Navigating the Greek Crisis, Avoiding Grexit, and Helping Greece Steer a Course to Sustainable Growth

Pierre Moscovici, the outgoing European Commissioner for Economic and Financial Affairs, Taxation and Customs, says investor confidence in Greece has dramatically increased and can continue to do so provided the reform momentum is maintained.

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GIG: Commissioner, you managed key aspects of the EU’s relationship with Greece during perhaps its most critical time since entering the eurozone. What is your assessment of the reform process that has been implemented in Greece during this time? What are the most significant accomplishments that you can pinpoint?

Pierre Moscovici Outgoing European Commissioner for Economic and Financial Affairs, Taxation and Customs

Moscovici: It’s important to recall how far Greece has come since the depths of the crisis, especially the turbulent summers of 2012 and 2015 when Grexit was a clear and present danger. I know just how difficult the past few years have been for the Greek people. The fiscal adjustment Greece underwent starting in 2010 was without precedent in the European Union. 

Today, growth is back. Order has been restored to public finances. And unemployment, while still too high at around 17% of the workforce, has fallen by 10 percentage points since its peak. There are almost 130,000 more people in employment today than was the case a year ago. 

In order to mitigate the effects of the adjustment process, we in the European Commission have worked hard to support measures to help the most vulnerable in society. For instance, the social solidarity income scheme, launched in 2017, today provides a basic income to 750,000 of the poorest individuals and households. The reform of child benefits has increased support to 800,000 households, corresponding to 3 million people.

I would also point to the fact that, for the first time, Greece has a genuine national healthcare system with universal access. Moreover, while the establishment of an independent tax authority may seem blandly administrative, it is extremely important for tax fairness, equity, and facilitating the fight against tax avoidance. A key objective has, and should continue to be, to ensure that everyone pays their fair share. 

With that in mind, I think the key to supporting and sustaining growth in the future will be to put investment and job creation at the heart of any policy platform. That means attracting business to this resource-full country – with a well-educated population to boot – and setting the policy framework, ensuring the stability necessary to keep it. The Commission will always remain by Greece’s side, whatever happens. Greece can, once again, stand on its own two feet; but that does not mean it must stand alone. 

GIG: In retrospect, what do you think you might have done differently if you had a chance? 

Pierre Moscovici Outgoing European Commissioner for Economic and Financial Affairs, Taxation and Customs

Moscovici: I took over as Commissioner in November 2014 but was already involved in the discussions on Greece in 2012 – as France’s finance minister – so let me answer this question in broad terms, looking at the whole history of the Greek crisis.

The EU and its Member States did not see this crisis coming and were not prepared for it. We had neither the capacity nor the tools, let alone the political culture, to manage major crises at market speed.

The EU also underestimated the disastrous state that Greece was in when all this started. What appeared to be a simple budgetary crisis was, in reality, a deep crisis of the Greek state and economy. So deep that it took several years to even properly assess it. 

As a result, the design of the three consecutive financial assistance programmes was imperfect. The first programme (2010-2012), too short-termist and very focused on public finances, could not respond to the country’s deep structural problems. The second programme (2012-2015) integrated more substantive responses to these problems but remained too limited in time. The last programme (2015-2018) was finally able to carry out much-needed structural reforms and implement them. 

Greek politics also has a major share of responsibility in this crisis, starting with those who chose to mask the deficit figures. The demagoguery of the election campaigns, the reversal of positions once in government, and the lack of national consensus, also profoundly affected the country’s recovery.

The second programme could have been concluded positively in December 2014 if the New Democracy/Pasok coalition had politically accepted the need for key reforms  – of pensions – and an increase of VAT on the islands. Instead, elections were held. The people chose Syriza, the radical left, on the basis of a diametrically opposed electoral programme that then launched six months of tensions with both European partners and markets.

European political leaders also have their share of responsibility. Perhaps paralysed by the risk of the euro imploding, they took too long to react, hiding behind Greek procrastination. Ulterior motives were very strong and many on the European right wished that the Syriza government of Alexis Tsipras, which won against New Democracy, would fail. Emotions sometimes prevailed over politics. 

Finally, I will not forget the role of the institutions responsible for running the programmes. Collaboration between the European Commission, the European Central Bank, the International Monetary Fund (IMF), and later the European Stability Mechanism was not always easy. The financial expertise of the IMF was initially necessary, and always useful; but certain positions were too brutal and personal, antagonised relations with the Greeks, and even led the Eurogroup to adopt reforms that, in my opinion, were too harsh.

Eight years of crisis is far too long. Politicians bear some responsibility, and I will accept my share. But many of us have also done the best we can to help the Greek people. I have persistently led this battle, sometimes alone or with Jean-Claude Juncker at the Eurogroup, and I am proud to have been consistent in that pursuit.

GIG: Your replacement, Paolo Gentiloni, will steer EU finances in a less turbulent EU internally, but a potentially more turbulent global backdrop. What would your public advice be to him? 

Pierre Moscovici Outgoing European Commissioner for Economic and Financial Affairs, Taxation and Customs

Moscovici: My successor, Paolo Gentiloni, is in no need of advice from me. He has all the skills and experience needed to perform this fascinating and important job that I have had the honour to hold for the past five years. 

