Jean-Claude Juncker on Greece, Europe and the crisis [full interview]

Jean-Claude Juncker, the former chairman of the Eurogroup and current prime minister of Luxembourg, tells Kathimerini that he had a battle on his hands to ensure that Greece remained in the eurozone during his term at the helm of the forum of eurozone finance ministers. He directs stern criticism at Greece’s international creditors – the International Monetary Fund, European Commission and European Central Bank – as well as some member states that, he says, either prevented steps from being taken that would have allowed wealthier Greeks to take on a bigger burden for the country’s recovery or who acted in accordance with the mood of the international markets and wanted to see Greece “punished.”

When did you decide that Greece was in real trouble?

We didn’t decide that Greece was in trouble; Greece was in trouble and we had to assess the situation. We reaffirmed that fact at the Eurogroup back in 2008-09 and then we started discussions and debates in the group.

There have been reports recently that you visited Greece secretly in 2009 and told the government then that things were really bad and that they had to take some measures. Is that true?

I don’t remember if I was in Greece in 2009. I should, but I don’t. I wanted to draw the attention of the then Greek government to the seriousness of the problem and I was discussing the seriousness of this problem with my fellow colleagues at the Eurogroup level. I never hid it from my Greek colleagues at that time that the problems were starting to become very serious.

Do you think that the crisis could have been averted had the government of Costas Karamanlis at the time taken some fiscal measures or was it too late?

I don’t think the crisis could have been avoided. One has to separate the crisis explanations. The crisis – the one we are facing now – did not start in Greece; it started in the US. The subprime crisis, the Lehman Brothers breakdown, these events were far away from Greece but Greece appeared to the markets – to observers in general – as being the weakest part of the euro area. So all the focus, mainly of speculators, was put on Greece.

I remember you uttering the famous phrase that “the game is over.” Do you think Karamanlis’s successor, Prime Minister George Papandreou, got it or was he ignorant of the real situation?

No, I am not in charge of criticizing the government and have no reason for criticizing that government or previous governments. I had a frank relationship with all the Greek prime ministers and with some of the finance ministers, and I don’t think that earlier measures could have had any effect on the crisis or that the Greek part of the crisis could have been avoided. Of course it would have been helpful if earlier measures had been taken but don’t consider that the crisis could have been avoided by having the Greek government taking some modest or even huge measures. The problem, the general problem, was far more serious than that.

Whose idea was it to involve the IMF in Greece’s bailout? There is a big debate about this issue in Greece. Was it Germany?

No, I was very reluctant to have the IMF involved in the solutions for what at the time appeared to have all the ingredients of a European crisis, because I thought – and I was wrong – that this was a problem of the euro area and we had to solve the problem as a euro area. Germany, the Dutch and Finland insisted on having the IMF on board because they thought – and they were not entirely wrong – that the IMF had the expertise to deal with crises of that kind, whereas the European Commission and the Eurogroup itself didn’t have that expertise. I decided finally – although [president of the ECB from 2003-11] Jean-Claude Trichet was also not in favor of having the IMF being involved – to bring in the IMF because that was the precondition for having other European countries – Germany, the Netherlands and Finland – as part of the packages we composed.

The IMF recently published a “postmortem” report saying that it would have been much better for Greece if there had been a restructuring of its debt from the start. Was that discussed back then?

I think we discussed that, but the problem during that period, 2010, was that we didn’t have the instruments with which to fight the general crisis we were facing. We didn’t have the money. Had we postponed [the bailout], Greece wouldn’t be a member of the euro area at this very moment. I still believe that we did the right thing.

In its report, the IMF said that the fiscal programs with Greece helped protect Europe and the European banks from a Greek default but didn’t benefit Greece itself.

We had to ring-fence because the contagion risk was enormous. Had we accepted the contagion risk we wouldn’t be sitting here together, because then the whole of the euro area would have disappeared in one wave, in one move mainly driven by speculators bidding against the euro and bidding against the coherence and the cohesion of the euro area. I don’t think that the IMF is right, although I like the fact that the IMF is increasingly self-critical. I never doubted that Greece would have the capacity, the talent, the energy to overcome this crisis and I never doubted that Greek genius, which is historically proven, would be of such an extraordinary volume, or that this crisis could be fought successfully by the Greek authorities and by the Greek people. But I have to say, although I never doubted the final outcome, from time to time I doubted the rightness of the measures imposed on Greece or negotiated with Greece. I am of the opinion that the wealthiest part of Greek society was not asked to submit to the same amount of contribution as the weakest part of Greek society. It’s the modest Greeks, the poorer Greeks, who had to suffer most. And these were my doubts. These are still my doubts. And the IMF is not truly criticizing that. I am criticizing that. The IMF was pushing for that which I am criticizing. Not only the IMF, but the Commission, the European Central Bank and member states – not me – were pushing, in the general framework of the adjustment programs, to impose new sacrifices on the poorer part of Greek society. I was fighting – just as an example – against the reduction of the minimum wage in Greece. I can speak about the Eurogroup now in a different way than I used to when [I was chairman]. I wanted to defend what I considered at the time to be the weakest part of the Greek work force against this request by the troika members. I was surprised that I didn’t have the support of each and every one of the Eurogroup.

