Tuesday, 27 January 2015
Greek Election Result
I thank the Cathaoirleach for allowing me to raise the issue of the political and economic situation which flows from the Greek election result. I am glad the Minister of State, Deputy Harris, is here to deal with this question and I look forward to hearing his initial observations. I heard him being interviewed on a radio show yesterday morning on which he gave a comprehensive analysis of the situation as it was then and I agree with most of what he said.
However, I disagree with one comment he made, which I have also heard from other Ministers and commentators, both domestic and international. This was the phrase, "We are not Greece". I appreciate the social, economic and political problems of Greece may be different from ours, but we should stop using the phrase, "We are not Greece". Greece is one of the most ancient civilizations in the world and Greece, the home of democracy is a cultured, learned place. It is part of the European Union and of the eurozone. The Greeks are our brothers and sisters in the European project and it is in our interest and theirs that we try to progress and move forward together. Greece is much more than feta cheese and post cards. It is an ancient democracy and we all have an obligation to try to ensure its continuation, economically, socially and politically and to work with the Greek people and the new Greek Government in that regard.
That said, we must reflect seriously on the election result. To change the emphasis, I would say we should beware of Greeks bearing political gifts. Not just in Greece but throughout Europe, there is a great welcome from both the hard left and the hard right for the election result in Greece on Sunday, an election result where 36% of the people - not 50%, 90% or 100% - voted for a political party made up of former communists, Maoists, Trotskyites and people with a view of society and politics the majority of us would not share. We must respect the result of the Greek election, but we must also see the dangers as much as the opportunities.
We must add a note of caution for people who believe some magic economic formula has been delivered by the Greek people on Sunday and urge a degree of calm. We must do so, because where the extreme left is politically successful, not just in Greece but across the European Union, be it in Spain, Italy, or Ireland, this is mirrored by the extreme right. Both extremes will thrive on chaos, confusion and fear.
We all know what the problems in Greece are - a huge lack of structural reform, a taxation system which does not appear to work and which certainly is not bringing in the required tax revenue, a complete lack of political reform and a welfare system that does not provide for those most in need. All of these problems will not simply disappear overnight.
The issue I am addressing relates to Greek debt. That was the focal point of the elections. The new Prime Minister sent the message, although it appears from his article in the Financial Times last week that he is slightly back-tracking from it, that there was a magic solution, that one could simply wipe off debt and expect to go to the same people three, six or 12 months later to seek to borrow more money, even though one had refused to repay one's loans. That is fantasy land economics and we cannot allow it to go unchallenged. We must also appreciate that the people of Greece, the majority through no fault of their own, are burdened with a massive national debt of 175% to 180% of GDP. That is a challenge that must be tackled and it must be tackled with creativity and imagination but also in a commonsense fashion. We must refute the idea that there is a simple solution, that one can simply make a national debt disappear. However, we must also co-operate with the Greek Administration.
I am a little surprised and disappointed at the general lack of enthusiasm for some type of debt conference. Bringing people around the table to talk frankly about the reality of politics and economics and the fact that one cannot wish or write away debt would be helpful, rather than a hindrance. Every country in the European Union, particularly those such as Ireland that have debt issues, could only benefit from further frank exchanges in that regard. I am disappointed at the dismissal of the idea of holding a debt conference, but I look forward to hearing the Minister of State's observations. I appreciate that it is only 48 hours since the elections and that the current position is not static, but we must be vigilant about both the economics and politics of Greece and the broader eurozone and the European Union.
I am pleased to give my initial view and the view of the Minister for Finance, Deputy Michael Noonan, on the consequences of the recent elections in Greece and thank the Senator for providing me with the opportunity to do so. While he has acknowledged that it is only 48 hours since the elections and that the new Government was only formed yesterday afternoon, it is timely and important that we begin this discussion in the House today.
Syriza clearly won the elections and has formed a coalition with the Independent Greeks. The ruling coalition will have a combined total of 162 seats in the 300 seat Parliament. The Irish Government wishes the new ruling coalition in Greece the very best in the challenges that it will face. I speak for all in the Government when I say I am particularly encouraged that the new Greek Government has committed to continued membership of the single currency. That is welcome and I am sure Senators on all sides of the House also welcome it.
