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Euro Area/Greek debt crisis

Published on July 28, 2011
Excerpts from the interview given by François Baroin, Minister for the Economy, Finance and Industry, to the “Le Monde” newspaper

Paris, July 23, 2011

Q. – Is the crisis over, or have you simply gained some time?

THE MINISTER – The measures adopted are historic in this sense: they’re a response to everything that didn’t work previously. The first support programme to Greece was doubtless too costly, with too tight a deadline. This one leaves Greece time to straighten her accounts, modernize and get back on the path to growth.

The European Financial Stability Facility was too limited in its operation. From now on, it will be able to act pre-emptively to prevent speculative attacks. It will also be able to buy back debt on the secondary market – the “second-hand” market – at a good price. The banks are taking part in the rescue. The governments are providing security. All this has been approved by the European Central Bank, which will be able to continue refinancing the Greek banks. We really are witnessing the birth of a European monetary fund.

Q. – By opening up the path to a selective default, hasn’t this [Euro Area] summit confirmed Germany’s victory?

THE MINISTER – That’s an extremely simplistic interpretation. France was campaigning for the Stability Facility to be more flexible in its operation. She’s achieved that.

Q. – Since the start of the crisis, there’s never been any Franco-German agreement, just compromises between totally different starting positions. Can Europe operate this way?

THE MINISTER – For certain observers – and certain speculators – the notion of compromise comes down to the lowest common denominator. On Thursday, we did just the opposite. You have to realize what a considerable shift the agreement President Sarkozy and the Chancellor proposed to the rest of the Euro Group represented.

Q. – A forthcoming summit is planned on European governance. Does that mean it’s dangerous to rest on our laurels?

THE MINISTER – We must learn the lessons of the year that’s just elapsed. The status quo isn’t a solution for the future. We must strengthen the governance of the Euro Area, reduce our dependency on the ratings agencies, think about creating an independent European agency, boost the convergence of economic policies and create a real economic government. The President will draw up specific proposals.

Q. – How can we be sure that the private sector will only intervene with Greece and not, one day, with Ireland or Portugal?

THE MINISTER – Greece’s debt amounts to 160% of gross domestic product (GDP); Ireland’s and Portugal’s are 96% and 93% respectively. It’s really not the same thing. (…)

Q. – According to François Fillon, the aid provided to Greece will increase France’s debt by €15 billion between now and 2014, whereas the plan was to reduce it. Will France be undergoing an austerity cure in order to meet her European commitments?

THE MINISTER – No. The Prime Minister gave a clear reminder of it: unlike the first aid plan, this one doesn’t entail any budgetary cost.

What’s really new about it is that we’re moving from loans between states to loans made by the European Financial Stability Facility, which will raise additional resources on the markets in order to lend. France is involved as a guarantor.

Now, since 2010 the European statisticians have been telling us that each state must be held accountable for its part of the European Financial Stability Facility’s debt. Beyond this impact in accounting terms, France doesn’t need to borrow more and there’s no impact on our deficit. The operation doesn’t leave the Facility any poorer, let alone France. (…)./.

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