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28 September 2017


- First, I would like to hear your assessment of the current state of the Greek economy. Is it possible to say that it is emerging from the crisis?

- On the contrary, instead of exiting the crisis, it is only getting worse. There is a lot of propaganda in the press about emerging from the crisis. Figures show that things have actually improved, but figures do not take into account that people continue to suffer.

In fact, our state is bankrupt, banks are bankrupt, and most Greek companies are also bankrupt. And in taking on more and more new loans, we cannot get out of this predicament. However, for now, this is our [the government’s] strategy.


- The IMF strategy restructured Greek debt to allow the country to return to economic growth. The GDP of Greece again shows growth. Is this not an exit from the crisis?

No, and I'm afraid the IMF understands everything and agrees with me. Following this logic: Greece now needs to reduce taxes and reduce the cost of servicing the budget debt. But the IMF understands the real situation, and it does not advise us to do this.

The real situation is that economic growth was brought about by falling prices in the country. Real GDP always takes into account the level of inflation, and when prices fall, this is a factor of formal growth.

In other words, instead of real economic growth, we have a situation where prices fall faster than people's incomes. Can such "growth" be called a stable development?


- Is there a way out of the crisis without writing off Greek debt, or at least the greater part of it?

- Zero possibility.


- Why does the European troika not want to write off Greece’s debt?

- Actually, they do not really care whether European banks get their money back or not. It is absurd, but if the European Commission and the European Central Bank really thought about having loans repaid, they would have agreed to the terms of debt restructuring that I proposed to them.

But they did not agree and now, according to the current program, European banks will receive much less.

Why did it happen this way? Obviously, they are interested in something else. They do not want to work with elected governments that thwart the wishes of the European establishment. Even though these governments were elected by the people of their countries.

Using the example of Greece, they want to send a signal to the Spaniards, the Irish, the Portuguese, the Italians, and eventually the French. They want to show what happens when an elected government disagrees with the establishment.


- Could exit from the Eurozone solve this problem?

- It would be very expensive. However, the current situation in Greece in the medium term will cost us much more than it would cost to exit from the Eurozone.


- When Greece proposed exiting the Eurozone, the EU immediately responded that such an exit is possible only together with an exit from the EU. Was it a bluff?

 - First of all, I want to say that we have never considered the possibility of an exit from the Eurozone. All my discussions were about possibilities to solve our problems within the Eurozone.

But there were discussions of this nature on the part of our partners. There were also threats. At the same time, this issue was not raised in our negotiations. These threats were voiced after the meetings, behind our backs.

In any case, I am sure that the threat to throw Greece out of the EU was a typical bluff. In fact, such a move would lead to enormous losses for the EU; it would be near one trillion euros.


- What is the basis for such an assessment?

- It's very simple: Greece’s state debt amounts to EUR320bn. It is in euros, and we can pay it, staying in the EU. Another EUR310bn is the debt of our central bank to the European Central Bank, the Bundesbank, and others. Debt of Greek banks amounts to EUR140bn, while debt of Greek companies totals EUR200bn. If we also take into account cross-default, then together it is EUR1tn.


- You said that Greece should be a warning for other countries. Did this plan work?

- To a large extent, yes. However, eventually everything worked out as they wanted.

But the problems will not disappear. When we created the euro, we did not understand what it would become. Would it have a fixed exchange rate, or indeed be a common currency for all countries? But once the currency scheme is finally set up, it is impossible to withdraw from it.

In my view, if one country exits the Eurozone, even a small country, then the conviction of its indestructibility will be destroyed. And then the financial markets will ask, who will be next?


- In the case of Brexit, there is no exit from the Eurozone. However, don’t you think that Brexit will lead to similar outcomes?

- I'm not sure, but it seems that Brexit has already destabilized the EU. Look at what happened after the announcement of the Brexit: Poland, Hungary, and other countries have refused to obey the rules of the European Union. They have already decided not to obey many EU rules.

I'm not sure that the European Union will disintegrate in the same way that the Soviet Union collapsed. However, even now, we see new centrifugal tendencies, for example, the idea of the so-called “two-speed Europa”.

If this initiative is implemented, instead of the European Union, we will get an anti-union—not an association of countries—simply countries that for some reason turned out to be together.


- But today, on the contrary, steps are being discussed to strengthen European institutions. For example, the creation of the post of EU Finance Minister. Moreover, it is often said that if such a post existed earlier, the Greek crisis could have been avoided.

- I have important news for you: the European Commission has nothing to do with this initiative at all. Previously, its powers extended to the financial sphere, but now these powers have passed to the European Central Bank and the Eurogroup.

The arguments about the need for the post of EU Finance Minister are absurd. After all, in order to have a minister, you need to create a ministry. And this would mean delegating to him the authority to set common taxes in the entire EU, by analogy, similar to the federal tax laws in the United States.

Secondly, then the issue of EU debt would go to this ministry. Instead, it is proposed to create a post of minister who will not have the authority to deal with debts and taxes. It just looks like a joke.

However, this is clearly not a funny joke. Such a step would deepen existing problems.

The only authority that they want to give to this minister is to make him a despot, who can say no to the budget deficits of the individual EU countries.


- Is it bad that the EU countries will be forced to comply with the Maastricht criteria?

- This question has been answered by history. It must not happen. The criteria are a failure. The crisis of 2008 showed that this idea is generally the worst in the history of mankind!


- Why? Because countries could not stimulate economic growth?

- Let me explain. If the state does not have a central bank that could support it, and the central bank, for its part, cannot support the state, then the [commercial] banks of this country in matters of their liquidity depend on the government, which does not have a central bank. The government does not have the ability to support these banks, and eventually a collapse occurs.

