TOPICS > Economy

Greek Budget Crisis Could Stagnate U.S. Recovery

March 8, 2010 at 12:00 AM EDT
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As Greece seeks support of its plan to bring its finances back from the brink of collapse, there are fears the weakening euro could impact the U.S. in its own economic recovery. Judy Woodruff talks to Greek Prime Minister George Papandreou during his visit to Washington.

JUDY WOODRUFF: How to avoid that fate was on the agenda today for the American-born and educated Papandreou.

I spoke with him at his Washington hotel.

Prime Minister George Papandreou, thank you very much for talking with us.

GEORGE PAPANDREOU, Greek Prime Minister: Thank you. Good being on your show.

JUDY WOODRUFF: Many countries around the world are having serious debt crises right now. Why has your problem in Greece created such turmoil, do you think?

GEORGE PAPANDREOU: Well, that’s a good question.

Obviously, we were affected by the international situation also. But, Greece, being a smaller country, people were wondering, well, will it be able to deal with this deficit problem? And then we became a target.

And that could happen to pretty much any country, as happened to a bank here in the United States, when Lehman Brothers basically closed. So, this is what — what happened to Greece, and it became the focus of attention.

JUDY WOODRUFF: You were traveling, doing a lot of traveling in recent days, Europe and now the United States. How worried are you that — that problems in Greece could spread elsewhere, including here?

GEORGE PAPANDREOU: What happens is, if you have one country — even a small country, like a bank, failing in one way or another, creating problems, this would create problems in Europe. It would create problems for the Euro Zone, of which we are a part. The Euro Zone is the euro currency, a common currency we have in the European Union.

That could create fluctuations. And, on the world currency mark, it could create, for example, a change in parity between the United States and Europe. And this could also affect, for example, the — not only the deficit, but also the growth potential, the export potential of the United States.

So, even though it’s a small — it’s one — we’re only 2 percent of the GDP of the European Union…


GEORGE PAPANDREOU: … that then could become a tipping point for — for metastasizing to other parts of the world.

JUDY WOODRUFF: In a nutshell — you’re here in Washington — what are you asking from the United States?

GEORGE PAPANDREOU: On the economic front, on the financial front, what we are saying is that, OK, we are in a period which is quite volatile because of the crisis we — we went through last year.

And because of the crisis last year, we have to get some lessons. And one of these lessons is that you can be doing what’s correct, you can be moving along as an economy, but, if there’s a lot of opaque and non-transparent markets, for example, speculation, the so-called CDSes, the swaps and so on…

JUDY WOODRUFF: Credit default swaps.

GEORGE PAPANDREOU: That’s right, credit default swaps, where, in essence, you could also — you could sort of bet against your neighbor, insure your against your neighbor, and, then, if his house gets on fire, you get the money, well, that’s…

JUDY WOODRUFF: And that’s already started to happen, hasn’t it?

GEORGE PAPANDREOU: And that’s what has happened — started to happen with Greece, where people were betting against Greece. And that didn’t help us, because what that basically made — what — the difficulty that it created was that Greece would then go out on the market to get some loans, as every country very often needs, and our loans would then be very expensive or be difficult to get.

JUDY WOODRUFF: So, how do you prevent that? What are you asking the U.S. and others to do? You were just in Germany, France. You said you weren’t asking for money.


JUDY WOODRUFF: What do you want them and us to do?

GEORGE PAPANDREOU: What we’re saying is, we’re doing our part. We’re putting our finances in order. And we have taken some very difficult measures.

Now, what we also wanted to make sure, that the markets are regulated, in a sense, so that they don’t speculate against countries. And I have been in touch with Angela Merkel, the chancellor of Germany, the president of France, Nicolas Sarkozy, the president of the Euro Group, so-called Euro Group, which is the euro currency, Jean-Claude Juncker.

And we together are now making initiative to push for worldwide regulation on this issue. And that is where what I have brought also to the United States. And I just had a discussion with state of — head of the State Department, Hillary Clinton.

