In a recent interview with German magazine Focus, Thomas Mayer, former chief economist at Deutsche Bank AG in Frankfurt, stirred controversy by arguing that lenders will never get their money back from Greece because they will no longer have a means of putting pressure on the debt-hit country. In the same interview, Mayer argued that “we should abandon Greeks to their fate.”
In this e-mail interview with Kathimerini, Mayer discusses his remarks.
In the Focus interview you provide a gloomy forecast about Greece. In contrast, the mood in Greece is more positive, or at least this what the government is trying to put across. German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble both came to Athens to express their support for Greek Prime Minister Antonis Samaras. Do you think this support is a political gesture that is not justified by genuine economic data?
The big recession is evidently over, but growth will probably remain too weak to make debt sustainable and to bring unemployment down. That should be clear to even Merkel and Schaeuble. However this does not change Merkel’s position that no country will leave the eurozone. She supports Samaras because he in turn helps her implement this policy.
You said: “We should have abandoned Greeks to their fate after it became evident that the rescue program had no impact,” a comment that caused a turmoil in Greece. Do you still believe this? Would that not destroy the eurozone or cause a Greek euro exit? What would Greece’s future look like outside the eurozone?
It is a mistake to consider EMU membership an irreversible process. Given that there is no such thing as a European federal state, it is up to nation states to manage their national sovereignty. These may give up part of this sovereignty to the EU, or vice versa. Those who believe that they have suffered a loss of monetary sovereignty should be able to recover it. In my opinion, there is evidence that Greece was wrong to join the euro. Greece should have the opportunity to correct this mistake. The example of other countries shows that life outside the eurozone, yet inside the EU, can be quite satisfactory.
Even [US economist] Paul Krugman has admitted he was wrong to predict Greece’s euro exit. How about yourself? Do you agree with Financial Times analyst Wolfgang Munchau that Greece should abandon the euro area?
Krugman obviously underestimated Merkel’s determination to preserve the unity of the eurozone. It is up to the Greeks to decide whether they want to stay in the eurozone. In this context, they must answer whether the country can pay back its large debt as a eurozone member.
Do you believe that investors buying Greek bonds are just speculating? Eurostat recently confirmed the country’s primary surplus. Do you question this [figure]?
The evolution of the bond market in eurozone countries over the past few years is reminiscent in my view of the interest rate convergence at the time of the currency’s creation. Once again investors are putting trust in the political will to preserve the eurozone. Basic financial data or legal reservations, like those of Germany’s Constitutional Court over Outright Monetary Transactions (OMT), are of no importance.
Samaras has ruled out the possibility of a third rescue package. You have not.
There will be no new memorandum. Greece, however, will remain dependent on the help of its partners in the eurozone and the ECB. This is proved by the government’s insistence on further debt reductions, a demand that the Eurogroup is likely to meet.
You have not ruled out a haircut via the back door (zero interest rate and extending maturities by an indefinite period of time). How could a restructuring of this sort be presented to German taxpayers without sparking reactions?
It will be argued that Germany cannot give up its demands on Greece. However, the fact that the current value of claims drops when interest rates fall and maturities are extended is a notion only understood by experts.
Greeks have suffered a great deal during the crisis. Do you think that all these sacrifices were in vain?
Many affluent Greeks benefited from the early years of economic prosperity inside the eurozone and when the crisis hit, they transferred their money to safe havens. It’s sad that the people who were not even invited to the party have had to foot the bill.