Deputy Prime Minister and Foreign Minister Evangelos Venizelos gave the following opening address today, at Zappeion, at the Capital + Vision Conference on “Innovation and entrepreneurship: The next step”, which was co-hosted by the Hellenic-German Chamber of Commerce and Industry.
E. VENIZELOS: Mr. Chairman of the Hellenic-German Chamber of Commerce, ladies and gentlemen, I thank the organizers of this meeting for inviting me again, this year, and giving me the opportunity to address such a high-level audience that is directly involved in the struggle and concerns of Greece’s real economy, in exiting the crisis and regaining Greece’s competitive position in Europe and globally.
Ladies and gentlemen, the crisis our country has been experiencing for the past five years – a crisis that started much earlier – is, as we all know and as we have all experienced, a fiscal crisis, of course, financial, but also a crisis of competitiveness, a crisis of the country’s production model itself, as that model was shaped over the course of many decades, up until 2010, I would say.
But the crisis is also a crisis of state, of the political system and our social attitude. What we have not said with the requisite emphasis is that the crisis concerns not only the structure and functioning of the state and the public sector, but also the structure and functioning of the private sector in Greece.
The market, moreover, in which the repercussions of the crisis are manifest is the field where the public and private elements meet. The private sector endeavors, acts, struggles, contends, succeeds or fails, and the public sector plays the regulatory role, not with the excesses noted by the Ambassador previously, as a European mindset, but because without a regulatory framework the market cannot exist and function under conditions of healthy competition.
The crisis is a crisis of the public and private sectors. The major and admitted responsibility of the political system and the decisions taken over the previous decades – decisions voted on and ratified democratically by the Greek people – do not cancel out the responsibility of society itself, of the productive groups, including the business community, of the banking system, or the responsibility of non-political institutions. Because we mustn’t overlook the fact that these institutions, too, which are not democratically legitimized, but perform other very useful roles in a system of rule of law, are also very important. I am referring to justice, the independent authorities, the communication system, all of the cores of power that exist in a democratic, polyphonic, European states of rule of law.
I often state the obvious, which, unfortunately, is not as obvious as it should be: that the crisis that has been gestating for decades is what brought the Memorandum, and it is not the Memorandum that brought the crisis. Without the painful support and adjustment programme for the Greek economy, we would have a catastrophe, rather than a crisis. The difference between a deep crisis – with economic, social, and psychological repercussions – and a disorderly catastrophe is very great.
What we are experiencing is the crisis. The Greek people were protected from outright catastrophe, and it is very difficult to compare the real experience of the crisis with the avoided experience of catastrophe, which is presented theoretically, but has not been experienced by the Greek people.
Now that the support and adjustment programme is coming to an end, and following the improvements secured through very tough negotiations and in the midst of great difficulties, the support and adjustment programme could obviously be more moderate, slower, more generous if our partners wanted it so. The fiscal adjustment didn’t need to take place over four years. It could have been ten, but this meant another funding framework for supporting the needs of the Greek economy. Whether we like it or not, in Europe and the world there are dominant outlooks and practices that are not just of the market. They are also of governments. And they are not just of the governments. They are of parliaments, and, in the end, of the electoral bodies that elect these parliaments in various countries and support these governments.
Let’s look at how the negotiations between the European Commission and certain very large European countries – among the three strongest economies in the Eurozone – have been developing in recent weeks. Let’s look at the course of the de facto negotiations between Germany, on one side, and France and Italy, on the other. We will see that the final compromise respects this framework, which is tough, is difficult, but is a given, and, in any case, based on the existing balance of power, there is nothing better, feasible, realistic and secure. There was not and there is not a so-called Plan B. And this is understood by the countries who were forced to be subjected to comprehensive support programmes – like Greece, Ireland, Portugal – as well as by countries that were partially in programmes, like Spain, or were forced to accept restrictions without support programmes and without financial support, as in the example of Italy.
So I think you see the great difficulty of what has been happening in recent years: to pursue, in parallel, both fiscal and structural adjustment while putting your fiscal house in order, and fiscal and financial bailout, as well as the radical changes to the structures of your economy. Because the difficult fiscal measures lead to losses of degrees of social cohesion with regard to support for the structural changes, when someone is facing problems of the survival of his household, or his business, is in danger of losing his job, or has lost his job and is desperately looking for a job opportunity, he is not inclined to support ambitious changes in public administration, education, justice, the functioning of the market.
So the achievement that has been made is extremely great and multi-levelled, because in under five years we succeeded in achieving the fiscal adjustment with impressive results, thanks to the sacrifices of the Greek people, and, in addition, very important structural changes that have changed the picture in the functioning of the market and have upgraded the Greek economy in terms of competitiveness, based at least on the classic criteria in effect in international rankings from this point of view.
