The International Review of the Greek Economy

Πέμπτη, 20 Ιανουαρίου 2011 13:08

Presentation at the HSCC Annual Event by Mr. Leif Pagrotsky, former Swedish Minister of Industry and Trade and former Minister of Education and Culture

Dear Mr. Chairman of the Directors’ Board of the Greek-Swedish Chamber, your excellencies the ambassadors and representatives of other European member-states’ representatives, your Excellency the Ambassador of Sweden to Greece, ladies and gentlemen,

I do not know whether I am in a position to rise myself to the level upon which you have raised me by your complimentary words but Mr. Marinakis, Mr. Malkvist, ladies and gentlemen, distinguished members of the Greek-Swedish Chamber of Commerce and honourable guests, first of all I would like to thank you very much for having invited me to participate in this prestigious event organised by the Greek-Swedish Chamber of Commerce and offered me the opportunity and the privilege to speak to you despite the fact that I was also invited in the past, in 1997, thirteen years ago, when I was firstly appointed Minister of Commerce and on my first official “foreign” itinerary, my very first travel abroad, I mean, was this of mine to Greece and the reasons why I am mentioning this first travel of mine are, firstly, that this mission abroad was very important as it was my first one performed in my capacity as a minister and, secondly, because I came to a country I love very much. Therefore, I am greatly honoured and privileged to have been offered the opportunity of conveying, for a second time, some of my ideas and views, especially, in the course of these extremely interesting times.

Indeed, this is a very interesting chronological period not only for Greece but also internationally, in Europe and worldwide. By saying "interesting", I mean this term in its double meaning in the way we have been experiencing a dramatic situation in global economy as it is seen on an old map showing the economic powers of the old economic order of things, where everything is being changed. New areas are coming to power and the stability of economic power of the “new” and of “the” old is constantly being altered rapidly. The economic crisis, as it occurred in the USA and here, is very hard as well as it is in Asia, Latin America and in other countries that are luckier than the previously-mentioned ones. European and American economies have almost fell back to the standards of the ‘70s in terms of their national income while China, during the same year, is happy and boasts that she has risen to high levels, given that the crisis has not abated as yet. At the same time, China has grown economically by 25% or 30%, India, Brazil and other countries in the neighbourhood have grown by 20% and feel happier that they are better off now than they were three years ago, which is a sign of the constantly changing world and of the dramatic changes in values occurring in it. It is not only that we have greater economies now than we did before but there are more economically robust countries and states both in Europe and in the USA than in the past. There are also weaker countries with debts both in the USA and in Europe as well as politically weaker ones and one might say that we are humiliated: when China, Brazil and India along with other countries have overtaken great partners, like the USA and Europe, and we are no longer in the position we used to in coping with our old economies. We can observe emerging powers, like China, grow all the time. Practically, little can be done in the field of economy without the participation of China in the economy sector globally and no reformation of the global social system can take place without her. The IMF (International Monetary Fund) and the European Bank are making efforts but we should not fail to remember that the USA and Europe were greater economic powers than China and India some years ago. The change has happened among the member-states of the G8 and G20 as well as between the Great 2. Now that the international economic balance has grown, China will become a great partner and we should also all be persuaded to organise our efforts and maximise our power round the world. We should also demand that such countries should be activated effectively and become members of the international society. What happened a decade ago, when everyone was afraid and wanted them to stay home, was a paradoxical phenomenon. We really were afraid of the Chinese and now we invite them to come because it is in our interest not to isolate and cut them off as well to participate in the growth of their economies and in the stability of their currencies, helping them with their working for all our world’s welfare. It is not only a matter of economic resources but also of various companies which go to other countries and make a progress everywhere. The Volvo industry has been bought by them in my country because they think they can sell Volvo vehicles in China. This happened in my very electoral constituency in Sweden and we all hope that this project will be materialised and turn out to be a good idea. We are not afraid of the Chinese; I hope they will do much good to Volvo. Also IBM, its computers and laptops, has been bought by the Chinese and we see now that they are doing fine as well as other companies have been bought by them elsewhere. All these are signs of our continuously changing world’s economic map. Also the USA have weakened: it is not only that China is getting stronger but, at the same time, the USA is becoming weaker due to internal policies which have accumulated deficits for many years and so would borrow money all the time, two billion USA Dollars a day, weekends included, to such an extent that there is no other country from which the USA can borrow money any longer but only from China. Therefore, the American president has to go to China, at least, once a year not to tell the Chinese what they should do in terms of political rights, Tibet, Dalai Lama and protectionism but only to borrow money, inform his creditors about what he does to pay off the debts he owes to them as well as to ask them how they perform their reformation there so that his hosts will be able to take their money back. No further talks about political rights, Tibet and Dalai Lama will take place when president Obama visits China and I think that this is the explanation. So, it is not only the changes occurring in technology, mentalities and in attitudes that are important but this is also the crux of the issue and a symbolical picture of how dramatically our world is being changed. In my country, everything has changed due to the international economic crisis in terms of how banks and tax payers are treated and of how bankers enter the game and play their role in it. In the USA, Obama’s influence on the American people has waned, there is a great turmoil all round and he is no longer popular in his country, being unable to organise his political and economic agenda there. However, the European Union is the most problematic case to us.

