of you. ladies and gentlemen, friends. welcome to brookings. this is a much expected event and we had trouble accommodating everybody who wanted to listen to you. i'm really grateful that you took the time out of the meetings to share your perspectives with you. you are well known, many books 15 books. i don't know all of them, but i note that to articulate the global medicine, two years ago and that modest proposal for resolving the euro crisis, two years ago. you were elected to the parliament in january 2015 picks i welcome you very deeply on the part of the brookings, the whole brookings community, that there is programs better hosting you today, all of us, the whole brookings family. i welcome mr. ambassador -- not
yet. and also personally. and i can't help saying that i also welcome yanis varoufakis as a neighbor of the turks. ok, it is your floor and then we will have a discussion. yanis varoufakis: thank you, kemal. it's with the deepest gratitude that i wish to thank you for this honor and privilege to addressing such a fine institution at a crucial moment when our government is shouldering a momentous task that of completely successfully and has human -- this is humanly possible that negotiations with our partners both european and internationally. the reason why i should be focusing on these negotiations is their global significance. not so because i'm a contagion through the financial circuit that frightened people so frightfully back in 2010 and again in 2012 because the
outcome of our negotiations with institutions what influence i believe heavily europe's attitude toward a larger problem located in the fibre of our democracies and within the foundations of our real economies. after all, must we forget that greek that drama of 2010 was the harbinger of much that followed throughout large swaths of europe are indeed of countries further afield. its resolution one way or another in 2015 now will surely prove equally influential at the global level. one may be thinking influence by the dominant narrative that
europe is on the mend. it has overcome its crisis and the combination of large bailout loans and austerity especially in the periphery of economies has worked and that only greece has failed to jump on this bandwagon towards recovery. for reasons that have to do with her own very greek peculiar failures. now, that greek public and private sectors are and have been for a long time replete with malignancies which require urgent and extensive and intensive treatment -- there is no doubt about this. indeed the greeks themselves were so incensed by lack of reform that they even went as far as to elect the party of the radical left to lead the country.
nevertheless, greece's chronic malignancies cannot explain the depth and stubbornness of our current crisis. over what has become satellite our great depression, our seven year old and long winter of discontent. to explain this one needs to count upon our monetary units design holds and how they went the design holds other eurozone went into an unholy alliance with our nation, the greek nation's failings to produce a monster of a crisis in greece. one that has turned into a humanitarian emergency. and one crisis in emergency which has global significance as i was saying before. now take a look at the rest of europe. even in nations portrayed as the shining light, the beacons on
on the hill. what you will find is investment, productivity growth and improvement in living standards and i can only be described as dismal even when compared to the american recovery over the last few years. europe's power houses, forget greece for a moment, serve as countries are turning the corner rely almost exclusively for doing so on building up counter services, either revelation to -- either in relation to other eurozone member states can this is an intra-european zero-sum game, or against the rest of the global economy. at global neighbor zero-sum game. of the kind that we thought was confined to the distant past around the bretton woods conference. the combination of a glut of savings in europe, five public and private debts come of low
investment, although interest rates and generalized austerity is causing europe to address its crisis by exporting it to the rest of the globe. while undermining further the real economy of its own peripheries vote up -- both other eurozone and peripheries within the eurozone. but simply that current policy is turning europe into a capitalist force that behaves as an exporter of vital savings, an exporter of deflation but even more simply if china's external balance was a problem a few years back i believe there is good cause to think of europe as a graver concern for the global economy. none of these are well either
for the global economy. and unlikely as it may sound at first i submit to you, ladies and gentlemen, that the outcome of greece's negotiations with the imf, the european commission, our partners, our fellow europeans, the outcome of this negotiation will play a major role in determining whether europe impedes the rest of the world's efforts and united states efforts to put behind them the crash of 2008 and its stubborn repercussions. within this context let me turn to a couple of pertinent questions. i'm often asked why are you being so difficult with these negotiations? why can't you sell it quickly? rest assured, ladies and gentlemen, that our government is keener than anyone to bring these negotiations to successful and quick conclusion and that we certainly do not believe that we have any kind of monopoly on
good ideas regarding the kind of reform program which is necessary in our country and in the rest of the eurozone. the longer these negotiations go on, the greater the asphyxiation of our social economy. so we are certainly more eager than anyone else to conclude. however, the operative word here are a successful conclusion. not yet another version of extending and pretending of the sort that for five years now has been turning a drawn into a crisis of global significance. a continuation of the extending
and pretending that gives greece's debt inflationary spiral yet another throw. now, let me share a thought with you. nothing would be easier for me personally, nothing would be easier for my prime minister nothing would be easier than design on the bottom line of the existed memorandum of understanding. of the existing program, nothing would be easier than pledging to do what it says. like previous governments, always pledged everything that was asked of them. in that way to collect several billion very quickly and immediately answer the questions that the good people of the financial press are posting full of angst for us regarding our liquidity situatn. except that it would be the wrong thing to do -- that it would be the wrong thing to do by our creditors, wrong by our
