Minister insists debt is manageable
Louka Katseli tells the Athens News that recent eurozone decisions
will facilitate Greece meeting
its financial obligations
By George Gilson
FOR LOUKA Katseli, the brouhaha over George Papandreou seeking aid
from the International Monetary Fund in December 2009 is much ado
about nothing – it was, after all, the Princeton-trained economics
professor who, as development minister, told journalists that going to
the IMF was well nigh inevitable.
An economic realist who by all accounts has managed to preserve
vestiges of Pasok’s social democratic conscience, Katseli, in an
interview with the Athens News, insisted that structural reforms must
continue full speed ahead.
The labour minister said she is convinced that the eurozone’s March 11
decisions will make medium-to-long term management of the Greek debt
“The most important decision is the possibility that the EU support
mechanisms EFSF [European Financial Stability Facility] and ESM[European Stability Mechanism] could lend to Greece directly through
the purchase of [new] sovereign debt. This is extremely important for
private markets. It provides a different option for lending to member
states if market conditions are not suitable,” Katseli said.
“The market itself has an upper hand – through the CDS [credit default
swaps] pricing – in terms of lending to sovereign states. Now, the
possibility of a European fund purchasing sovereign debt, together
with the European Central Bank proposals which we have not yet seen
fully, opens up the market. It will influence positively market
conditions for countries such as Greece,” she said.
A preferred way of lowering existing debt is having the EU support
mechanism purchase sovereign debt in the secondary market. “My sense
is that this decision will not be taken by the end of March,” Katseli
said, though she did not rule out the EU move happening by the March
With the aid of its eurozone partners, Greece can create the
conditions that will permit long-term debt management, Katseli said.
That includes securing 2-4 percent interest rates, spurring economic
growth, privatising state assets and securing conditions that allow
Greece to return to the markets.
“The decision to utilise state property reduces the debt burden and
allows Greece to repurchase its debt,” the minister said. “The EFSF
being able to purchase sovereign debt in the primary market, and
eventually in the secondary market, will also calm private markets and
allow Greece to enter the market.”
Many believe the ambitious, 50bn euro fast-track privatisation
programme is unrealistic in terms of attaining the targeted amount,
and that it will in fact force Greece to sell off its assets for a
song. Katseli disagreed.
“There is a sovereign debt crisis – and the other side of the same
coin is the banking crisis. Banks and financial institutions that hold
our sovereign debt also stand to lose by Greece not being able to pay
up. There are risks on both sides, and both have incentives to find a
solution with mutual payoffs. Raising funding through privatisation is
a win-win deal. The banking system has every incentive to exchange
higher risk assets.”
But huge delays in cutting red tape for business have raised questions
about growth prospects. Talk of one-stop shopping for business
startups, since the time Pasok was main opposition, is still just that
“We need to go much faster in completing the whole planned regulatory
reform, even if we have two-to-three month delays in each step.
Regulatory reform and the new funds [to bolster business] will be
completed by June 2011.”
But she noted a law for simplifying business startups was passed in
May, and a one-stop-shop registry that was due in October 2010 was
delayed by the autumn cabinet shuffle and is now expected by May.
“There is just a one-month delay in a new law simplifying licensing
procedures,” she said.
The political storm created by IMF chief Dominique Strauss-Kahn’s
recent comments that Papandreou went to him for help soon after being
elected is, for Katseli, a storm in a teapot.
“European governments are not outside the global architecture for
lending of last resort. The euro came into being in 2002, but the
eurozone had not provided for a lender of last resort. For all of us
who were in the debate beforehand, this was always an issue since the
inception of the eurozone,” she said.
“If the European Central Bank was unwilling to play the role, it was
clear the IMF would,” Katseli added. “When the crisis came, it was
only natural for the IMF to step in. Now we need to develop European
institutions faster, to complete this monetary integration.”
Does the bitterly divisive rhetoric of Papandreou and New Democracy
leader Antonis Samaras point to snap polls? Katseli says no, and
defends the prime minister’s sharp attacks.
“There is an argument by ND and others that there was an alternative
route to the memorandum. This is an irresponsible position,” Katseli
said. “I sincerely don’t think we had an option other than signing. It
is vexing for the premier, after a good outcome on March 11, for the
main opposition to start putting caveats on a good decision.”
‘I would apologise to pensioners’
THE ATTACK on labour rights through the EU-IMF memorandum, the
battering of collective bargaining rights and the slashing of salaries
and pensions in the public sector have all cost Pasok in the polls.
And though Louka Katseli largely defends the government’s moves, the
labour minister also expressed her regrets.
“I would apologise to pensioners,” Katseli said when the Athens News
asked her whether Pasok should apologise for any of its actions. “The
cut funds should be reinstituted as soon as possible. You can
apologise for any delays, and for not explaining to people what you’re
doing. I would not, however, apologise for structural measures that
have been taken that were in our programme.”
As for charges that Pasok demolished in one fell swoop labour rights
that were hard-won over decades, Katseli disagreed. “There has been no
battering of collective rights,” she said. “According to the law,
individual business contracts in the private sector are collective
bargaining agreements. We had dialogue with our social partners and
the [EU-ECB-IMF] troika.”
The law passed in January allows businesses that are losing money to
negotiate wage cuts with staff. If there is an organised labour union
at the firm level, representatives may negotiate with the owners. If
not, the branch unions or the confederation of labour speaks for the
But it was put to Katseli that labour is negotiating from a position
of weakness, to say the least.
“There is always an asymmetry between employer and employee but that
asymmetry is witnessed every day in the market through private,
individual contracts,” she replied. “For the first time in the Greek
legal framework this law introduces the possibility of more
flexibility through collective bargaining. That’s why all social
partners agreed to go along.”
Katseli denied New Democracy’s charges that the government, by
implementing a means test, will vastly cut the percentage of
unemployed entitled to the 430-euro-a-month benefit. The government
has agreed to cut 500m euros from social transfers but Katseli said it
will be found elsewhere.
Means tests have cut 40m euros in payments due to families with three
children because they earn above a certain income.