JUDY WOODRUFF: And are you getting the — are you getting the support you need? Is this going to happen? And, if it doesn’t, what does that mean, if it doesn’t happen?

GEORGE PAPANDREOU: Yes, we are getting the support.

First of all, there are two forms of support. One is — well, Greece as a particular case, if we do go out on to the market and we have problems getting loans, which I don’t — I hope we don’t have that problem, or we have very high interest rates, beyond our capacity to sustain this, then there will be a certain intervention from the European Union, where we’re discussing the type of instrument, so that the markets will respond positively and won’t profiteer on Greece’s misfortune, if you like.

But, on the other hand, what we’re now doing is — is also taking this — this a step further by asking further regulation. And this is, I think, where — this will come up in the G20, the so-called G20, in the next meeting, where the United States, of course, will participate, and will have a voice, a very strong voice, on this issue.

JUDY WOODRUFF: About these speculators, though, I mean, these are people who are betting against Greece’s success. But aren’t they looking at the data and at the history and saying, this is really the way it’s been, and we don’t think — we’re not sure you are going to be able to turn it around?

How can you convince them that they’re wrong?

GEORGE PAPANDREOU: Well, if we can convince major players and — and very important institutions, whether they are our partners in the European Union, whether they are the European Central Bank, whether they are the International Monetary Fund, all have said that what we’re doing in Greece is spot on, is right, is — we’re doing the right thing.

But what happens with the IMF, if somebody goes to the IMF, is that they say, OK, in order that you don’t have speculation, we’re going to put money on table. It’s sort of like putting a gun on the table, saying, I may not need it, may not use it, but it’s there as a threat, and making sure that there won’t be speculation against Greece.

Now, Greece is not — Greece is in the Euro Zone, so we’re not…


GEORGE PAPANDREOU: … we’re not asking to go to the IMF, although we would have to if the Euro Zone wasn’t there to help us. And that’s what I have been discussing right now, that, if we do need some special kind of intervention into the markets, so that there is no speculation, even though we’re doing the right thing, that there could be speculation — and that’s — that’s the point that you’re — I think you’re asking — that, therefore, we are able to counter this speculative attack on Greece.

JUDY WOODRUFF: Some are asking what’s taken so long. I mean, Greece has had these endemic problems you mentioned — corruption, people not paying their taxes, this huge load of debt — for years and years — you yourself have been in government, in and out of government for, what, 20-some years, 25 years.


JUDY WOODRUFF: So, why should people believe, now it’s going to be different? Your predecessors have tried to do something about all this.

GEORGE PAPANDREOU: Well, I think there were certain endemic problems, but, in the last five or six years, unluckily, the previous government, rather than dealing with these endemic problems, exacerbated them.

We have reached the point — we have reached the bottom, if you like. Now is a crisis which we can use as an opportunity to make changes which we have not made over the years.

JUDY WOODRUFF: How much is ultimate success going to depend on you, personally, your personal skills of persuasion in talking to other leaders and in talking to your own people?

GEORGE PAPANDREOU: Well, obviously, this is a great responsibility one has, when one takes on the leadership of any country. And that is a big responsibility. And I have taken on it, in a sense, a time of deep crisis.

But I have seen crises in my life. I have lived through a dictatorship, seen my father and grandfather in jail. We fought for democracy very, very hard, to bring back democracy in Greece. When I first took over in the ministry of education, it was during a teachers strike.

When I took over the foreign ministry, it was when we had the worst of relations with Turkey, and I turned that around. When I took over head of my party, we were at just before elections, and we were certain to lose. And I turned that around.

So, this is a bigger crisis, of course. It’s a crisis in — in — of Greece. It’s a major crisis we’re facing. But I think what — what I have is the strong support of a wide majority in Greece to make these changes. And they want these changes. And I think that’s a very optimistic sign for — for Greece and for our future.

JUDY WOODRUFF: Prime Minister Papandreou, thank you very much for talking with us.

GEORGE PAPANDREOU: Thank you very much.