partners, wrong but our people. when i say our people and he nudges the people of greece but equally every citizen of every member state of the eurozone. we are one people. why would it have been wrong to have our signature to the logic of the philosophy of the existing pre-existing problem? because ladies and gentlemen this problem constitute a recipe that no reasonable person can consider to have been successful. the insistence we should continue with this logic and philosophy and its policies is bound in a medium-term to reinforce an image that we need to expand. the image of greece as a bottomless pit, an image that causes much frustration amounts our global partners while it engulfs our nation in unbearable hopelessness. now, track records, track record of this problem that we inherited from the previous government is a sorry one. to paraphrase john maynard keynes, the economic
consequences of the peace, we are not going to sign up to targets. we know our economy cannot meet by means of policies that our partnership not wish to impose upon us, not just for our sake but for the common european and global interest. ladies and gentlemen, in 2010 a greek state ceased to be able to serve its debt. while nominal gdp was falling. europe's banking system had become more or less insolvent, the growth prospects of our trading partners were abysmal and the global credit crunch ensured that interest rates would be going up. and how did we deal with this problem as europeans? by means of the largest loan ever on condition of a massive internalization, a program that was found to shrink incomes which we all knew that's what have to be repaid. those loans were naturally extended to the greek government
in the context of the -- i don't have a diagram to show to you. i had one but in the end it turned out that we don't have the facility to project it. but if you look at projections of nominal gdp growth in 2010 by the imf and in 2011, and again in 2012 and in reality you realize that dispassionately we are talking about a massive predictive failure. in any important sense, and these are heady words, greece went from a time before 2008 of the ponzi growth of growth fueled by unsustainable borrowing do a kind of hysteria which is what i call strange posterity funded by unsustainable borrowing. i am asked also these things
why did other countries on which the same policy was tried not experience a catastrophic collapse? the reason, ladies and gentlemen, is very simple. they suffered significantly less. we had, we are the champions of the fiscal consolidation. we had more than 11% reduction in the deficit. this is unprecedented in peacetime. and if you blocked a diagram of fiscal austerity, fiscal consolidation on one axis and what happened to nominal gdp on the other you will find that greece is falling and falling eight partner -- pattern but because of fiscal austerity is indicative but because our austerity with so much stranger than everybody else's the collapse of national income and all the repercussions that come
with that was much greater. in this sense of greece is a classic outlier have it in the first to be bailed out in the eurozone in which let me remind you in 2010 bailouts were banned, our country into debt and expanded 11 which much occurred to the benefit of others. greece took a hit for europe because of her own economic and social failures, i insist on.com we took a hit on europe's behalf because of our economic and social failures that major we were the first domino to fall and, of course, due to the eurozone's design faults. so our particular failures were exacerbated by the hits we took for the team. history will tell the story of how a series of insolvencies integrate public and private sectors were pushed under the carpet, portrayed as cases and liquidity. history will also register this was an abuse of the national
solidarity. greece was never really bailed out as a 9% of the bailout loans and we took over the last few years we did a great state. the rest went to the banking sector. finally, the record will show the whole program and the company that owns was precisely wrong. if one is to rank all the cases of malignancy or rent seeking of oligarchic practices in greece from the worst case to the least offensive one you will find that the reform program over the last five years started from the bottom not the top. the interest of alert at the top with the ones backing the government that were pointing moralizing fingers that the majority of greeks who may have been micro-parasitic but nevertheless could not be easily persuaded to reform themselves when being told to do so by the greatest rent seekers who thought reforms were never for
them. not surprisingly, as a result of this practice, debts both private and public skyrocketed. banks ceased to function as credit provided institutions. investment dried up and all we have had over the last few years was a slowing down of the rate of shrinkage of our economy as all the fat went, then the muscle come then we were proceeding to the bones of our social become the. it is often said that 2014 marks of recovery of sorts, a very mild, very fragile recovery but recovery. i beg to differ on this. what happened in 2014 was nominal gdp, gdp in market
prices continued to fall but market prices were falling fast. that is not my definition or anybody's definition of recovery. it's the definition of what happens when you go through a recession to a depression. but that's all past history. we are now negotiating a very simple principle. on the one hand, we have an existing program that the greek state is committed to legally -- legally, legally bound and surely states have, continue it, and, therefore, there is no doubt that our government even though we were elected to challenge the velocity and the logic, the essence of those policies, we are bound to the. this is a principle of democratic states that there is another principle. that democracy should matter for
some. in some degree. the fact that we have a mandate to challenge the philosophy of the problem that we inherited it should also make a difference. so what happens when you have two different principles that clash with one another? that's what democracy are for. you have a there is principles of clashing with one another the principle of liberty, the principle of justice for inequality or the rights of individual against the interests of the collective. this is what we do in democracy. we blend together. this is precisely together we do. upon our election. we try to convince our partners into your group, in the european union, at the imf that what we need to establish as the common ground on which to build a new