I would like to see progress in three areas in particular under the next Commission. Clearly the most important – as it concerns the future of our planet – is the climate crisis. The new team must seize what is effectively the last chance to tackle catastrophic climate change. In five years’ time, it will be too late. Carbon neutrality in 2050 must be our common objective, and we must provide ourselves with the means to achieve it, particularly through an extremely ambitious green investment policy. In tax matters, the priority must be the reform of energy taxation. Unchanged since 2003, our energy taxation rules are incompatible with the goal to make Europe a climate-neutral continent by 2050. So it is crucial that Member States agree to modernise these rules.

It is also essential, in my view, that the next Commission steps up the fight against inequality. The consequences of the crisis are still present, and they undermine our societies. To address them, we need new tools to ensure the convergence of our economies and societies. I am thinking in particular of a real budget for the euro area. We have taken a first tentative step in this direction during my mandate by agreeing to a budgetary instrument for convergence and competitiveness. Efforts must be intensified during the next five years, and I hope that the Member States will be able to agree on an ambitious stabilisation tool for the euro area. 

Lastly, we need to reconcile our citizens with Brussels. In the field of economic policymaking, we need simpler, more transparent decision-making processes. We need to open the Eurogroup to the light of day, and we need an EU finance minister who is accountable to the European Parliament. We must also move to qualified majority voting in tax matters to give the European Parliament a stronger role. 

GIG: Greek borrowing rates came down significantly during your last few months in office, yet many argue Greece is not entirely out of the woods yet. Greek ratings are still short of investment grade by some margin. What would you advise the new Greek government to focus on? What are the key challenges ahead? What unfinished business must be prioritised? 

Pierre Moscovici Outgoing European Commissioner for Economic and Financial Affairs, Taxation and Customs

Moscovici: I am very pleased that the new government has signalled a strong will to cooperate closely with European partners. There is a common understanding on what needs to be done.

On the fiscal side, the government has committed to respecting the agreed fiscal targets for 2020 and is on track to do so according to our forecasts. Any adjustment to the targets for subsequent years should be discussed and agreed upon in a constructive manner with the Eurogroup. Unilateral or surprise moves should be avoided.

Then, to deliver higher growth, it is important that the government proceed swiftly with measures to reduce the administrative burden by making the licensing and operation framework less stringent and ensure greater certainty in legal and operational frameworks; to open up parts of the Attica region to businesses; and to provide incentives to investment. The completion of flagship reforms like the Hellinikon project and key privatisations, as well as determined action towards transitioning to the new energy market model, would also be perceived very positively by investors as a signal that Greece is now firmly on the right path.

These, along with the government’s ambitious digital agenda and announced cuts in corporate tax and social security contributions, should contribute positively to the business climate. 

With the global economy slowing, it is particularly important that Greece keeps up its efforts on all of these fronts. I have no doubt that the new European Commission will remain fully committed to supporting the efforts of the Greek administration. In particular, this will be through technical assistance and structural funding on key policy areas, and maintaining continuous and open dialogue between Brussels and Athens.

GIG: Can Greece regain trust on the global stage? On what time horizon, and under what conditions, would you see that happening? 

Pierre Moscovici Outgoing European Commissioner for Economic and Financial Affairs, Taxation and Customs

Moscovici: Absolutely. I am very optimistic about the prospects for the Greek economy. I am encouraged that the authorities have made clear their commitment to continue with a number of key reforms and measures to boost growth and jobs in Greece. 

In July 2015, Greece and the euro area stared into the abyss of Grexit before pulling back from the brink. Rebuilding trust and regaining confidence began with the agreement reached in the European Council that summer, but this has been a long road, and it is, of course, a gradual and incremental process.

The authorities have already taken key steps in the right direction, signalling their commitment to pro-growth, pro-investment policies and to strengthening reform momentum. These go in the direction of modernising the Greek state, making Greece more business friendly and boosting investment. As a result, investor confidence in Greece has already increased quite markedly and can continue on that trajectory provided the reform momentum is maintained. 

GIG: You have been to Greece many times in an official capacity. Will you continue to visit the country in a private capacity after the end of your tenure? What did you most like/dislike here? 

Pierre Moscovici Outgoing European Commissioner for Economic and Financial Affairs, Taxation and Customs

Moscovici: I certainly intend to continue visiting Greece in the future. It is a country I love, and in which I have always had the warmest of welcomes on my many visits, professional and private, these past years. 

I have always appreciated the hospitality with which Greeks have continued welcoming foreigners in even the most troubling and difficult of times. There is a resilience – which has been amply demonstrated during these recent crisis-filled years – that must be admired, and which I hope will be compensated by the recent positive economic turn. All Greek citizens deserve to see the fruits of the efforts and sacrifices they have made. 

In that same vein, it has been extraordinarily encouraging that Greeks have continued to support the European project and voted for retaining Greece’s place at the heart of the European Union and the euro area, even during the peak of the crisis. I hope that this sense of belonging and commitment to our common values and common future will continue and will positively inform Greece’s role in the European Union in the years to come.

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