The ‘90s were a poor decade for Europe in respect of its growth. We tightened our economies everywhere in order to prepare ourselves for the monetary union since I believe that there were immense deficits in various places many a time as well as in Sweden, which had to tighten its expenses and raise taxes and, as a result, it had a very slow growth in order to be prepared for acceding the Eurozone. The following decade also saw a low, stagnant growth in Europe and we also saw the first decade of this century to be a chronological period with the lowest growth-oriented rates in the world. I think that this decade has been disappointing: we have all been curtailing our expenses in order to provide for higher prosperity and employment ever since 1990, which has led to a third decade (and I am very sorry about it), when the world expected to see a great Europe with a strong economic growth and a loud voice in international affairs. In my personal opinion, Europe’s weak response and some events that came from abroad was the worst thing I observe in the course of this economic crisis, which, in essence, was an American crisis and the mistakes made in the USA struck Europe with a blow imported from outside and although we had many chances to face it, we were unable to have done so. We did not manage to work out a central strategy to offset the lack of demand caused by the American crisis as well as we failed to provide our people with explanations on how to cope with it. The central European economic system failed to function because we did not succeed in agreeing among us. There were no voices of consensus raised so that the global economic system would be reformed and the European countries remained fragmented and split despite the oncoming hurricane. As a result, we missed a very good opportunity to step forward and show that we were mature enough to do things all together. This negative development was magnified by the crisis occurred within the Eurozone and the problems following the American crisis, for example, when the Greek problem broke out, which showed the same lack of decisiveness in Europe, as it was put by Dominique Strauss-Kahn, who said, “You should take decisions allowing the weakest partner of yours to evade a disaster” here in Athens. You should not slice things like a salami, one slice here and one there, and try to do your best to avoid a disaster only when you have reached the turn. As a result, the Greek, Irish and Portuguese problems have come to be European problems since they are not an individual problem of the respective countries but a part of the crisis for the whole of Europe as well as for its decisions-taking ability. It is a crisis striking the trust in the European Union, generating, I am afraid, a new decade or a chronological period of also a low growth hampering countries plighted by immense internal deficits as well as by debts and try to borrow money to meet them. I do not know where this situation will lead to. I am pessimistic in terms of how this crisis will be faced due to the dearth of leaders. I believe that we shall not be the locomotive of global economy in the years to come but I also think that if we, the Europeans, want to be higher and richer than others, we should become their locomotive, which seems to be a rather remote possibility today, and not the last carriage of the train pulled ahead by other countries.

Let me also comment on the argumentation over this issue. There is an ongoing debate in the today’s international press about the fate of the Euro, that it is being disintegrated, that it cannot stand upright, as well as there questions about the chances of the survival of some countries and of the Euro itself. In the aftermath of the European crisis, things grew worse than before and the results we all expected were not achieved. In my opinion, I do not believe that the Euro will actually be disintegrated but political interests and powers will restrain, support and strengthen it so that this adverse situation may be reversed. I think it is in our interest and to our welfare of not only Sweden but of other countries as well that we be successful, endure the current crisis, prosper and be developed. There is no other way for one but look forward to the great future of the Euro. My forecast says also that the Euro will reverse the crises and rise again.