set of conditionalities, a set of conditionalities that we would all i'm sure have agreed upon had we started afresh so that we overcome the inertia the institutional inertia of the program which i am not sure, ma or actually i am quite sure that almost everyone had they had the chance to start afresh would have considered to be a failure and would not want to continue along those lines. but, you know, how bureaucracies are, how complex they are and there's no -- nothing more complex than the eurozone system or lack there of managing our collective economic prospects. they tend to develop a life of their own and they tend to be subject to inertia and it's very difficult to shift once you have embarked upon a certain path. we would not be putting ourselves in this situation with
very harsh negotiation if we didn't think that the past -- the path we have embarked upon for greece is a path that could get us to a good place. we are convinced that it can't. the greek people did not vote for us because they believed that great success story of last year. they voted for us because they knew that it was smoke and mirrors. in this negotiation we are not trying to impose our will upon our 18 partners in europe grew. we have a mandate, so today. i accept this fully. what we are asking for is for the opportunity to do two things. firstly to be heard, to have our proposals for the way to which the greek social become must be reformed, discussed in good faith. and the second thing we are
asking for is for the time and the space in which to allow these conversations to take place so that we can do the one thing that needs to be done. and what is that one thing? we need to convince our partners especially in northern europe that has come is not about going back to the prophecy of yesterday and they need to convince us they are serious about rebooting a series of measures, prorams and fiscal consolidation plans that have failed. these negotiations must succeed and the reason why it must succeed is because as mario draghi very success of said two months ago for the your project to succeed anywhere, it must
succeed everywhere. greece insists on being part of it everywhere. greece believes that a new government that the greek people have elected is offering our partners, despite a significant political differences, a chance for pluralism and democracy to prevail within a monetary union that knows how to acknowledge errors and do what the united states has done with such great success in the 19th and 20th centuries. and what is that? create consolidation out of the crisis. in europe we like to think that we have achieved that, that we've learned the lesson, that we have consolidated, that we have created new institutions which are allowing our monetary union to evolve and develop the mechanisms that we lacked by
which to counter a major earthquake shock like that of 2008. i do not believe we have done that. i believe in many ways we have proclaimed in name that which we have denied in practice. for instance, a proper banking union. this government with our quirky left wing backgrounds, i admit will come generation with our global and european partners that will simply abate district europe consolidates in a manner that creates greater efficiency, genuine growth, overcomes than major productivity failures and investment failures of the last few years, not just for greece but for everyone, and a way that allows all europeans especially those who are critical of the institutions of europe to remain
within the europeanist camp which is where our government firmly locates itself. thank you very much. [applause] mr. dervis: i just want to thank again minister varoufakis very much for his excellent speech i will say that i want to say two things. i want to say to think they're going to i want to introduce my partner and friend here today on the panel was directed at the center of fiscal and monetary policy. he joined brookings about a year and a half ago. he was at "the wall street journal" and most recent as economic editor. is the author of two "new york times" bestsellers in 2009 and 2012. "in fed we trust" published in 2009, and red ink, 2012.
question. mr. wessel: minister, thank you for your very clear remarks. to an outsider it seems as if there is very little overlap between the policies that fall within your mandates and the ones in which the imf and your european partners are insisting. so it's hard for us to see how this comes to the conclusion. and there's been speculation that one option here is to have some kind of referendum on staying in the eurozone or perhaps a snap election in a different coalition. is that part of your game plan now? mr. varoufakis: this is an easy question. ask libbey not. let me bp size -- absolutely not. let me be precise. we mentioned or you alluded to a
great gap between the policies that are being pursued by our government and the policies that would be acceptable to our partners. i don't think of it that way. remember what i, the key word i use, pluralism. we used to live in societies where we tolerated differences of opinion and different mixes of public and private virtues. so you recall in the '70s and even in the early '80s we used to take great pride of the fact we live in a mixed economy where we had a public sector playing an important role, when we had conventions and norms of the collective bargaining that created a safety net in the workplace, where we had the social welfare net that also played the same role in guarding humanitarian issues. we have public enterprise, public-private enterprises. i remember one of the great arguments in favor of capitalism back in the old cold war days was precisely this pluralism. now what we are bringing to the table there is a notion that the monoculture where everything public must by definition be
problematic and everything private, everything that is directly related must necessarily be on the road to virtue. that monoculture has not worked very well. it hasn't worked very well here in the united states and i don't believe it has worked very well anywhere. what precise mix we use is another matter. let me be a bit more precise with regard to some of the policies and this is where i'm going to be specific. privatization of pensions, labor market. just picked three out of a hat. take privatization. let me tell you what our policy is. firstly we look at privatization's that took place in the last few years. they were disasters. well firstly they were disaster from the point of view of legal public rights, a number of significant ones collapsed when they were taken to the high court, greek high court, the european competition commission.
