Syriza had to change strategy under pressure from creditors – Greek Cabinet Minister

Greece is struggling to get a grip on its debt, as the country’s ruling Syriza party has been forced to backtrack on promised policies and continues to impose painful austerity measures on Greek citizens. With a wave of refugees putting extra strain on the country’s economy, can Greece pull through the crises intact? Deputy Minister of Foreign Affairs, responsible for international economic relations, Syriza member Dimitris Mardas is on SophieCo today.

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Sophie Shevardnadze: Dimitris Mardas, Greece's Deputy Foreign Minister, great to have you on our show today, welcome.

Dimitris Mardas: Thank you very much for inviting me.

SS: I know that you've just won a libel case against German newspaper Bild, that tried to accuse you of sending money abroad when you were a Deputy Finance Minister. Do you think those kind of publications were intentional, maybe to tarnish your anti-austerity party's reputation in the wake of the election victories?

DM: In any case, following the Court of Justice, it has been proven that there was not such case or it was a big lie, I can say. This announcement took place during the period when I was the deputy minister of economy, and in that case I was responsible for finding money in order to keep our public budget alive. As you can understand, such kind of announcements could provoke problems, I can say, even huge problems in Greece - because nobody knew, during that period, if it was a lie or not. Of course we have announced, we have proved during that period that it was a big lie - but, however, it could be a major, I can say, factor which could have a negative impact on all our efforts.

SS: Do you think it was intentional or not necessarily?

DM: I do not know if there was an intention or not. I see the results, and the result could have been very painful for Greece. When there's a lie, I suppose, there's an intention for something.

SS: I know that the Greek parliament has recently approved cuts and reforms for the labour law. Now, your party came to power with a very strong anti-austerity platform, but now it's actually pushing for more austerity. So, I'm just wondering, is the bailout really worth making 180 degrees on the promises Syriza has made? Is there really no other way out?

DM: Syriza had a plan, had some economic goals, and had a strategy - and has a strategy. When we faced all these problems, we had to deviate from this strategy, because of the pressure dealing with creditors and all the well-known stories. When we have seen that there's this deviation, we have asked the Greek people to vote again to see if they trust us, if they think that we're the best manager in order to solve problems that we have faced since 2009 - or not. So, we knew there was this deviation, dealing with our goals and everything that we would like to do. That's why we have asked the people to say "Yes" or "No" - and in this case, people took into account all constraints, all goals, and finally, the voters decided and they said that "We trust you to manage this story". However, our strategic goals remain, which means that when we overcome all these problems in the short run, we're going to rebuild, step by step, the policy that we have promised.

SS: I know that Greece had already made cuts to social services, to pensions - why does the Troika believe that more cuts are necessary and they will solve the problem this time around, if all this wasn’t enough to solve it before?

DM: This is, I can say, a concept which exists mainly in IMF. We didn't provoke cuts in the context of pensions. Simply, we have arranged an early retirement system which was a system very expensive and without any sense, I can say. We have been discussing the early retirement system in Greece for a long time, for 20 years, and no government decided to touch this issue. Finally, we solved the problem with this issue, and we tried to solve all problems in dealing with structural issues, which prevent Greece from modernizing its economy. Of course, we know that some measures dealing with... fiscal measures, mainly - are painful measures. But, we believe that these are for the short run. When recovery comes in Greece, and this recovery will come even during this year - then we will start relaxing all these painful measures.

SS: You said the recovery will come this year - I know that the cash injection Greece is receiving now is 7.5 billion euros, but that barely covers the 7.2 billion euros that Greece has to pay at the end of the year as a debt payment. So that really leaves just a tiny fraction to prop up Greek economy. Is Athens stuck in perpetual debt cycle?

DM: The amount that we're going to take during this period is almost 9 billion, 3.8 billion of this amount of money will remain in economy, the rest will go for serving the debt. Besides, we have the regional funds, which are going to receive more or less about 4 billion this year. This means that by the end of the year, we will have an amount of 8 billion, probably, 9 billion euros which will be inserted into the economy. We have decided with creditors that half of the money that we received will be for serving the debt, and the rest will remain in the economy. This can be a good starting point, even for this year, just to see a change of the provision that we have - there's a provision of -0.7 reduction of our domestic production, but we can reverse that, through all this amount of money and through the positive expectations that we cultivate.

SS: So, your finance minister has called the goal set by the bailout program, which is  surplus in the budget, "socially unattainable" - I believe, they've asked for 3.5…

DM: 3.7 for 2018.

SS: So he says it's unrealistic, socially unattainable. Why are the Troika's demands so strict? Do they even want them to be met?

DM: Listen. The primary surplus depends on the growth trends. In the case that you can reach an interesting growth trend, we can save a 3.5, although difficult - it can take place, which means that we can succeed, but everything depends on the growth trend during the period of 2018. So, we cannot say in advance that we cannot reach this goal. Of course, it's painful...

