Goran Persson, who served as prime minister of Sweden for a decade, took over the helm of the Scandinavian country in 1996, with the economy “in a terrible situation.”
In this interview with Kathimerini on Sunday, Persson, who this week visited Athens and gave a speech at the Hellenic Swedish Chamber of Commerce, explains the main steps that his government took to bring the deficit under 3 percent, halve the unemployment rate and bolster Sweden’s productivity rate.
What was the economic situation in Sweden when you came to power and what were your first steps to reduce the public debt and balance the budget?
It was a terrible situation. Sweden was under severe international pressure because our debt was skyrocketing and our deficit was around 12 percent of GDP. No one trusted us and interest rates were extremely high at 500 percent. On top of that there was growing unemployment and no belief at all in the future. It was a severe crisis. In many respects it was roughly the same situation as the start of the Greek crisis. Greece and Sweden are two different countries with different political traditions and different economies, but what we have in common is that we are highly dependent on our international relations, how other countries look upon us. I have been able to follow how the international community has looked at Greece and the Greek economy over the past 10 years and it’s roughly the same situation in that perspective.
This year, after decades, Greece will have a balanced budget for the first time. How important is it to have a balanced budget?
It is extremely important, and if you succeed it will mark a turning point that will send a signal both domestically and internationally that you have the situation under control, that you are masters of your own house and not in a situation where you need to borrow money to cover expenses.
What were the first steps that you took to change the situation that you described before?
My first step was to present a program that was coherent, not ad hoc, that covered both the reduction in expenditure and tax increases as well how to do it – and not only to talk about and decide on it but also to implement it, because that is something extremely important and [often] forgotten in politics.
You once said, “Those who are in debt are not free.” Do you think it’s crucial for the Greek economy to reduce its debt/GDP further with a haircut? Will Greece “be free” without further debt reductions?
If you need to borrow money to finance your daily life in a family or in a state then you are building up a debt that is extremely dangerous. But if you borrow money to invest in buildings and infrastructure then you are building up a debt that is not that dangerous and it is very important to separate the two kinds of debt. But you are not even allowed to do that when you are in such a dangerous situation as Sweden and Greece were. You just need to reduce the debt because you are not free. If you borrow too much you end up in the dependence of those who lend you money. I talked about this in New York. It’s a question of national independence. Politicians elected in Sweden could not deliver what they had promised in election campaigns, because when they came to Parliament they realized that there was no money, and then they had to go to the other side of the Atlantic to borrow money to fulfill their election promises. And then those working in these institutions said no and that was clear proof of where the power lies in an indebted country. It is not in the Parliament, it’s somewhere abroad, it’s in the markets and the market is in Frankfurt or New York. I remember my first visit to the markets as newly elected minister of finance. I met with quite a large crowd in New York and they were all young. I saw 27-year-old boys sitting there and smirking at me and I had to explain to them how we were going to try to reform the Swedish economy and I realized they were literally in power, it was them and not me that had the democratic mandate and they had never been to Sweden at all, and they were the junior at that desk that taking care of Northern Europe or Europe or something. It was humiliating and I came back to the Swedish prime minister and told him, “Please let me do anything I can to get rid of this dependence on all these young guys because they will not decide about the Swedish future.” For me it was extremely important. If you are in debt you are not free, somebody else will decide on your behalf.
How important is political stability in a country like Greece, which is in the process of implementing reforms?
It is extremely important and it’s hard to carry out this kind of program if you don’t have broad support in Parliament. That is something which is linked to the general awareness of the population. If people think this is something that is forced upon you by the EU authorities because they are mean, then of course that gives populists room for maneuver. You can wish for political stability but you can’t take it for granted. You have to fight for it, constantly take the debate, meet people, explain, be visible, take responsibility for what you are doing. If the politicians responsible for the program can’t explain it and can’t defend it and can’t link it to deepest reality, then you are lost.
The problem in Greece’s case is that the reforms have been brutal. The average household has lost 30 percent of its income. There is always a limit on the patience of the electorate. What advice would you give to the current government to prolong this patience and maintain its power to finish with the reforms and retain political stability?
This experience is hard and painful. This is something we shared. It was necessary to always be able to say, “This is painful,” but we tried to do it in a fair way: “Those who are strong, those who are rich, those who have a good job, they are paying more than you who are poor, unemployed.” Fair distribution of the burden is a prerequisite in a modern society because if you don’t have a fair situation you create a terrible situation. If you have a fair distribution this will end up in discussions and will probably win debates in parliament, probably able to demonstrate that any other way of doing it is unfair.
I was very surprised when I visited Greece a couple of years ago and I met high representatives of the Greek private sector who looked at taxes as something that you just pay when there is a crisis in society. No, you have to pay and collect your taxes every year. If the taxes are too high then they act as a brake on growth. There is a constant debate but get used to the fact that you have to pay taxes, because you have to have hospitals and schools, infrastructure. The government won’t give you everything that a modern society requires, you have to pay it yourself.
Do you view the crisis also as an opportunity? If so, what opportunity do you see in Greece?
If Greece does well in handling the crisis, it will help build the brand internationally. People will say, “Look how they managed, they went through that crisis, they did it themselves, now they are back again, they are strong, they have started to grow.” If you fail with this reform activity, then of course you will be in trouble.
Do you think the austerity that was implemented in the program countries in Europe was the correct formula? Do you think that the flexibility being requested by Rome and Paris at the moment is legitimate and should be given?
You can always argue whether you could have done it another way. Now Rome and Paris want to loosen the deficit criteria. I don’t think it’s the right signal to send to those who have been through a very hard program like Greece has, for instance.