PES leader: Debt ‘retro-profiling’ the solution for Greece


The Greek crisis could be resolved if EU leaders were to allow a longer repayment period and lower the interest rate under a bond swap, using a genuine European guarantee mechanism at no cost to Greece's European partners, Party of European Socialists (PES) leader Poul Nyrup Rasmussen told EURACTIV in an exclusive interview.

Poul Nyrup Rasmussen is president of the Party of European Socialists (PES). He was prime minister of Denmark from 1993 to 2001.

He was speaking to EURACTIV Senior Editor Georgi Gotev.

To read a shortened version of this interview, please click here.

Mr. Rasmussen: You are just returning from Greece, where you met with the socialist prime minister of Greece. What news do you bring from this country, which is currently the centre of attention in Europe?

In fact, we in current contact with Prime Minister George Papandreou and the finance minister [George Papaconstantinou], because from the very beginning last year, we were to propose a European mechanism to assist Greece out of the crisis.

We're still in the lead to find the right way. So the contacts are based upon the simple fact that we feel, from the PES, that now it's the time to act and find a more sustainable solution for Greece.

There has been for too long too much understatement or a wrong perception of what George Papandreou is actually doing. He is doing the right thing. The problem is that the expenditure for the interest on the loans is simply too high.

If you look at what he is actually doing and say "How high a part of the deficit of the Greek budget is due to interest rate expenditures on the bonds", you will see that an alarmingly high part of it is due to that fact.

So the problem is not that George Papandreou and the Greek government have not delivered. The problem is that the expenditures for the interest rates for renewing the loans are simply too high. That is the problem. From there you need to find a new profile, a new way of handling the loans. That's what we are focusing on now.

But the finance ministers of the Eurogroup said that Greece had not completely delivered. This apparently contradicts the view expressed by Mr Papandreou, which you apparently support. Apparently a 'soft restructuring" of Greece's debt is a possibility. I don't think that German Chancellor Angela Merkel agrees, however…

I don't know Mrs. Merkel so well but what I do know is that we need to be concrete now. And I'm not talking about soft or hard restructuring. I'm talking about 'retro-profiling' the Greek debt, which means a very simple mechanism.

Number 1 that we need to have a much longer period for repayment of the Greek loans. And number 2 that it needs to be at a lower interest rate. And number 3, it needs to be tied to a better and genuine European mechanism.

And it's really simple to do that! We can do a bond swap using a genuine European guarantee mechanism to allow Greece's interest repayment to be greatly reduced, at no cost to Greece's European partners!

So the point is that there is an opportunity now to avoid that those banks which have bought Greek bonds will come into difficulties if we do one or the other type of haircut. And instead to have a re-profiling of the Greek debt, which will make everyone better off, not only Greece, but also the banks and the whole stability of the system.

If you combine as I said a longer period, a much longer period of repayment, the low interest rate and swap "part wise" to Eurobonds in a new European agency – that can be done and the trick here is that it can be done in a way so that Germans and other citizens won't pay more for it to be done.

How would you describe the social situation in Greece? It looks like the protests over austerity measures are an obstacle to taking the steps required.

I was in Athens yesterday, the European trade union movement had their congress in Athens. My concept is that if we could do such a reprofiling of the Greek debt then it will give Greece room for some growth and thereby a way for a future which will also have some real hope for ordinary citizens in Greece.

If we just continue to say to Greece: "You're not delivering. You have to make more sacrifices, more and more austerity," then we are cutting off, not only possibilities for Greece, but also the possibilities for all those financial institutions that are involved in buying Greek bonds.

So we are coming closer and closer to the limit on using the austerity method to clarify the loans. That's why I'm saying that now is the time for change and this is why we proposed a European mechanism to put in place a re-profiling of the Greek debt. That's the only way to go. All the alternatives apply worse situations for Greece and a dangerous situation for the many banks all over Europe that have bought Greek bonds.

So you see, what is at stake is not the only whether Greece can deliver or not, it's about finding the right way forward and this is re-profiling. I am quite sure.

One question now which is not only about Greece. It's about the fact that everywhere austerity measures are being put in place, ordinary people feel they are paying for the mistakes of economists, bankers, speculators, the so-called 'casino economy' and so on. Do you have an answer to that question?

Yes, I think really the time has come now to step forward on the financial transactions tax [FTT] and the FAT tax [Financial Activities Tax]. Both are on the agenda and both have to be realised. It was the financial institutions who made these crises. It was not ordinary people. It's time for the financial institutions now to contribute to the way out of the crisis.

Many financial institutions are more or less signalling "back to business as usual". But I am saying that it is absolutely necessary that the banks contribute to financing our way out of the crisis so that the banks who were the major, key players in creating this financial crisis – together with other shadow bankers – they have to assume their share of the responsibility of getting out of the crisis.

So it's time to introduce the financial transactions tax and the FAT tax so that we can help to ensure jobs and growth again.

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