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André Sapir on 'unthinkable' Greek finance scenarios

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André Sapir on 'unthinkable' Greek finance scenarios

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With Greece on the verge of bankruptcy again, questions are being asked about the IMF and European Union having already made a loan to Athens of 110 billion euros. euronews sought answers from André Sapir, an economist and professor at the Free University in Brussels.

Laurence Alexandrowicz, euronews:
Why can’t Greece keep its head above water, even with this aid?

André Sapir:
The demands made one year ago in order for Greece to keep itself from going under were, without doubt, much too hard to meet, and the latest news is that the Greek deficit remains clearly higher than what was foreseen, so that Greece will not be able to turn to the markets for fresh money in 2012, as was intended in the EU and IMF plan.

euronews:
The euro zone has studied Greece’s case but no one seems to agree on it. You say things are more complicated than expected. How does the euro zone count on saving Athens?

Sapir:
It’s absolutely necessary, first of all, to reach a common European point of view, and then not to move forward with small steps, but to have a credible solution for the medium term, and not simply for the days and weeks to come.

euronews:
You talk about small steps: 110 billion euros wasn’t ‘small steps’. Does more money need to be injected?

Sapir:
No, I didn’t say more than 110 billion euros is going to have to be injected, but we’re going to have to see how to manage that, because once again now the markets are lacking confidence that the measure that have been taken are going to produce a sustainable solution — that’s the real problem — it’s not granting an extension every six months or every year. But to see what the solution is now, not just for the months ahead but the years ahead, and what solution might be necessary for other countries, which complicates the thing, since we know that we’ve got Ireland and Portugal who aren’t very far behind Greece.

euronews:
What disaster scenarios are we afraid of in case the Greek rescue fails, notably for those other euro zone countries and for the euro zone as a whole?

Sapir:
I don’t want to look at disaster scenarios, and I’m not thinking about a disaster scenario. There are solutions; they may be difficult, but they are solutions. These solutions go to an extreme of political union. That is what [ECB President] Mr Trichet talked about, roughly a week ago, when he mentioned the idea of having a European finance ministry. That’s one solution. The other solution, which is a solution in the short term, IS intervention by the public sector. I think we’ve reached the end of a solution — without making the leap towards political union — the end of a solution which injects public money without our seeing clearly where we’re going. And there’s a German demand — but also from the Netherlands and Finland and maybe other countries — for a participation soon by the private sector, which holds a lot of Greek government bonds.