I needn’t remind you where we were and where we are now, as we are now just a few steps away from a definitive and, I would like to hope, secure exit from the crisis and the Memorandum, so that Greece can pass into another phase, turn the page, return to the normalcy of a member state of the European Union and the Eurozone, essentially equal amongst its partners and using the existing European support and protection mechanisms, rather than being disaffiliated, a pariah.
The fact that Greece has succeeded at this time in having not just a primary surplus, but also a fiscal deficit that is well under the limit set by the Stability Pact, while other countries are struggling to meet the 3% target, is very important. The fact that, right now, Greece has a structural surplus – that is, a cyclically adjusted surplus minus the one-off measures, which is the best in the world; better than that of Singapore – means a great deal. The fact that the head of the European Stability Mechanism himself has not stopped reiterating that Greece has a debt that is serviceable, sustainable for the next 10 years -- because in 2012 we did not just achieve the haircut of the nominal value, but also a radical restructuring that incorporates a mechanism for a further haircut through parametrical changes with regard to duration and interest rates – is something very, very important.
The fact that the Greek banks, the four large, systemic banks that belong to the group of European systemic banks, came through the notorious stress test successfully, under tense conditions, means a great deal. It means a great deal for the plan for exiting the crisis and for the mechanisms of guarantee that can function without the Memorandum, without the troika, without our having the symbolisms and insults that we have experienced over the past four or five years.
It is also of very great importance that these fiscal results are what now enable us to organize much more courageous measures for protecting vulnerable groups, like the guaranteed social income, institutionalization of measures for overcoming the crisis on the level of businesses, through regulating bad loans and restructuring company debts. We can now provide a solution with regard to the many instalments for serving companies’ debts to insurance funds and the Greek public sector. We can really talk now about a substantial restructuring of the entities of the private sector, because we now have the ability to do it, to negotiate it, to impose it and to transform it in practice.
The conditions are now much clearer for an upturn in the real economy; that is, employment. Because there is no doubt that Greek society’s biggest problem – a problem of social cohesion – is the brutal unemployment rates. A society cannot bear up under these conditions. A social security system cannot bear up under these conditions. The European social state cannot bear up under these conditions. So it is of very great importance that we now use the departure point that we have created.
It is of very great importance that the country has now returned to positive growth rates, after seven years of cumulative recession, because the recession started in 2007. Much greater importance than is visible to the naked eye. We have shaped the fundamental conditions, but these have to be respected by society as well. They have to be respected by the private sector. They have to be respected by Greek citizens. Because the first condition for anything is stability. Not just stability in terms of the government. A stability that must be of an institutional nature. This is linked with the process for the election of the President of the Republic, who symbolizes the unity of the nation and consensus at the highest social level. And we also need a national stability, in the sense of a clear national strategy that brings us out of the crisis and leads us into a new phase.
The stability also needs to be progressive, because nothing is more progressive that telling the truth, understanding the real balance of power and the real state of affairs and presenting a comprehensive and practicable plan.
But for there to be stability, in all of its ambitious dimensions, there has already to be a relationship with the truth and honesty, there has to be consensus, there has to be a sense of responsibility, and we have to see all of the country’s creative forces – political, productive, social, intellectual – rally round this objective. From this perspective, the role of the business community is decisive, because the business community has a responsibility to itself and its pursuits, but it also has social responsibility. The state is shaping the conditions for business to be done, and it is shaping them at a huge political cost, at a political cost out that has been shared out unequally over the past five years.
So we are offering the business world and the real economy another fiscal framework. Right now, the country has a primary surplus and a debt, which, via the implementation of the already “given” decisions of the Eurogroup and the European Council regarding parametrical changes, is sustainable and serviceable. The annual cost of servicing the Greek debt is 60% smaller that it was before 2010.
All of the characteristics of the public debt are radically different. There are many who insist that the Greek debt is reflected in a totally erroneous manner in the international markets; that if it were reflected accurately, it would appear significantly smaller than the debts of many other countries, like Portugal or Italy. There are now research departments of many international banks that accept that the statistical snapshot of the Greek public debt is unfair and dysfunctional. They may not talk of 60% of GDP, as some international funds do, but of 115% of GDP, as opposed to the 175% that is the statistical projection.
