Recently you have had meetings with institutional and other political persons in Athens and you discussed the vision and role of Greece in the long-term development of Europe. Do you think that Greece can play a decisive role in creating conditions for sustainable development in the European Union?
Greece is one of the oldest EU members, an essential part of Europe and has been critical to European development culturally, economically, politically and strategically. Unfortunately, Greece has been in a crisis situation since 2008, i.e. far too long. This is unacceptable for modern Europe, especially when combined with such a high youth unemployment. Responsibility for this lies with both Greece and the EU. The EU for its imperfect structure, especially of the Eurozone. For economists it is clear that sustainable development and a common currency also require common economic-financial policies and political structures. Likewise, it is not necessary to push every country into Eurozone with its incomplete structure. The EU is much more important than only the implementation or preservation of the euro in every member state. Greece’s experience is very important for the future of Europe. We must learn from the mistakes that was made and avoid them in the future.
Greece – Latvia: Two countries with many in common. Latvia was on the verge of bankruptcy in 2008, with the IMF and the EU drawing up programs that directed the economy from the first year of implementation in a shrank of 18%. However, it started to recover despite the difficulties (unemployment, etc.), using the difficult recipe for public spending cuts, drastic reforms and massive privatizations. a) How much did this model affect the economic situation of the average Latvian citizen? b) Do you think that such a model could be applied in the case of Greece, especially after the results of the seven-year implementation of other types of policies?
It is always critical that countries draw up the country’s development programs by themselves. Of course, it is good to have advisers from institutions like the IMF and the EU, but the most important decisions must be made by the countries themselves and sometimes despite differing proposals from other institutions. Our best experience is working together with OECD experts. In my personal opinion it is the best economic think-tank in the world.
What Greece and Latvia share in common is that during the last crisis we both lost about a quarter of our economies. The difference is that in Latvia and in our neighboring countries we mostly have a current account crisis in the private sector. In Greece it is a public finances crisis, with high country debt and budget deficit.
In Latvia, we decided to ask for help from the IMF, because money was cheaper. Our neighbor Lithuania decided to borrow without the use of IMF funds. Both countries have recovered from the crisis similarly.
We had both the options of internal or external devaluation, because at that time we were not yet part of the Eurozone. The opinions of economists were varied. Our government chose external devaluation, cutting salaries, budgets, everything. We had three very difficult and painful years but after that we were able to get back to growth and able to borrow in markets. The worst result from this solution is that many, up to 10 percent (including many skilled workers), left the country for jobs elsewhere.
We did not have to have massive privatizations during the crisis. After having lived for 50 years in a centrally planned and administratively run economy, we had already been supporters of privatization and had thus enacted privatization previously. In Greece, the private sector is working very hard and is efficient, but that is not always the case in public sector which is, similarly to Latvia, less efficient than the private sector.
Our experiences do not give Greece a clear answer to when it is better to introduce reforms, during crises or in the good years. As an economist I stand for the opinion that it is in the good years, but as former politician I do understand that for politicians it is difficult to enact policies that are important for the country but will only bear their fruits after their tenure has expired.
I am not in a position to state that our experience is valuable for Greece, but I am happy to share our experiences. Every situation is different and you can not have the same remedy for everyone and everything. Greece has excellent economists. What I am sure of is that you cannot allow the country to remain in permanent crisis. Young people need jobs and not only during the summer! However not everything is bleak, one thing I have learned in Greece is that the people here in Greece enjoy life and have a strong spirit of perseverance despite hardships. I see more people smiling in Greece than in Latvia. This is something we in Latvia must learn from Greek people!
We know that stability is the key feature of Latvia’s political scene. Do you think that today Greece, having the longest-running government (Tsipra’s) during the crisis, is able to come out of this crisis? Do you think there are signs of a recovery in our country’s economy?
I deeply believe that more important than government stability is sustainable development, continuing reforms that are important for the country. Having the same people in charge does not guarantee success, it is the continued implementation of correct policy that is far more important.
That said it is only good if people democratically continue to choose the same leaders, it speaks to the public’s belief in their policies. I have noticed that people in Greece are now more optimistic about their country’s future, than a few years ago. I had the honor to meet your leaders, including Parliament Speaker Voutsis and Governor of the Bank of Greece Stournaras. They are very concerned about the crises and they have a vision to overcome it. Despite their differing political backgrounds I heard very consistent and similar visions, even if they use slightly different words. I think it is very important to achieve consensus in your society about economic strategy. Then it will be easier to implement it. We in Latvia have been successful when we have succeeded in this and have been unsuccessful when failing to reach such a consensus, education and healthcare policies are examples of this.
Many blame Alexis Tsipras that since 2015, made a radical change of his economic views, practicies and policies, defined already internationally with the Greek term “colotoumpa,” while others more lenient, speak of him turning to realism. What is your view, based on your personal political experience?
In all honesty, before my last visit to Athens I did not understand the logic and the consequences of the referendum. To win it, and then not to respect the outcome. But yet after that to again win the elections. It surprised me. I think now I understand this case a little better. As I have read in Henry Kissinger’s book “Diplomacy” the qualities that are need to be elected and to govern are different. But for both you need a public trust. As we well know it is afterall common for politicians in many nations to speak to one effect and then act in another. Politics is an art as well. In any case, I believe that the stability of the reforms is far more important for a country than the stability of its government.
Recently Greek Prime Minister traveled to the US in a basic effort to attract foreign investments in Greece. Given the experience of Latvia, which since 2014 has been one of the fastest growing EU countries, with a wave of investments that has helped its growth, what would be your suggestions concerning an investment attraction plan that might work successfully in our country?
Predictability of political and economic policies, including, predictability of taxation policies. A friendly environment for business and competitiveness. A transparent legal system, that enforce the contracts honestly and resolves business disputes in a timely manner. A constant and effective fight against bureaucracy and corruption. All of these conditions are important for both local and foreign businesses. We in Latvia are very far from perfection, but we understand that reforms to reach such conditions are an ongoing process. Even if many politicians do not seem to like the word ‘reforms’.