SS: What is your prediction? When is 'enough austerity' is really enough for Greece and Greece's creditors?

DM: We cannot say that there's a threshold, according to which they will say that after this threshold the austerity is a difficult issue. Everything depends on the series of variables, and the main variable, I can say, is the growth trend and everything which is related to the recovery of the economy. This is the main variable, and of course, we have some other variables which can influence all these issues dealing with austerity and all that. We believe that, taking into account that recovery will come, austerity will relax. This is our main goal, because we have austerity measures since 2009-2010. It is too much. All counties which face austerity measures in the context of their crises - Korea, Israel, Turkey, Sweden - then faced all these problems, dealing with crisis, in 2-3 years. Because of the short run of this exercise, in this case, they succeeded. It means that all positive expectations which existed for these countries, remained, and then, after these three periods of crises, the economy found their way and they finally relaxed all these austerity measures. Finally, I can say, people took back money that they paid during the crisis period. So, the point of success is how short can be all these arrangements dealing with our crisis, or economic crisis, debt crisis and all of that. That's why we say that all these unpleasant fiscal measures are for the short-term period and after this period, taking into account that the recovery will come, I can say that all these unpleasant measures can be relaxed.

SS: Last year, Greece was ready to leave the Eurozone. Do you think the storm has passed for good? Is the Greek exit from the Eurozone out of the question at this point?

DM: The story started in 2011 - this question. I think it is out of the question now and I think that we must stop discussing such issues, because first there's a local problem and Euro problem.

SS: Tell me why it's so bad for the Eurozone economy - because Greece is not a big fraction of the  Eurozone economy and, you know, a lot of people believe that if Greece was to go back to drachma, it would  be very profitable for its economy. Why is it so bad for Greece to leave the Eurozone?

DM: First, for Europe, it is accounted that the cost of Greece leaving the Eurozone would be at least a trillion euros. Second, you know, any system can show its value in a difficult period of its life. So, this means that if Europe cannot solve a problem of Greece - and Greece is a very small country - in this case, the value of this system is not so high. That's why from the European point of view, all problems dealing with members-states of the EU must be solved within the system. Besides, in regards to Greece, we consider that it will be - a Eurozone exit and return to drachma - a very painful solution. The problem of Greece is the need to modernise the economy and to increase production of tradeable goods and services. With the drachma we didn't succeed in that. So, returning back to the drachma - I cannot see what will be the new positive impact.

SS: You know, when it comes to Greek debt, it does seem like the European creditors can't agree or coordinate a single policy. For instance, the IMF was actually ready to ease up the Greek debt burden, but then, it met resistance from Berlin, because Germany said there's no way they're going to give Greece debt relief. First of all, why won't  Germany budge on it? Why do you think they're so against it, and  why can't the European creditors just form a united front when it comes to Greek debt?

DM: Regarding haircuts, this was the main proposal of the IMF, I think it is too early to discuss that. We know from the world history that haircuts took place in many cases, where there was a problem or a threat of default. So, we have to find another solution - and we've found a solution. There are many solutions dealing with debt management. The solution that we found is... First, I have to say that we have short-term solution, medium-term solution, and a long-term solution. Regarding the short-term solution, we have decided upon an extension of our debt service for 30 years. There's a reduction of interest rates, and besides, Brussels has decided that every year, that debt service must not exceed 15% of our GDP. Generally, it's around 25% or 35% of it. This is a good beginning for managing  our debt. Since next year, we're going to discuss measures with middle-term and the long-term management of our debt, and I think that we can find the appropriate solution. And finally a haircut is not excluded. It is simply excluded at this period of time.

SS: I want to talk about the refugee crisis, because in the middle of the austerity programme, Greece is actually struggling to cope with the refugee arrivals. I can see that  your tourism industry is already suffering from that. Athens, basically, right now, is playing a frontline role, as far as the refugee crisis is concerned. Could that make the creditors soften their stance, or these two issues don't go together, they can't be put together?

DM: For the moment, I have seen that there was no impact in the review process. Probably, they paid attention, but it was not projected. The second issue regarding the refugee crisis is the following - I think that the national press and the international press exacerbated its meaning, I can say, a little - I could say, much. Why is that? First, Greece, is a part of an organized system within the EU. There's the Lisbon Treaty, there's a provision in the Lisbon Treaty about the way you have to manage the problem. So, Greece is not, alone. It's a part of the EU mechanism. Second, what is the number which has provoked so much noise? It's 40,000 people. If we take into account that in Turkey they have 2.5 million, in Lebanon almost one million, in Jordan it's 1.2 million refugees. In Armenia, of 3.5 million inhabitants, they have 25,000 refugees. Have you ever heard any big noise about these countries? Nothing. What is a disadvantage of all these countries? All these countries are not part of an integrated system which can face the problem. In contrast, in Greece, we have only 40,000 and we are part of Europe, which means that there's money for all these problems…

SS: Is there?

DM: There is.