Moreover, the country has now incorporated very important structural changes, it has a completely different labor market, a perceptibly different social security system, other regulations for the functioning of the market. We are offering the measures for social cohesion and support for vulnerable groups, and mainly funding tools. The fact that the Greek banks are under no stress at this time and can confront credit extension in another way, not just through cautious refinancing of old loans, but through substantial support of new business ideas and investment plans, is very important. The fact that we are a few day, perhaps a few hours, away from the definitive presentation of the plan for the “red” loans, including the restructuring of the debts of the largest enterprises, is very important. The fact that we are preparing our intervention for home loans can open up new potential with regard to the housing market and construction sector.
We had the opportunity yesterday, with the Prime Minister and the Development Minister, to talk about the need for the new regulations to cover all the cases of business loans and the loans that are guaranteed by the Greek public sector and businesses’ obligations deriving from the ongoing implementation of the development law, which is something that can create certain problems of interpretation and implementation of community law, in terms of state aid. But we don’t have just the banking system, we don’t have just the legislative interventions for unserviced loans and the restructuring of company debts. We have the non-bank tools, the NSRF, the CAP, the Institute for Development, with the participation of the German and other European governments.
So the question is, given that the state, the political system, has, at such a cost, done what it has done, and given that we want consensus and stability, and given that the biggest problem we have internationally and financially and as a real economy for our exports is “country risk” – that is, the country’s political problem – what will the business community do?
The business community must take a risk, must undertake an initiative for major investments on all levels. I’m not just talking about major and ambitious investments, but also ongoing ones. This means that it will have to contribute to the creation of new jobs. It is significant that, politically, we spoke of 640,000 new jobs over the next five years, and the Research Department of the National Bank speaks of 720,000 jobs in the coming years. So there really is a latent dynamic that has to come to the surface, and from this point of view it really is very important for one to talk, like the title of this meeting, not just about entrepreneurship, but also about innovation. That is, before we go to innovation, in the formal sense of the term, inventiveness, flexibility, vision, ability, we all need to realize, together, that we cannot remain within the framework of the development model that was in place before 2010. Nor can we promise a return to the most tragic and dangerous practices of the post-dictatorship era. Because there are those who are indicting the post-dictatorship system, but at the same time promising a return to the most miserable aspects of the post-dictatorship system.
From this perspective, there is no doubt that when we talk about innovation in Greece and in an economy like the Greek economy, with its flexibility, its size, its ability to adapt, its comparative advantages, which are linked to the land and people, to agricultural production, to tourism, to energy, to natural advantages, we see that we cannot talk solely about high-tech innovation, but about a horizontal and pervasive innovation that concerns all services. From patents that have international commercial value, if implemented, to simple clever ideas in standardization and promotion of products.
Innovation is not limited to petroleum products. Innovation exists in simple internet applications for day-to-day life and entertainment. Innovation isn’t limited to nanotechnology. There is also innovation in our mattresses, cosmetics, agricultural products, like spirulina, saffron and gluten-free products.
A very important event was organized in September 2013, in Thessaloniki, on the occasion of the inauguration of the TIF, calling out characteristic cases of new entrepreneurs who came up with and implemented simple ideas: applications for internet users, entertainment, agricultural innovations related to certain products, snail farming, standardization of foods and international trading in those foods, which were traditional, but were promoted in modern manner.
With regard to the complex innovation index – both before and after the crisis – Greece has an impressive peculiarity that I want to mention with reference to my introductory observation that the crisis was not just a crisis of the public sector, but also a crisis of the private sector. This has been the case persistently for many years: Spending on research and development in the private sector is perceptibly lower that research-and-development spending in the public sector. The entrepreneurial initiatives for linking up with the universities with the research centers, with spin-offs that come from the research centers and the universities, are very few. It is very important that it be realized that this link-up must become an everyday reality. Moreover, the level of business spending, national spending – but in the sense of the private sector – must rise for research and development, because public spending is at a perceptibly higher level than that of the private sector.
This means that we need to invest in forms of entrepreneurship that are by definition and by their very nature linked to innovation, like youth entrepreneurship, women’s entrepreneurship, agricultural entrepreneurship. In cooperation with the Development Ministry, the banks can really finance start-up investments. On the thinking that a 10% return will be made on investments, so that someone can invest expecting impressive results. Incubators, technological parks, spin-offs, start-ups – all of these need a certain amount of support, but mainly they need an environment of stability, of confidence and of optimism. We cannot shape this environment alone. We are too few. We need to rally all of the country’s creative forces, an no one can hide. Everyone has to come forward in this effort that is comparable to a war effort. This is the war of our generation. It started five years ago. Now we can end it and enter a phase of peace and claiming our new role under “Greek” conditions.
In order to do this, we need the citizens of Greece, Greece’s workers, Greece’s entrepreneurs, to understand that there is a common national responsibility.
Thank you.
October 31, 2014