Let me say a few words about Sweden, which is one of our two countries involved. The Swedish ambassador explained, in general terms, some of the policies of the Swedish economic model and industry as well the Swedish economic situation, which is quite different from other European economies. Sweden was bitterly struck by the economic crisis from top to bottom, up and down: the Swedish gross domestic product fell by almost 8%, which amounted to a much higher percentage than that in the Eurozone and to the double one in comparison to that in the USA. The year 2009, that is, last year, was the worst year of all in terms of the Swedish GDP ever since 1920. It was a shock we had never seen before. Another shock had occurred in the aftermath of the international oil crisis 15 year ago but then we were, of course, richer than we are today and could not be compared to other countries’ GDPs. Today’s crises is bit more particular than other were in the past because our banks were not struck by the infectious American hedge funds since they had been clever enough to have avoided the attractive American market and hedge funds invested elsewhere. We are coming out of the crisis, being rather healthy since our banks were not struck as it happened with other enterprises, car industries and banks in Latvia and Lithuania. Our banks have capitalised their gains, the private sector has turned the corner safely and we are quite stable in our economy now. Recovery is rising along with a respective rise in out GDP and we are doing well during this year in general. However, in terms of the crisis itself, we have not risen as yet to the levels on which we where before the occurrence of the crisis and I believe that we may go even higher in the last quarter of the next year. This means that we have lost three years of growth and development, which is not so bad if one would think of what night have happened due to the severity and magnitude of the crisis. We are currently going through a period of an extremely high growth rate and intend to carry out with this upward movement so that we will come out of the crisis even stronger.

Let me say a few words about Greece now. The Greek-Swedish Chamber of Commerce is organising two events, one in Greece and one in Sweden, sharing the same practices and experiences in terms of the crisis. I visited Athens in January this year and I could not avoid detecting some parallel characteristics of the current Greek crisis in comparison with the crisis in Sweden then, in 1994, when I was appointed Minister of Economy and faced many dramatic situations. It was something then like your difficulties of today. We had also a deficit amount to 13% of the Swedish GDP and might have risen to 15% but was stabilised at 13% eventually. It was a really severe crisis. We organised campaigns, read the relevant forecasts, which were in the neighbourhood of 5% to 6%, but when the figures came out, we understood that the percentage was much high than we had thought and were shocked with this development. We also encountered a total loss of trust in various markets as well A we were not trusted abroad and thought of deceiving them by means of our statistics or that we were hiding the truth and making false scenarios. I travelled to various economic centres in London and in New York and saw the ironic smiles on many of our potential creditors’ faces as a sign that they would not believe our forecasts, which, I reassure you that it was not an encouraging sign at all. We also faced lack of reliability because we appeared to have been unable to take correct political decisions. Our figures, statistics and policies, all together, were taken for lack of reliability on our side. Therefore, we had to work a new strategy and perform a realist assessment of things. There was also another parallel: a brand new government gad been elected and could start doing things from scratch despite the fact that American creditors would not know what right or left wing was like. They would only focus on their flag and serve their interests. This was a very hard lesson for us to learn and we could not incriminate them for this attitude of theirs because they disbelieved in what we believed. They would see nothing else but their flag. We also had a very high unemployment rate, round 10%, like yours last year as well as extremely high rates that were much higher than of those of Germany’s, something like what you are facing now. Nevertheless, we struggled to maintain our dignity and reliability in the way we felt it. In other words, we felt that people would still listen to us and while other people would take off their headphones. We felt that this job of travelling abroad to borrow money was a weird thing. Nevertheless, there are also some differences: we had already experienced a drop in the Swedish GDP by 13% before I took over my office. Greece fell, firstly, into the economic crisis and, then, experienced a small drop last year that may be higher a bit in the coming year. Yet, we left the adverse situation behind us and we started to grow slowly but steadily, which has to do with a second difference: we devaluated our Swedish Krona, which had collapsed by a considerable percentage, and, thus, our competitiveness returned. We were again in an orbit in international economy as well as our exports were sufficiently increased along with our competitiveness. The conditions today are much harder than those existing in the ‘90s, when all our banks were seriously in debt and rather bankrupt, which was rather normal because they could not have avoided being struck by the crisis in the context of such an adverse situation all round, but I think that your condition is not as bad as ours was then. All our banks were in the red. Our bankers flocked all together to my office for guidance and I did not know what I should say to them. The situation was not at all good then. Nevertheless, the optimistic thing was that we managed to reverse that situation completely and succeeded in getting rid of our deficits, creating as well as maintaining a surplus and in keeping this surplus for a ten-year period in terms of both our domestic and international affairs, which made Sweden become a lending country with surpluses instead of a borrowing one with deficits. With regard to also the current crisis, our fiscal affairs dropped as everywhere else but if you go from here down to there is not a very serious thing but if you go further downwards, then, things get even worse than before. However, our deficit is not our problem any longer even if things are not as good as they were in the past and one cannot so easily see a light at the end of the tunnel but what can be done is that no light decisions be taken and that we not apply hard policies during an economic crisis. The difficult thing is that we all stick together and carry on with our efforts until the sun appears to shine again in the long run when long-term prospects have been implemented.

