CAIRO: Austerity measures implemented by the Greek government have been demonstrating positive results, with public debt cut by 32 percent as of August, an official said Monday.
“Public expenditures have been cut by 50 percent, and the public debt has been cut by 32.2 percent by the end of August,” said Greek Ambassador to Cairo Chris Lazaris, who assumed his new post just three months ago.
“In terms of real economic activity, internal consumption has been cut fiercely, retail services have been hit very hard, and living standards have regressed to 1990 levels,” he told a small media gathering at his private residence.
The economic instability has spurred unrest in the country with repeated protests, the latest occurring while Prime Minister George Papandreou gave a press conference ruling out any debt restructuring, AFP reported.
Lazaris pointed to the root of the Greek sovereign debt crisis as being the result of a flush of cheap international credit, which many governments in Europe took advantage of in order to bolster public spending, yet “without realizing that the credit would not last forever.”
By the end of 2009, “we hit a wall: we had accumulated so much debt that we couldn’t manage it ourselves.”
Ambassador Lazaris shifted some of the blame onto the EU, contending that its reaction to the Greek sovereign debt crisis as “tentative,” which heightened the intensity of the crisis.
The inherent structure of the EU as a monetary union was also at fault, he said.
The EU and potential European member states were eager to expand the size of the union, and thus, countries were admitted into the club, which failed to meet the requirements set forth by the Maastricht treaty — the treaty which founded the European Union as well as the euro, turning the trading block into an internal market without borders.
In fact, he continued, “if you look closely, 25 of the 27 member states don’t fulfill all of the Maastricht criteria, with half having problems similar to [Greece].”
In the end, “being part of the eurozone was not a panacea,” which would protect any member state from financial instability, Lazaris noted.
He argued that eurozone countries that were having similar financial difficulties were able to avoid a major crisis because the EU had created a financial support system to stabilize the eurozone before they, too, fell victim to their own toxic debt.
In his view, Greece simply had the misfortune of being hit first before other EU member states.
In spite of the slow EU reaction, ambassador Lazaris mentioned, the action taken to support the Greek state by the EU, the European Central Bank (ECB) and the International Monetary Fund (IMF) through a €110 billion loan — with €80 billion from the ECB and €30 billion from the IMF — has been instrumental in stabilizing the crisis that left the country teetering on the brink of financial collapse.
However, according to a Sept. 16 article by the Financial Times, “Many investors are not convinced that Greece will be able to avoid default. Athens has to cut costs and many consider the only way to do that is to restructure loans,” Marco Annunziata, chief economist at UniCredit, a major European financial group, was quoted as saying.
The article noted that should Greece default, it would result in major losses for bond holders, which are largely French and German banks that are estimated to be holding up to €40 billion in Greek debt.
Lazaris refuted the notion that Greece would be forced to restructure its loans due to defaulting, stating that his country is meeting the conditions and requirements attached to the loans it received through the EU, the ECB and the IMF.
Greek Finance Minister George Papaconstantinou last week also ruled out a restructuring of Greece’s national debt, warning that such a move would be "catastrophic." The restructuring scenario has nearly shut Greece out of private equity markets, AFP reported, and has weighed on finances of other countries along the rim of the 16-nation eurozone.
Egypt, Greece
He sought to assuage fears in Egypt concerning Greece’s financial state, especially as it is a significant trade and investment partner.
“We are telling [Greeks] that they should come and invest in [Egypt], while we are telling Egyptian investors that Greece is an opportunity market,” he stated.
According to a Greek embassy document, Greek companies have an estimated €800 million of investments in Egypt, which the embassy claims has grown “substantially” since 2004 via various acquisitions and expansions, such as by the Titan cement company.
He highlighted both maritime shipping and banking as two sectors that have managed to weather the financial maelstrom that has gripped his home country.
Ambassador Lazaris stressed that Greek banks have been able to remain stable thanks to their conservative banking practices, which shielded them from the global economic crisis, and thus should provide an added layer of financial stability within the country. As proof, he said, Greek banks outperformed most, if not all, other EU member states’ banking systems during stress tests conducted earlier in 2010.
In 2009, the overall balance of trade between the two countries saw Egypt’s trade surplus with Greece fall 72.09 percent. Greek exports have fallen 16 percent, he said, “and interestingly Egyptian exports to Greece have fallen by 60 percent.”
“We expect trade volumes, ranging around at least €450 million by 2011 perhaps,” he indicated.
Egyptian exports to Greece largely focus on mineral fuels at 41.89 percent and vegetables at 12.55 percent as well as fertilizers at 9.50 percent, according to a document obtained from the Greek embassy.