so you have private investors that go through the arduous process of winning a bid, and auction. they get the property rights come and make an investment and didn't whole thing goes belly up. so there's a disaster. this is neither left nor right. this is a question of efficiency and the security. we want to change that. i can give you many examples. secondly, we are in the middle of a great depression. how clever is it to try to sell public assets when asset prices are through the floor? at such a time, take these few pennies that you get and put into the bottomless pit of an unsustainable debt. i don't think this is an apt use
of public assets. we are not against privatization. we are against this kind of firesale that even coming even a little bit our debt situation. so are policies our to wrap it up are simple. we want to impose minimum investment levels on the winning bid so as to give a developmental dimension to a denationalization of privatization. secondly, we want to have a deal with the winning bidder regarding minimum labor standards, minimum environmental standards. we also want to ensure that the local economies are cut into the deal so that there is both national and local developmental effect. is this something we cannot
discuss sensibly with the imf and our european partners? i don't think it -- we do amortization to the way the previous government did. take pensions. there's no doubt that our pension system is in trouble but how could it be otherwise? we have a collapsed labor market. we have a massive reduction in numbers of people who worked and were capable of making pension fund contributions. we have more than 30% of paid labor income declared labor. so when you look at the problem of the pension system in the labor market, they are intertwined. and our government is simply saying cutting and pasting from the imf bluebook the ideas of the labor market deregulation, with the most regulated market in the world. we are as i keep saying, 90% of unemployed people receive an opponent benefits. nobody else. 91% of the unemployed have never received one year of unemployment benefits.
how much more can you deregulate this labor market? half a million workers have been working with in five months and haven't been paid a cent. why? because we're in recession and they keep reporting to work in order to not lose their dignity, in order not to lose their claim to the company, do that the
company survive so they don't lose everything. now, what we are saying is that in that environment, smart collective bargaining agreements similar to the want of a have in germany that we want to hammer out in unison together in collaboration will help regulate markets not in an efficient way but anyway that brings the whole labor market into the labor market. and at the same time deal with the pension problem. one of the things that is competing a conclusion to negotiation is quite well-known, i'm not preaching by saying this come is the demand that we do not stop an automatic clause that was voted in by the previous government that would have pensions cut by almost 90%. vacuuming somebody on a 600 euro a month patient would have to lose 180 euros. in the middle of this recession. we want to put a freeze on this. we are accused of rolling back reforms. why is it reforms to reduce low pensions? i don't see any serious reform. we want to reform. of course, when they asked us, so how do you envision the pension system in the next 20 years, i have to admit to you i don't have an answer that goes beyond a general description of principle, but when france
germany and the united states answers that question we will answer that question, too. it may take us a little bit more than a few weeks. let me be serious now. what we are asking for is absolutely sensible principle that we are a new government. we need to come to terms with our partners on four or five large reforms that need to be instituted tomorrow which we can do because we have common ground on a number of them. they be disagreements. we will compromise. we are perfectly prepared to compromise. introduced these reforms, come up with a rational fiscal plan for the next five, eight years not the one we have now. once we get this agreement going in we can get negotiation about our intention is a good faith to
reach a new contract with our partners by the end of june that will create a sustainable greek economy so we can cease having these conversations. mr. wessel: let me make two points and ask a question. two points i think which departed already covered but i want to emphasize of them, that balance sheets are more important than floors. we had the same discussion with the minister. if you focus on the floor of one year he missed a lot of the story. if a country, talking about germany, can invest negative interest rates and create positive aspects, expenditures may go up but, in fact, the balance sheet of the public sector improves and that's the point that larry summers makes
all the time. one of the issues i think between the funding programs and the discussions not just on greece but on other countries is the importance of having truly needy and frameworks rather than annual expenditure come and i think you alluded to do. the second point that i can't help, i want to support yanis varoufakis on this come is privatization. when i was in your job in turkey, yes, i was in your job one privatize everything come immediately. at every -- at whatever price they could fetch. that is not good for public finance, i'm sorry, and i refuse. we were asked to privatize and allow a foreign strategic investors to buy it. we refused and today turkish
airlines is the airline that flies to the greatest amount crunch in the world and is quite profitable and is still a state enterprise opened a small private investors. so when we talk macroeconomic policies we always discuss primary surplus. when we say structural reform, some other something under there which i think we have to get into the details of to see whether they are good or bad. and replacing a public monopoly by private monopoly, even if one is a perfectly liberal economist is not a good idea. two things i have to get off my chest. but i think there's one thing, i wonder, you made a very strong point, very, very strong by saying the people of greece are the same as the other people in the eurozone. we are the people of the eurozone. don't you think that at the beginning it would have been
better to somehow give the message, the press was quite careful at times, that there are two sides to being part of the eurozone, that they have to respect, they being your creditors have to respect greek democracy and the will of the greek people and realized that suffering the greek people have gone through but at the same time that the greek government if it wants to be in the eurozone, in the european union, cannot just do whatever it wants. that message came out, we have been elected, we've got the support of the people, we will do whatever we want. you can do it outside of europe but inside europe you do have to kind of stress that the european agreement is needed.
