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Jyrki Katainen says reform is as vital as economic stimulus


Jyrki Katainen says reform is as vital as economic stimulus



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Greece dominates the headlines when it comes to the European economy. But the story is bigger than that. It is also about growth and getting people back into work. Maithreyi Seetharaman from Euronews caught up with Jyrki Katainen, the Vice President of the European Commission, in charge of Growth, Employment, Competition and Investment.

Maithreyi Seetharaman: “How flexible is Europe actually in terms of policies? And is Greece a prime example of that question?”

Jyrki Katainen: “There are only a few countries who can afford to stimulate their economies. But the best stimulus which all Member States can do now is to carry out reforms. To really change or reform the country in a way that makes it more flexible, when it comes to the labour market or when talking about how easy their business environment is. So flexibility and stimulus mean they have to be ready to reform our societies, and many governments are doing this.”

Maithreyi Seetharaman: “Would you say that Greece is not? Or would you say that maybe Europe is very slow to react, and the Eurogroup meetings, the Troika meetings end up going nowhere?”

Jyrki Katainen: “Greece has achieved a lot of good things. If you look at the primary surplus, it is one of the biggest in Europe. Also, economic growth is very strong. But now after the elections, the fundamentals of the economy have not changed, and the Eurogroup just took the first step this week. And they will continue to try and find a solution which is acceptable to all 19 Member States. So we have to accept the truth that the economy in Greece hasn’t changed even though the government has.”

Maithreyi Seetharaman: “We’re really taking it down to the wire with Greece. Is that going to be the situation, that we take our own time and the goal post has moved too much?”

Jyrki Katainen: “When it comes to European decision making, we are delivering quite fast. Just a few months ago we said we were going to establish a new investment triangle, with the “risk” fund, with the deepening single market and transparent project pipeline, and this is going on. This spring, many of these pieces in the puzzle will be in place. But when looking at national reforms, it always takes some time because if you need to make reforms that go very deep in your society, it is not easy politically.”

Maithreyi Seetharaman: “What is a good compromise from your perspective on Greece? What will hold water with the other countries that are looking at Syriza and worrying about their own internal political situations?”

Jyrki Katainen: “Greece has been helped by other European tax payers. And it is clear that they have to continue to make growth-friendly reforms. Right today it is too early to predict the final outcome. But the commission is very committed to helping Greece. We have to make sure that people can get medicines and health care if needed. So we are on the side of Greek people. and there are 19 Member States, 19 electorates, 19 governments and parliaments who must accept a help programme, and of course the most important thing is that the Greek government is willing to cooperate.”

Maithreyi Seetharaman: “If the investment plan is based on growth-related bonds, why should Greece at the same time not propose growth related bonds?”

Jyrki Katainen: “The Greek authorities must make sure that confidence around the country will increase. This means they must show the courage to make growth-friendly reforms. Also they must take care of their fiscal policy because otherwise, if uncertainty grows as it has done in the last few weeks, no one will invest in Greece. But for instance, a new fund could finance projects, private sector projects in Greece. Also it has been constructed in such a way that it can take more risks. But confidence must be at good levels, otherwise nobody will want to invest in Greece.”

Maithreyi Seetharaman: “The investment plan has been on a kind of road show. What kind of reaction have you got from the investment community, and how realistic is it?”

Jyrki Katainen: “Well, the feedback has been very encouraging. First of all we can deliver very fast, so everything should be in place by the end of June. And we can already start increasing SME lending before that. We don’t know the projects yet. It depends on the private sector because the new funds will finance only private investment and public private partnership. There have been some questions. Why we are using such a big figures when talking about leverage, but it is based on the history of EIB lending. Of course we are interested in resources from outside Europe as well. And once everything is ready, I will be more than happy to visit different parts of the world.”

Maithreyi Seetharaman: “Do you think the ECB’s quantitative easing program is making it easier for you to sell the investment plan?”

Jyrki Katainen: “It has been very helpful and it has stabilized the situation. If you look at the monetary policy and you add the cheap Euro and you add the cheap price of oil, all together they create a tremendous stimulus to the eurozone economy.”

Maithreyi Seetharaman: “My final question – what keeps you up at night? Deflation? Greece? The lack of growth, the investment plan?”

Jyrki Katainen: “Let’s say the investment plan, because there is so much work to do. I am not worried about a deflationary spiral at the moment. I am working very hard for the investment plan because It can make a change. It will not change the whole world, but it will help private investors to invest in Europe, to invest in real job creation projects all over Europe.”


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