SS: Because, I'm thinking, Turkey is getting so much money to deal with the refugee crisis. Do you think Greece is being adequately helped by the European countries to deal with the crisis?

DM: Yes, Greece - as Italy, as all countries, will take a part of an amount of money which is in total 1.1 billion euros. Turkey took 3 billion euros because it has 2.5 million refugees. We have only 40,000. There's this amount of money in Europe which can help treat the problem in an appropriate way, but apart from this money, there's a mechanism that allows us to discuss the problem in the framework of Europe. This mechanism does not exist in other countries.

SS: You' said 40,000 refugees are stranded in Greece right now. Okay, so, the EU has struck a deal with Turkey that it's going to take care of the refugees, and they've closed the borders. So, you have 40,000 refugees in your country, approximately, that are applying for asylum in Greece, which wasn't initially their goal, they didn't want to stay in Greece, but now they are applying. Is Greece ready to receive these people?

DM: The asylum is not the problem of Greece, it's a European issue…

SS: But they want to stay on your lands, the Greek lands.

DM: Yes, they want to stay, but they have to go back to Turkey and Turkey has to keep them. This is the agreement that we have. Which means that by the end of the day, the final amount, the final amount of these people, will not be 40,000. It can be 30,000 or 20,000 - we will see according to the approval of asylum following the requests that exist now, the requests that are being examined at the moment. But the treaty, the agreement between EU, Turkey, and Greece, says that the rest of the refugees will be sent back to Turkey, and they will remain there or they will find another way, following the agreement that has been signed, another way towards Europe.

SS: Is Greece getting ready to deport some people back through the Aegean sea? I know that Greek police has been dismantling some migrant camps on the northern border.

DM: No. If there's any chance of that, it means deportation or anything else - this will happen only under the agreement that we have signed.

SS: I want to ask you how reliable is Turkey in dealing with this refugee crisis. I know Turkey is helping the EU with the crisis, but the Turkish-Greek relations have traditionally been cold. Are they a reliable partner for cooperation? Patrolling the sea together, finding the refugees together - because we've seen President Erdogan on  several occasions say that he might end the deal. What happens if Turkey's relations with Berlin or Brussels sour and Ankara actually jumps off the deal? What will that mean for Greece, basically?

DM: You know that Turkey has an Association treaty with Europe, and there are some agreements. The behaviour of Europe vis-a-vis Turkey depends on the fulfillment of these agreements on behalf of Turkey. So, if Turkey wants money, it has to show that it keeps the agreement it signed. If Turkey wants to see visa-free travel,  if Turkey wants to see the free movement of people towards Europe, it must keep its promises. It means that everything is under assumptions in the context of Europe. In Europe, they know that sometimes there are some problems with all agreements signed with Turkey - that's why Europe applied such kind of policy. It means, we have to see first what they are going to do, and then, we're going to apply everything that we have agreed with Turkey.

SS: Okay, but you still haven't answered my question, you cannot exclude that Turkey will actually jump off the deal. What would that mean for Greece in terms of the refugee crisis?

DM: In the case we have a new increase, for example, of refugees, this problem would be a European problem, and we have to discuss it within Europe. There are institutions in Europe which must decide, following the provisions of the Lisbon Treaty. It means that we're not autonomous to say that we're going to do this and the other. There's Article Three of the Lisbon Treaty, there's a provision about solidarity, and three specific articles which show the way about the management of the refugee crisis in Europe.

SS: You know, just recently, when Greek and Russian leadership have met, your Prime Minister Alexis Tsipras has said that anti-Russian sanctions and their counter-measures are not productive, and they're not helping anyone, they're damaging all parties involved, all of their economies. That's not the first time he has spoken against the sanctions. Is this just a polite talk during the meeting with the Russian leader or do you think that your PM has some real leverage when it comes to, maybe, influencing the situation with sanctions?

DM: Regarding the sanctions, there's a big discussion in Europe about the impact of these sanctions - it's not only Greece. We suffered too much from the sanctions, mainly in the agricultural products, and we try to find solutions with Russia. However, the impact of all these sanctions is a major discussion point within Europe, and I can say, even on the international level, and of course, this discussion is not a problem of bilateral relations with Russia…

SS: No, it's not.

DM: Simply, there was an expression of one point of view, I can say, dealing with the impact of this.

SS: It's not a bilateral issue, but, if people - different officials, from different European countries, are some against and some for, could those people who are against sanctions actually influence the decision or not? Could your Prime Minister somehow influence the decision on the sanctions, to reverse the sanctions - speak up, for instance?

DM: This is, I can say, is a case that we discuss in Europe. You know how we decide in Europe. In order to reach a common agreement, there's, I can say, an interesting discussion which must take place, in order to see if sanctions remain or if sanctions are off. So, everything depends on the extent of the discussion within Europe about this issue. There are some initiatives, but we have to see the results of these initiatives.

SS: Dimitris Mardas, Greece's Deputy Foreign Minister, thank you very much for this interview, we wish you all the best