mr. varoufakis: let me start with your last point and go back to some of the earlier ones. you are quite correct. i did mention it before that having one mandate in the election of the 25th of january, we didn't win the right for free -- to do as we please. i mentioned, remember, there are another 18 mandates. but the point i made was it gave us that mandate, the right to say, to put a hand up and say we would like to be heard about issues and at most important work, when we are in a great depression and have a humanitarian crisis. we want, and my request at the
first eurogroup i attended, i asked for four weeks during which in peace and quiet without the threat of liquidity, without that there is reports and actions that gave rise to background come to sit down to be allowed a month to have control of our ministers, to come up with a plan and he sent it to our partners. and i asked for another month during which an agreement, this was our strategy. we never said that, you know, we are not a responsible. we have the right to do anything we want to. that was never the point. but that we have the right to be heard and we have the right to challenge the logic of the program that we clearly face. i believe that is not to ask for them to been. on the other two points you mentioned regarding prioritization, we are unfairly undogmatic about privatization. we don't have an answer are you in favor?
the answered to that question is which privatization? if you ask me about the railway, about electricity generation and distribution, if you ask me about the horse racing outfit or an electronic gambling, i will give you different answers depending on the particular case. and lastly, and this is very important, you mentioned the distinction between balance sheets versus stocks flows and bonds. we are a very particular economic union. we have governments without a central banks backing them. we have a central bank went out a federal government backing it. this is a unique state of affairs. ideally we are completely
speculating and the federal government. but, of course, this is a sad realization that i am sharing with you. this crisis that began in 2008 nine, 10, instead of helping has come closer together is creating centrifugal forces that is making the political process of unifying even harder. once you are caught up in this union, that has peculiar forms of government, -- you end up with a lack of coordination.
the argument that you mentioned earlier. i was not here. i wish i were. the germans capacity to invest. that is very different. i understand your argument but i understand the fear after government that doesn't want to have debt-to-gdp ratio that exceeds 6%. in our government there is no fiscal room for deficit spending program. however, and this is a big however, europe as a whole
eurozone as a whole is typified not only by a mountain of great private and public debt, which we do have, but there is another mountain hiding behind this, huge mountain of idle savings with nowhere go and it should be our joint project to energize, motivate those idle savings to overcome the great fear that keeps them idle and channel them into protective investments. not investments into assets but in real productive capacity. how do we do this? we have european investment bank that could do this. and we have european central bank embarking on quantitative easing. why can't they fund a new major deal for europe that channels investment to the private sectors of the regions within countries that have regions with great deflationary forces running through them with the ecb standing by to jump in into secondary markets to purchase the eib bonds if yields start going up? have you noticed there is no
mention of government here. there is no need for government involved. it is money borrowed by the taxpayer on banking principles as it has been doing for decades. but the ecb is playing a role that simulates the federal government in the context of smart quantitative easing. i'm only mentioning this because we need to have an answer to the question, ok, you don't have a federation, you don't have the political dynamic that can lead you to one. how can you respond differently from self-defeating austerity? i wanted to give one small example of the kind of out of the box thinking that can get us there but to do this we need to begin trusts one another. -- we have to begin to trust one another. i come back to the original question. we greeks have to earn the trust
of our partners but they must also acknowledge the fact that for five years now, particularly problem has been impose upon our nation that has been making banking problems worse. mr. wessel: let's say i buy your analysis but there is a certain reality here. you owe some money yet you can't afford to pay unless they open the spigots. he says to us, it is up to them. they meet my conditions or i will not let them have any money, not quite how he put it. look what is going on. greek yields are buying in the bond market. no contagion to portugal or spain. he says there won't be smooth sailing if you have to leave the euro. it probably couldn't be done though. are you inexorably walking to point where you have very little leverage left and you basically have to default? then what happens after that?
mr. varoufakis: i would willingly, eagerly an enthusiastically accept any terms offered to us if they made sense. i would have no problem with a memorandum of understanding if it was founded upon a reform program that attacked the worst things in greece and made reforms necessary in order to enhance efficiency and social justice. if it came from the planet mars , if it came from berlin, came from brussels, came from portugal, slovakia, i don't care with it comes from, would i -- i would embrace it. the problem we with these conditions, take or leave it conditions, not so much we tried the medicine and it hasn't work. mr. wessel: so what happens if
you can't come to a resolution? mr. varoufakis: hang on a second. our government, that is the second question, these days i'm told that liquidity is drying up in greece and it is. but you know what? there is a reason why it is drying up. the reason is that the previous government in its infinite wisdom decide to try to retain power by starting a bank run. saying in no uncertain terms, if we win, the banks will be shut the next day. how irresponsible is that for a sitting government when the opinion polls clearly showing we're going to win to start a bank run in order to survive. at very same time you had voices from within the system, the euro system, system of european central banks, warning people if we win there would be liquidity restrictions. then the moment we won, the liquidity restrictions started happening. on the 4th of february, the day after i visited london and
inspired some enthusiasm in investors mind to the extend that the stock exchange went up 11% next day, ecb removed waiver and started imposing stricter restrictions on the commercial banks capacity to participate in. liquidity is being squeezed, and demand for liquidity due to fears being propagated into the system increased. imagine i take a elastic band, tied it around your arm very tightly, said, oh, you have a liquidity problem with your blood vessels.
