DAVOS: George Papandreou swept into power in the autumn after the conservative leader threw in the towel and called elections early on a wave of corruption scandals. He inherited a far worse set of books than anyone could have ever anticipated.
Right now, that stands at 12.7 percent of GDP. The government is under intense pressure from Brussels and investors who are making Greece pay a premium in the bond market. It is promising is to bring that number down by four percentage points in 2010-11, but due to the past track record in the country, no one seems to be buying it.
At a closed door press briefing with 20 Davos editorialists, the Prime Minister and his Finance Minister George Papaconstantinou fielded questions for three-quarters of an hour. The PM tells the assembled group that he studied sociology, the finance minister a trained economist. Both take their jackets off, the PM rolls up his sleeves and they try to head off what is a very bleak situation near term.
After 10 years in the Euro, bad bookkeeping, a culture of patronage and outright corruption are sinking Greece’s boat. But they are not alone, Spain, Portugal and Italy have similar debt problems and the spotlight now on Greece is likely to widen as investors look for fresh victims in this trillion dollar market.
It is an impressive double-act. The PM addresses the big picture items: the need for justice and the support he has in the polls to forge ahead despite the budget cuts that will be felt quite hard by the left leaning (partly communist) population.
The finance minister deals with the nuts and bolts of economics and the budget. He says by mid next week they will get the green light on their long term program from Brussels. After that, there will be a process by the European Union to check off “performance guarantees to really measure whether they are sticking to their promises.
The two brush off questions about selling bonds to the Chinese. They did not deny they are talking to Goldman Sachs to help raise funds, but added “we are talking to everybody right now. Don’t expect a bailout from the European Union, but do expect their backing. If one country falls, again investors will look to test others.
Finally, it raises another key question, where were the EU or European Central Bank safeguards in the past decade? Now they are talking about an independent body to audit the books of member countries. The trust of investors has been broken, now this double-act is scurrying to bring it back.
John Defterios is CNN’s anchor for Marketplace Middle East. He will be blogging from the World Economic Forum at Davos this week. www.cnn.com/davos; www.cnn.com/mme.
