Venizelos Says More Cuts May Be Needed

ATHENS – With elections approaching, the PASOK Socialist party’s new leader Evangelos Venizelos, who just stepped down for now as Finance Minister in a shaky hybrid government-ruling Greece, said despite two bailouts from international lenders, including a second for $175 billion that he helped engineer, Greece may still need more of the austerity measures that have sunk the country into a deep recession. In an interview with German magazine Der Spiegel, Venizelos, whose party has fallen from 44 percent support in 2009 when it won the elections to about 15 percent now, also said he believes those harsh conditions could be altered if needed, although he vowed previously to support them.
As Finance Minister, he doubled income and property taxes and taxed the poor, putting his party in a nosedive, and appeared to be trying to give himself and PASOK some wiggle room as voters dropped off. The New Democracy Conservatives are leading in polls, but with only about 20 percent of the vote. New Democracy leader Antonis Samaras, who opposed austerity when PASOK was in power but then supported it to be part of the current coalition, said he wants to renegotiate the terms if he wins. Samaras would also adhere “to the letter,” a contradictory position he didn’t explain.
Venizelos said the terms are subject to quarterly review and “could be adjusted,” although the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB), who put up a first series of $152 billion in rescue loans and has okayed release of the second bailout, said they could not. With such low support, there is a strong likelihood the two parties-if they finish in the top two-would have to form another coalition. Though they have been squabbling in the current regime, leader and former ECB Vice President Lucas Papademos has told them to stop filing amendments to undermine the reform legislation they supported publicly.
In an interview in which he gave evasive answers to hard questions, Venizelos insisted that only he could rule Greece, and he couldn’t rule out more of the pay cuts, tax hikes, slashed pensions and firing of 150,000 workers the Troika demanded. “Had we applied certain elements earlier of the second bailout package, such as the reduction of the debt and the smaller cost of interest rates, we would have progressed much more by now,” he said. He also imposed 74 percent losses on investors to help Greece write down $134 billion in debt, which has locked the country out of the markets and left them reliant on continued aid from public entities.
“Our aim is to emphasize structural reforms in order to avoid implementing horizontal cuts of salaries and pensions. But in June we must finalize our medium-term fiscal strategy and I can’t exclude the possibility that there will be cutbacks in the future to comply with constraints of the aid package,” he said. He warned of reforms that will be painful and noted that “without the people’s support we will be unable to apply them.” Greeks have been protesting, rioting and striking for two years but he said he wants them to support the austerity that has destroyed many of their lives, as tax evaders owing the country more than $72 billion escaped with near impunity under his watch. He also acknowledged that Greece has messed up its economy and will have to accept some of the responsibility. Insisting they are such a small part of the 17-country euro currency zone, he believes too much has been made of the crisis which threatened to topple the economic bloc and continually rattled world markets.
In response to German popular criticism on loans to Greece, Venizelos said German Chancellor Angela Merkel’s bailout was appropriate. “The German taxpayer is benefiting from the sound investment of his money by his government,” as “the German Finance Minister can borrow money almost at no cost and then lend it to us at a certain interest rate.” He said Germany has already earned some 400 million euros ($523 million) in the last couple of years.
Venizelos said that although priority will be given to structural reforms, including privatizations he didn’t implement as Finance Minister, the specter of more cuts still looms. “Our aim is to emphasize structural reforms in order to avoid implementing horizontal cuts of salaries and pensions,” he noted.
Venizelos emphasized that it is difficult for the government to implement the reforms without support from the Greek people and acknowledged that some measures, such as the privatizations, will need to move faster. Additionally, he said, the pace for privatizations has picked up and will accelerate, noting that the government has received at least 17 bidders for the sale of the state gas company DEPA. Greece ranks last in the EU in attracting new enterprises, and has a fabled labyrinthine bureaucracy and deep-rooted corruption that detracts investors. Asked whether Greece would leave the euro behind after all, Venizelos said, “No. We are currently experiencing the most critical phase in saving our country…If we get through it, then a time will soon come when this question is no longer asked.”