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Greece/conclusions of the European summit

Published on July 21, 2015
Hearing of M. Michel Sapin, Minister of Finance and Public Accounts, before the National Assembly’s Foreign Affairs, Finance and European Affairs Committees (excerpts)

Paris, July 15, 2015


Germany wasn’t the hardest country to persuade. On this subject, you haven’t asked me about the Franco-German axis, but I’ll come back to it: nothing can be resolved in Europe in the absence of agreement between the two countries.

Agreement doesn’t mean alignment: it means each side clearly stating its position – which has been the case. It was the smallest countries that were the hardest to persuade: the ones which, because of their surface area, the size of their population, the toughness of whatever reforms they’ve conducted and sometimes their living standards, can be compared to Greece. (…)

But I’m telling you, an exit from the Euro Area lasting five years is an illusion: you either exit or you don’t exit! (…)

Let’s take the scenario, often put forward by economists, whereby the new currency was worth around half the value of the euro. This would cause a poverty shock: not only would holders of a €600 pension, for example, find themselves with incomes of €300, but inflation would also be considerable in a country that imports 80% of its energy and food. So the situation would have been disastrous for the people, for the weakest Greeks. Moreover, it was because he wanted to protect them that Mr Tsipras rejected this scenario, and I think he was perfectly right. (…)

With Greece having indebted itself to the Europeans in this way, it owes them money, and it owes them not in drachmas but in euros. Consequently, if you moved from the euro to a drachma devalued by half, the debt burden – which is already intolerable today – would double, increasing to 350% of GDP. So what would the Paris Club’s first decision be in such an event? It would halve the debt. And because it would still be unsustainable, it would decrease it further. So Greece’s exit from the euro would mean the pure and simple cancellation of more than half the debt owed to the Europeans, including France. (…)

So it must be noted that, when you look closely at the practical consequences a Grexit would have had on the weakest Greeks and on French taxpayers, it was in the interests of everyone for Greece to remain in the Euro Area. (…)

Let me add – but I’ll come back to this – that among the quid pro quos included in the comprehensive political agreement is the issue of the debt, which we couldn’t exclude from the debate either politically or economically, as many countries nevertheless wanted. (…)

According to the indicative date given by the Eurogroup President, the negotiation must be completed in such a way that the programme can be approved by the Eurogroup and the European Stability Mechanism on 7 August – it may be on 14 August. Either the negotiation will be completed or it will fail, but there’s a big chance of it being completed. Let me specify that the programme is being drawn up with the IMF, which I point out wasn’t the most unpleasant [party] in the negotiation, mainly because it emphasized the debt burden. In any case, its presence is essential, if only because there’s a delay between the European programme, which will begin in mid-August, and that of the IMF, which will end next March. Furthermore, the IMF will contribute €16 billion to the €80-billion assistance programme to Greece. (…)

Admittedly there have been privatizations to the tune of €3 billion, but the conditions in which they were carried out by the previous governments are utterly reprehensible: it appears that some people gained a lot more from those transactions than the state. We must put in place mechanisms of governance, of management of Greek assets, which make it possible to go ahead with other privatizations in conditions that protect the Greek state and people, i.e. showing vigilance on the nature of the assets privatized and choosing the right moment to sell. Technical assistance can be set in motion, along the lines of what has existed in France for a few years, particularly with the Government Shareholding Agency, which enables us to know the range of values in which a transaction can be carried out.

Some people showed such mistrust for Greek society and its workings that they advocated entrusting the privatization fund to a calm country where its management would be assured in a good household manner, namely Luxembourg! As you’ll understand, the French government joined the Greek government in rejecting this idea: it’s true that better governance must be sought so that the fund brings in more under better conditions, but it must be done while respecting the Greek people’s sovereignty. So the privatization fund will remain in Athens but will be managed under very different conditions from those prevailing today.

How will the fund be able to reach the sum of €50 billion hoped for? There are already the banks, with €25 billion. (…)

Having followed the debates held in the Eurogroup over the past six months, I know who bears responsibility for the delay that partly lies behind the aggravation of Greece’s situation. We initially chose procedures a lot simpler than the ones finally put in place: at the end of April, we should have finished the previous programme, which would then have enabled us to take time to negotiate. The political situation in Greece didn’t allow it, which I can understand, but it forced us to do everything at the last minute, with a timeframe that went from a few weeks to a few days and then a few hours.

Whatever the case, the current Greek government is brave and is showing absolute determination to put an end to cronyism, corruption and the erosion of the state. In my view, that’s where real change in Greece will come from, and so we must support this government, politically but also technically – by making advisers available – to help it cope with the difficulties it’s facing. It’s not about showing compassion for a country which has a gun to its head, but supporting the efforts of a brave government that wants to take the necessary decisions. (…)./.

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