Audrey Tilve, euronews: Paul De Grauwe, you teach at the London School of the Economics and the University of Leuven. You’ve been following the Greek crisis closely. If in the end, Greece leaves the euro, would that bring about a financial disaster?
Paul De Grauwe, London School of Economics: It would certainly be a disaster for Greece. But your question is on whether it would be a disaster for the eurozone. In the short term, I think that it’s manageable. We have now a range of tools which can be used to stem the kind of contagion that could happen. The problem is the long term. If Greece leaves the single currency, that means that monetary union is not permanent and so that means in the future, when there are new economic shocks, such as a recession, the questions will be asked. Where is the weak point? Which country could leave? That would destabilise the eurozone.
euronews: I’d like you to comment on some figures that you know well: the countries most exposed to Greek debt. Germany (is exposed to the tune of) 56 billion euros. France 42 billion. Italy 37 billion. Do these countries have any chance of getting this money back?
Paul De Grauwe: It’s not a 100 percent chance. In fact, one needs to focus on the fact there has already been some losses. So the amounts we’ve seen are nominal amounts. There have been implicit restructuring. The maturity of the debt has been extended; the interest rate cut. If we calculate the actual value of what Greece has to pay in the future, we come to a figure that clearly less than the amounts lent. So there have already been losses but the government don’t dare to say it to their taxpayers.
euronews : So some debt has already been lost?
Paul De Grauwe : Yes, about 50 percent of Greek debt has been lost,according to my calculations.
euronews: What’s the point of all that if we don’t tackle the key problem in Greece today.It’s the inability or at least the huge difficulties that Greece has in collecting taxes. The malfunctioning of an administration where there is corruption and cronyism. Why has there been no progress there in the past five years, since Europe put Greece on financial life support?
Paul De Grauwe: There has been progress in some areas. There has been a reduction in the number of civil servants, reforms of the pension system.
euronews: There is no land registry. Ship owners aren’t taxed.
Paul De Grauwe: There is a whole lot of things to do. These things have to be done but the most important issue is the fact that the austerity imposed upon Greece has pushed the economy into the abyss.
euronews: What would take for Greece to be able to survive without help and become economically viable?
Paul De Grauwe : First of all, stop with austerity which hasn’t worked. It has reduced the ability of Greece to pay its debts, unemployment.
euronews: Will that be enough? What industry is there in Greece? It imports a lot.
Paul De Grauwe: Greece had growth rates in the past, so of course, one part of that growth was unsustainable, but before that Greece saw growth. To say Greece can’t grow doesn’t make sense.