The existing system was not ready to withstand the financial crisis. Even Berlin had to agree that the time has come to set aside all the rules.

I will give another example. The policy of quantitative easing—when the ECB bought shares of banks or government bonds—is illegal!

And although the Maastricht Agreement does not allow this, Draghi decided to break the law. This was the right decision. Otherwise the euro would not have been saved.


- Why then does Germany manage to comply with these rules, and show high rates of economic growth?

- They got a free ride. I will explain. If I have a trade surplus with you, it means that you have a trade deficit with me. I cannot rejoice in this surplus, because it causes problems for you.

With regard to Germany, I want to draw attention to three points. First: their trade surplus with other EU countries is illegal. European rules allow you to have a trade surplus of not more 6%. In Germany, it is 10%. In fact, the European Commission should fine them, but instead the Commission in Brussels turns a blind eye to violations of Germany.

And now forget for a minute about the rules. If you have such a large surplus for many years, then you have no other option but to invest the saved money abroad. And then financial bubbles are created in those countries, as happened in Spain. That is, Germany exports economic crises to other countries.

Second, why is the federal government in surplus? The answer is because of negative rates. But after all, negative rates destroy the pension system. Is this a success?

Third, the percentage of unemployed and poor people in Germany has doubled in recent years. This is also a failure.

And a last point. The German government saves, German households and corporations also save. It is impossible that in the country absolutely all save. What to do with this money? It’s exported, but then you have deflation, and problems arise for someone else.

It turns out that the price of German success is, in fact, the failure of the rest of Europe.


- Does the Greek crisis have similar causes?

- In general, yes. We became hostage to the situation when the leading economies of the world needed new markets for their goods. They encouraged lending to other countries to ensure the sale of their goods. And when this bubble burst, problems were placed on the shoulders of the weakest.


- Is it possible that this situation will change after the German elections?

- Zero possibility.


- What could change this situation?

- I see only one way. If Emanuel Macron says to Merkel, “Mrs. Chancellor, you won only because of my victory. And my terms to continue our work is the federation—a common budget, common taxes, common taxation. And if you do not accept this, I will not fulfill our financial obligations”. That's all!


- Is it realistic?

- I do not think that Macron will do so, but this way is quite realistic. Moreover, only such a step can save the EU.

And by the way, this is the only chance for Macron. If he does not do it, he will end up as Hollande.


- But now Macron pursues a different policy, trying to copy the German course.

- It's impossible. It is impossible to become another Germany. It basically is impossible.

Just like we cannot become a second Switzerland, and just like Switzerland cannot collect all the money of the world. It's just impossible.

Germany has succeeded with labor-market reform; no one else has done anything like this. But if such reforms were made by everybody, then no one would have an advantage.

And here is a very important point. It is very important to distinguish between productivity and competitiveness. Germany has invested in competitiveness, not in productivity. What does this mean?

In order to increase productivity, it is necessary to invest in education, in technology, and so on. And in order to increase competitiveness, it is enough just to cut wages.

And this is the fundamental difference—that we all can increase productivity, but we all cannot increase our competitiveness, because this is the path to nowhere.

If I cut my salary and you do not, then I have become more competitive. And if we both cut our salaries, neither of us will benefit.

Germany has already done it; they have become more competitive. But France cannot repeat this move because they will only create other problems in the economy.


- Following this logic, wouldn’t the federalization of the EU lead to enormous economic damage for Germany?

- No, it will be fantastic for Germany, because now they are very unstable. They live by lending money to others. It's impossible to live like this forever. In the case of the federalization of the EU, this problem is removed. It turns out that this idea is also beneficial for Germany in long run.


- Such statements are reminiscent of the words of Donald Trump about the fact that Germany is "unfairly trading."

- An important refinement—it is not Trump's idea. This is the idea of the Obama administration in 2013-2014.

And the fact that Trump accidentally said something right should not upset us.


- Based on current trends, how do you see the future of the Eurozone and the EU?

- If nothing is changed, it will be a very unpleasant place. I do not know whether the EU will collapse like the Soviet Union, or if we will stay together, but we will be unhappy.

The EU is rich enough to squander its potential for a long time. But I know for sure that this policy leads to failure. And I know for sure that Europe will destabilize the world economy.


- The Ukrainian crisis is sometimes compared to the Greek one. We cannot yet reach high growth rates, but only increase our national debt. In this regard, what advice would you give to Ukraine?

- First, you need to restructure debt and break the link between politics and big business. It is important to remember that the oligarchs are the main enemy of your economy.

Second, stop praying the false gods. I was surprised how your financiers celebrated the placement of Eurobonds with a total face value of US$3bn. I'm not saying that this is the wrong step. But do not celebrate the increase in public debt, especially at such an insanely high yield!

Third, you need to be more critical of yourselves, and the European Union.

And if you ask what is the main lesson learned by Greece, I will answer, namely this: understanding that both Brussels and Berlin can be very, very wrong.

Ukraine was a very loyal part of the Soviet Union. You did not question the course pursued by the USSR and as a result, the Soviet Union collapsed.

Now you want to be the same loyal part of the European Union, and this is a big mistake!

Work with the EU, integrate with the EU, eventually become part of the EU, but do it with a critical look at the processes that are taking place there.

Then it will be in the Ukrainian way, it will be reasonable, and most importantly, it will not allow a bubble to form in Ukraine, as has happened in other countries.

And last, although, in fact, this is the most important thing, invest in education, in young people. This will allow Ukraine to increase its potential, regardless of what happens to the EU.