you will become gangrenous, what will you do about it? i don't think this is the way that our european union and monetary union was meant to function. our answer to your question is very simple. we will compromise, we will compromise and we will compromise in order to come to a speedy agreement. but we're not going to end up being compromised. this is not what we were elected for. we were elected to put an end, draw a line, at the debt deflationary spiral and to the fact that the reform program that was perpetuated in greece imposed in greece was badly designed and administered by those who had to be reformed but refusing to be reformed. if this means that europe is going to stand idly by while a young government is snuffed out, i have to say our only rational, pro-european response is to spend every waking hour, moment, second, trying to reach a honorable agreement with our partners.
we shall endeavor to come to reforms along the lines that i mentioned on privatization and pensions and, and at the same time make a commitment that is cast in stone, iron, even, you know, penned in our own blood, in order to increase capability that we shall never slip again into primary deficit. this is what we're committing to. we're inviting our global partners and european partners to meet us not halfway, 1/5 of the way. we expect them to do this. why? because toying with grexit which is something we don't do we are refusing to discuss it, as i said before, even worrying about it is like being hit by comet in the universe which comets are attracted to you if you're worried about them.
toying with exit and ideas of amputating greece is profoundly un-european. anybody who claims they know what the effects after exit is are deluded. mr. dervis: let me say, yanis when the minister was here an hour ago he also ruled out exit and expressed his confidence that a solution will be found. i was quite kind of happy to hear that he said quite strongly. so i think, i mean i think everybody, i think is trying to find a solution. let me ask you the following. in the experience of the imf and of the world bank and of debt issues there is the precedent of saying to a country, to a group of countries, bring up your reform program.
we will suspend your debt payments but the final debt agreement will come two or three years later, provided that your reform program, i mean there can be changes negotiated during the two, three, years, but provided that your program has been carried out? in other words, greece would suspend payments with the agreement of the creditors including by the way, imf payments, in exchange of an agreement of reforms, but would also commit, this is not restructuring done up front. the real legal restructuring or reprofiling if you like or change of interest rate, whatever you call it, would come after, let's say two or three years of a period during which the program is carried out. so to me -- and there is this
experience that has been actually successful for a group of low income countries. it has never been used for a middle income country. but i kind of wonder, whether the seemingly unbridgeable gap without, when you make a debt payment, you run out of money. you don't have the time right now to build the whole program. so that way you could find could you have the time, to build up a program. meantime, your debt burden will be relieved, primary surplus would go down. at the same time, the creditor community and the international institutions would not write off any part of your debt in a complete way, or agree to any change in interest rate in a final way. mr. varoufakis: well, this is such a radical proposal that i didn't even think about it myself.
well, our proposals are extremely moderate by comparison. if this is put to me, i would say i would look at this first would this belief, then a few minutes later with glee and satisfaction. we don't need that degree of generosity from our creditors. if we get it we would be very happy. what we need, is, to stay faithful to the spirit of the 20th of february agreement at the europe level. would allow greece to be -- much its reform agenda. we would dearly like to get down the work of actually discussing the actual bills that will go through parliament to affect these reforms. we've been pushing for this. instead however we keep hearing there has to be comprehensive review, the kind that never happened last few years. it has to happen within a few weeks of our government being elected but nevertheless we go along with that.
and what i would think would be very -- would be to separate the conditionalities for closing the final review of this current program, on the basis of four or five major reforms that need to be done and can be done in the space over the next few weeks. let's face it, this is the time frame we're facing. do what you're suggesting by end of june, very soon, but nevertheless we're prepared to do this but by end of june come to agreement about long term. that is what we're proposing. keen from the beginning to effect the separation there for of the current review, from the medium and long term, is, i think, essential for avoiding the accident and creating circumstances for greece's recovery, which by the way let's, say a few things on the optimistic note, if we make this, and i believe we will.