Last time we spoke you said you thought part of the program was designed to punish Greece. Do you still believe that?

You have to remember that there was great anger about Greek forms of behavior in the past. It was not the European Union, or the euro area or someone outside the country who created the problem in this country. I’m referring to the real domestic problem this country was facing and still is facing. There are maybe some Protestants in the North that have a tendency to punish instead of – as we Catholics and Orthodox normally do – reward one who recognizes his sins.

There is a theory in Greece that because Europe was not ready for the crisis, the Greek government back in 2010 could basically have blackmailed Europe by saying that it would just default on its debt. Would that have been possible back then?

No, no, no. I don’t even remember if there was any temptation in that direction. The problem was – back in 2010, 2011 and 2012 – that this obscene word “Grexit” suddenly dominated all the headlines of the international financial press. I was in Greece in 2011, and I was in Greece in August last year, and now I’m discovering a totally different atmosphere. When I was here last August everyone believed Greece might have to exit the euro area. Some member states of the euro area wouldn’t have been against this prospect. I have always thought that, Greece being Greece and the Greeks being Greeks, this is not an option. It would have been in the worst interests of this great nation and of this – sometimes weak – Greek state. It wouldn’t have been in the broader interest of the euro area as a whole, or the European Union as a whole. So, everything I did was to convince others to step away from this criminal undertaking that would have consisted of throwing Greece away like a piece of paper, like nothing. Greece is not nothing. Greece is a major part of all that is important in Europe.

Did you get scared at any point that we were close to that happening?


When was that?

I don’t remember when it was, but I remember that whenever this danger occurred, suddenly, because domestic policies of others were pointing in that direction or because the market reactions were indicating that this could be a way out, I always reacted strongly against it. Not only in meetings. The meetings are important, yes, but the meetings before the meetings are important, the phone calls before the meetings are important, and I made it very clear that if anyone tried – and it was tried – to bring Greece to the last door before the exit, I would resign as chair of the euro area. I did help avert Greece having an uncertain future, and I’m applauding the efforts of Greek society, mainly the poorest part of this country for the enormous efforts that were undertaken in this country. These efforts were needed. There was no other option but consolidation, structural reforms and budgetary consolidation. The first results are there; promising results are there.

I’m sad that the consequences of the first signs of promising results didn’t reach individual Greeks, and individual Greek homes, because after having shown such an enormous and impressive amount of courage, we have to support Greece in its hope that things are improving and becoming better and better. This is a country which is proving that it takes its European responsibilities seriously into account and I do hope that other Europeans will continue to prove that solidarity is a European virtue. I do think that we have to stop this dividing line between this so called virtuous North and the so-called unvirtuous South. Do you know that next year or the year after next year Greece will have a smaller deficit than some of the virtuous countries of the North? Who would have believed that two years ago? Nobody.

The IMF and Germany are expected to clash after the German election in the fall over another debt restructuring for Greece. IMF Managing Director Christine Lagarde has been very clear that she is going to push very hard for an official debt reduction. How do you see that playing out?

Speaking as a former president of the Eurogroup, I don’t think that it is wise for Greece and the euro area to discuss this matter right now. Debt relief, a haircut, whatever you call it, is not on the table. We will discuss this problem when it is tabled. If we were to discuss debt relief in 2015 or 2016 right now, we could, without meaning to, harm the newly rediscovered credibility of Greece. What is important for this country? People have to know that its international credibility is returning; nobody today doubts that Greece will succeed. If we discuss these issues without having hard data in our hands, we would invite financial markets to take a new interest in what they would consider as being a Greek weakness.

Do you think that a Greek exit from the euro is not a possibility anymore?

It’s done with. The reason that Grexit is no longer a subject or an issue is that Greece has done what Greece has been asked to do, and what was negotiated with Greece, and it is also due to the fact that the political leaders of the euro area have stated again and again that everything will be done in order to avoid the breakdown of the euro area. It is also due to the fact that back in November 2012, under my chairmanship, we said that if Greece implemented the program, if Greece achieves a primary budgetary surplus, then we will provide all the means necessary in order to support Greece in the future. And I will always be among those who will support Greece for the future.

Do you think the disagreement with Germany over this issue had something to do with your leaving the Eurogroup?

Maybe, but if this was the price to be paid, that’s OK by me.