The Greek economic situation is more composite. You will have to deal with both low budgets and competitiveness problems at the same time. You cannot do what we did with the devaluation of our currency during a period in which the world is full with unsuccessful devaluations. You have also applied some policies that are more dynamic than the ones we could apply then. Your reformations are more long-term oriented than ours. The measures you took were also applied faster than ours. The progress you have made is unparalleled to ours and, as a result, you dropped from about 15% to 8% or 9% as concerns your deficit, which is an exceeding good performance. Yet, above all, you have succeeded in accomplishing many reformations in your economy, which is a more illustrative sign of your greater competitiveness and of being distanced from the bad scenarios. Closed professions have been opened, your boosted your competitiveness and, thus, Greek entrepreneurial society can breathe and be relieved now. We did not do all these things together as you have done, which is a very impressive development even though we were in a more difficult situation then than the one in which you are now. I was also impressed by the observation that, despite today’s strikes, it is obvious that would have faced these difficulties with a far greater tolerance than one could expect because the Greek people is wise an can cope with difficult situations. Your programme having been applied for a year now shows that you are moving in the correct direction. The success of your strategy will depend on how fast and dynamically your competitiveness will grow. In terms of the costs and of the rigid bureaucracy, these obstacles must be removed since they impede competitiveness, which will pave the way for a better performance in your exports. I have noticed that your exports started being increased as of the middle of this year. You are also lucky in a very particular sense: trading is carried off among neighbours; China and Brazil are remote markets but it among neighbours that commercial exchanges are performed. We have Norway, a country of four million inhabitants, as our neighbour. We export more goods to Norway than to China, India, Japan, Pakistan, Indonesia, Vietnam as well as to the entire Asia and to the Middle East. The entire Asia will buy less goods than Norway, which is just next to us. The status of having a neighbour who is represented by a country with the most rapidly growing economy in your area has to be exploited. I mean Turkey. Even if your relations are still not the best you could have with one another if we see it from the expedience point of view, I think that these problems should be put aside and there are large margins for the development of a vast market between you. I read in a newspaper yesterday that Turkish tourism to Greece grew by 50% last year. Fifty per cent! Just imagine it! The imports of Turkey from Greece grew by 35% also last year while they have remained rather stagnant in Europe. I simply mention what can be done but also what you yourselves can do, which makes me be optimistic. These are the affairs concerning and depending on the European and global economy. Let us hope that Europe will recover from its paralysis soon and show us all that we can cope with the present situation even more dynamically and accomplish an even higher growth in the years to come. These are the questions and the affairs that will help Greece, Sweden and the Greek-Swedish relations.

I thank you very much!