and i'm greatly encouraged by what he said in this hall an hour or so ago. if there is a declaration, similar to that of mario draghi's of 2012, that the eurozone will do whatever it takes to remain indivisible and at the same time there is announcement of an agreement between greece and its international and european partners, on a number, especially fiscal matters, let's agree on appropriate fiscal numbers that not exorbitant as they are now. p sub is standings investment packages through the european central bank. a way to write off non-performing loans from the banking sector in order to unclog the clogged circuits. privatization policies and social security and safety
rather than five things. debt restructure proposal that doesn't have haircuts and ends up giving more value back to the creditors through gdp and bonds. at the same time we attack, what i call the trilogy of sin in greece which is procurement, bureaucracy, the political system with a such a cozy relationship with the oligarchy and the media that play a toxic role in greek society and always have done. at the same time, we have reforms that then percolate down to the level of produce market supermarkets, then go down to pharmacists if we need to, but but be patient with pharmacists we attack all of the sources in
greece would be great if it weren't so tragic, these things we can agree upon in one afternoon. the announcement of such an agreement will unleash such a wave of optimism about greece. remember asset prices in greece are on the floor. suddenly greece will be a great field for bargain hunting. suddenly greece will be a great field for bargain hunting. there is going to be such a a relief amongst greek investors amongst foreign investors. and we have excellent human capital and various potentially growth in the space at that we can do the one thing we have not been able to do, create export led developmental model that would be buoyed by the initial enthusiasm and will be fueled immediately after that by a never of ending sequence of great reforms. this is what we're striving for. it would be such a great shame if this agreement is not included in the next few days, or weeks. thank you. >> we have to leave the room at 4:00.
ok. let's see. but what i'll do, if it is ok with yanis and david, take a few together. lady up front. please identify yourself. >> thank you very much. i am greek citizen. i would like to thank mr. varoufakis for the political analysis. would i like to request, address this question to policymakers because you are member after government who is starting in january. a coalition of populist party and sereza, we know from our families, from our friends in greece, day after day, greeks are waiting an action from this government related to development. so i would like to ask you, do you have any proposal, any development measure that this
government took since january 2015? thank you very much. >> we'll go for gentleman there in the middle. >> thanks very much. assistant professor at johns hopkins next door. i have actually a question for you as a politician. i think many of us actually agree with your economic analysis. d.c. is probably most favorable audience you're going to get. as a politician are you worried that being right is not going to be enough? because the political economy is that realty you're one against 18. in the eurozone. how are the 18 other eurozone countries going to sell concessions they're going to make to your government if they meet you 1/5 of the way? thank you. >> third, gentleman all the way to the back there, yes, you're
right there. >> i'm basil scarlet. observer of greek economy over last 30 years, off and on. i wanted to make a suggestion regarding ones that you might find sensible, dealing with the state-own enterprises and the suggestion is, before you sell off the family jewels, that you consider making them more productive by eliminating patronage jobs which have gone on for 30 years or longer, and specifically, that you fire non-performing employees who have very high salaries compared to the private sector in greece, in contrast to many other countries. but they have extreme job security. on top, you give jobs to youth of greece which have 60% unemployment. and then to attract foreign investment, you consider eliminating the restrictions on mass dismissals.
>> i think we take three. you answer this and a few more? ok. then you have the, the lady at the back there, next to the camera, who still has her hand up. i'm trying to keep gender balance also. >> thank you so much. from bloomberg tv africa. we know that a lot of economists are basing on the fact that greece will leave the eurozone. that is at least what we're hearing. what do you assure that greece doesn't leave the eurozone? madam lagarde said imf rules state you can not have any delay in payments. we heard from the german finance minister he give you advice you stick to the reforms. how do you plan to ensure you will not be compromised but instead ensure that you are going to compromise as much as you possibly can without putting the greek economy in danger? thank you.
>> maybe one more. i mean, subject to my imf friends in the room, there have been cases of arrangements conditional on future performance so, you know, it is not an undone thing that some payments are either refinanced or delayed. >> thank you very much. with sgcs. my question is follow-up to what all the colleagues said before. and, it goes to the essence of negotiations that are taking place. it seems to me, and you know reading papers, trying to talk to some of the actors involved that the piece that is missing is not so much the flexibility and trying to find a slightly different compromise on how to achieve the goals that you want
to achieve, but the lack of specificity. basically how i understand it, your eurozone partners and institutions involved, are showing some kind of flexibility but, since there has been a breakdown in trust, what they would like to see is not so much generic goals formulated, but more specific actions taken, the beginning of actions taken, help they can help restore the trust that has been broken probably over the past few years, not due to your actions necessarily but due to all the things that have happened since 2010. how do you respond to that criticism? thank you. >> yanis your turn. >> yes. right, your question. policies. what are we suggesting? actions. i did allude to some before. each one of these topic was take up another whole lecture but
the, example again concerns privatization, ok? so, our policy of developing public assets in conjunction with privateers where we have minimum investment standards in the ports when it comes to the airways, right? that is a very clear policy saying we are going to go into partnership with the private sector. we will allow them to manage it. we will even give them a majority share holding. but they will have to insure minimum investment, inmum labor -- minimum labor standards.
