ECONOMY

EWG’s Wieser: ‘If we were realists, we would have seen that Greece’s debt was unsustainable’

Brussels – The first Greek program should have been built on much more realistic assumptions and targets, the president of the EuroWorkingGroup (EWG), Thomas Wieser, told Kathimerini in an interview. Asked to reflect on the mistakes and achievements of the past three years, since Greece signed the first Memorandum of Understanding with its emergency lenders, Wieser argues that “it wouldn’t be such a bad idea” to realize at an earlier stage that Greece’s debt was unsustainable. On the other hand, he claims that Greece’s economic downturn has been more severe in 2012 and 2013 because structural reforms and the opening up of markets were not undertaken with sufficient vigor in the very early stages of the program.

Could Greece and the Eurozone have avoided the MoU deals?

Greece was in such a horrid economic and fiscal situation in 2009 that there was no way that Greece could ever have made it without massive outside assistance. Successive governments had been covering up a steady loss of competitiveness and a steady erosion of fiscal sustainability.

I know that there are some conspiracy theorists around who want to persuade people that there was no problem, and that this was a fabrication. But these people are misleading the Greek population with their delusions, just for the sake of personal gains. The MoU was unavoidable.

Was there another way for taxpayers and governments to deal with the debt crisis in April 2010?

The best way to have dealt with the crisis would have been to act many years earlier – every year of hiding the problem from the population and from international observers and from markets just made it worse and worse once the time had come to have to deal with it. Greece would be today in an economically better situation if the structural reforms of opening up markets had been undertaken earlier and with greater vigor in the very early stages of the program. But the sectors who had been profiting from protection for many years obviously were able to continue to profit from some kind of protection against liberalization. And thereby the economic downturn has been more severe in 2012 and 2013 than would otherwise have been the case.

With the benefit of hindsight, which were the major mistakes in the architecture of the MoU agreements? Which things could have been done differently?

With the benefit of hindsight, the first program would have built on much more realistic assumptions and targets. It was at the time believed that privatizations and other reforms, as agreed in the program, would actually be fully implemented. This was very much not the case. And this inability to deliver the agreed targets produced a very negative political atmosphere between the European partners, as it was no longer clear who trusted what and whom. But had the program [been] built on more realistic targets, one would have seen at an even earlier stage that Greece’s debt was unsustainable. Maybe this would not have been such a bad idea.

What were the major achievements of the rescue mechanisms for troubled Eurozone members and Greece?

Obviously, the mere fact that the EFSF and then the ESM came into existence and were available for helping troubled member states is a major achievement in itself. Providing cheap financing when markets no longer want to fund and finance a member state like Greece rescues this country from insolvency.