minimum environmental standards. that is policy. i could, i don't have the time but i could give you a lot of different examples of this. i could talk to you about our ideas regarding, the tax system. so for instance, in greece we have the peculiar privilege of being a country with extremely high tax rates and extremely low tack states. how do we intend to tackle this problem? there are ways of doing it. we're in the process, again you have to realize our sovereignty is severely second quarter couple described by the negotiation. in almost everything that we are introducing as ideas, we're being told that it has to go through a filter of negotiating process. that is slowing us down. we are much keener than it seems to legislate and put these actions, put these policies in practice. on the question of, i will come to your question because it's, it is related on the question of lack of specificity. well, let me answer it just directly. our original suggestions to our
partners was that we sit down, specify, three, four, five bills, that need to be introduced and particular reforms. indeed we said to them, to build trust, this is the only way we know how to do it. agree on three measures that need to be taken. you pass judgement on us depending on us. we didn't get anywhere. everything has to be discussed. my fear when you discuss everything, you're not discussing about much. so, let me share another source of frustration with you. we entered into these negotiations. we constantly asked for, you know, narrowing down the focus specificity that you're referring to. we present proposals.
10-page, 20-page, 100-page particular proposals which are not discussed. instead we have comprehensive review which is effectively an avalanche of questions and questionnaires about this, that, other. quantifying this. this is not same thing as talking about specific policies, ok? international press becomes full of reports that we have no proposals. in a situation where we reveal our proposals, this is considered to be unilateral action that is breaching faith. please consider that. on the questions of, you asked me, the standard questions, what is it better, to be right or to actually succeed? i don't know of any way in which i can argue something that i believe is wrong. consider this to be my personal failure as a politician. in that case, i'm very happy for you to say that i'm not a good politician.
but i would rather tell you what i think should be done. instead of using subterfuge. you see the previous five years, are full of greek politicians who signed on the dotted line and they played little strategic games and made commitments they never intended to uphold. didn't work very well. maybe the truth will work. not that i have the monopoly of the truth but i tell you what i truly believe in. this is not a game for me personally speaking. let me also, because you also asked a question, how will you convince the a-team that are standing in front of you? i don't believe it is as simple as that. appearances are deceptive. there is a great deal of the common ground between us and the 18. there is something else happening here. there is equalibrium of consensus, which definitely is
not found on genuine unity of conviction that the that everybody is on the right track and our suggestions are wrong. as adam smith once said, when you address the beg a, the -- the baker, the brewer and butcher, do not speak to them on the your needs, speak to them on the base serves their interests. we'll always try to couch the argument what is in terms the common interest for europe. we're not generally in this for the greeks. we're in this for maximizing the benefits to the other europeans. it is only strategy i'm willing to pursue. let me finish? >> no, no, go ahead. there was one more question? >> there was a question about state enterprises. >> oh, yeah. >> and, jobs that are secure highly-paid and effectively
patronage. >> hire younger workers. >> this is obviously a fine ambition and it is one that i share. firstly, before i get to it, let me say that we have many fewer state enterprises than we did some years ago, since you have been an observer, ok? so privatization is not process that is growing to begin now. it already happened to a very large extent. very few state enterprises exist. all right? telecommunication, for instance, gone. port authority, partly gone. we are in the process of considering, there is a tender that is happening for the remaining. we will be very happy to see the development of the railway system in conjunction with private partners and, management teams that come from outside.
but you're quite right. not so much for state enterprises but for the whole of the greek bureaucracy, and the greek public sector. now it is quite clear that we need in order to do what you say a system of effective evaluation. under the previous government troika was a travesty. i know from first-hand, on some of these occasions people that were fired were most productive and younger, ones that were kept were better connected ones. we know this from universities don't we? system evaluations can be a double-edged sword. what they do, they create a system of evaluation but also a system of power. sometimes when their own people use it, in order to propagate their own power and we need to do this very carefully and we're working on it. finally would like to do the for the eurozone, we'll compromise,
-- finally what would i do to stay in the eurozone, we'll compromise, compromise compromise without being compromised. that is what we're going to do. >> david, you have the last two questions? very quick the questions. >> one over there. and then the gentleman here. over here,. >> very quickly. >> short. >> i work in local government and we are looking at models that you have collective impact where rising tide can raise all boats but it is compromise using collective impact, cross sector collaboration between non-profits, private sector and public sector, we're having good success with that here in fairfax county, virginia, just outside of washington, d.c. there is interesting progress in social impact bonds. >> here. >> how confident that there will be able to reach an agreement
with institutions that everyone will hope that the agreement will be approved by parliament? >> if we reach and agreement, it will be approved by parliament. ok. regarding your question, i'm familiar with social impact bonds and they're a very good idea. first me to complete this negotiation to get down to work. >> we do have to close. i am grateful to all of you. please stay so the minister can be escorted outside first. many thanks to all of you. i predict that there will be entering agreement. [applause] [indistinct chatter]
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