Now that the elections are over and a new government has been formed, we will wait to see what proposals are brought forward, specifically relating to the high level of public debt in Greece. The Minister, Deputy Michael Noonan, attended the eurogroup yesterday, which was also attended by the outgoing Greek Finance Minister. It is important to stress that this was the normal scheduled monthly meeting of the euro area Finance Ministers. Furthermore, the Minister, Deputy Michael Noonan, highlighted that the eurogroup was the appropriate forum for discussions with Greece and other programme countries. On the Senator's comments about having a full and frank discussion, this takes place at the Eurogroup. I represented the Minister at the eurogroup in December and there are full and frank exchanges, with discussions specifically on the challenges facing programme countries and debt levels. The most likely scenario is that discussions will take place at the next scheduled Eurogroup meeting in February. In that regard, the president of the eurogroup has stated the eurogroup is ready to work with the new Government in Greece.
I am sure the new Greek Government will prioritise its discussion with the European Union in the coming days and weeks. The current Greek programme of financial assistance was due to expire at the end of last year but was extended by two months until the end of February to allow conclusion of the fifth review by the troika. Subsequently, the fifth review was halted by the presidential and ensuing general elections. There is a great deal of work to be done between now and the end of next month, which is a crucial timeframe.
Key to the discussions on the Greek programme will be the issue of debt sustainability. The vast majority of the Greek debt is official debt and is owed to European taxpayers and the IMF. Indeed, before entering a programme, the Irish taxpayer provided almost €350 million to Greece by way of bilateral loans.
There is nothing on the table yet in terms of proposals and it is up to the Greek Government to make formal proposals. Prior to any formal proposals from the Greek Government it would not be appropriate for me to speculate on the position of the Irish Government on the matter. However, I reiterate the comments of the Minister for Finance, Deputy Michael Noonan, last night to the effect that Ireland will work constructively at Eurogroup level to find solutions that are in the best interests of all our citizens.
Reference was made to the consequences for Ireland. It is worth reiterating that Ireland is in a decidedly different position to Greece. This is not to make the flippant "Ireland is not Greece" comment. I take the point Senator Bradford made about European solidarity, the importance of the Greek nation and its contribution to civilisation and democracy over hundreds of years. Nevertheless, we are in a very different economic position and this is the point that I and my colleagues have tried to make.
As a small open trading economy we have managed to emerge from the economic and fiscal crisis. The economy is now growing and, most important, jobs are being created. We have successfully exited the EU-IMF programme. In the most recent budget we were in a position for the first time to invest further in public services and to reduce the tax burden on individuals. The people have made major sacrifices to achieve this economic and financial stability and that should not be taken for granted. I assure the House that the Government will continue to act prudently and in the best interests of Ireland at all times. We will continue to use the available resources to invest in jobs and public services.
Moreover, we are in a very different position when it comes to debt. Ireland's debt levels are sustainable. We can now borrow at record low levels. This stability is opening up opportunities to achieve further savings. As Senators will recall, before Christmas we replaced €9 billion of IMF debt with cheaper market debt. The intention is to similarly re-finance a further €9 billion in the first half of this year. These early repayment transactions will deliver a saving of over €1.5 billion over the lifetime of the loans. The IMF re-financing builds on the progress made in our negotiations on debt in recent years. We also restructured the promissory note, reducing the State's borrowing requirement by €20 billion in the coming decade or so. We have succeeded in gaining concessions from our European partners in the form of maturity extensions and lower interest rates. The maturity extension removes a market re-financing requirement of €20 billion from the period 2015-22 while the interest rate reduction delivers savings each year in the annual budget. Furthermore, our net debt at the end of last year was a little over 90% of GDP. This does not take account of the value of the banking assets.
While financial markets in Greece have been adversely affected through declines in the stock markets, capital outflows and increases in bond yields, markets appear to be treating Greece as an outlier rather than a source of contagion. This is encouraging and suggests that the institutional reforms of the euro area are now having the desired impact. I thank Senator Bradford for giving me the opportunity to outline my view and the view of the Minister for Finance, Deputy Noonan, at this initial stage in response to the Greek election.
The Minister of State referred in some depth and length to the consequences for Ireland. I call on him to comment briefly on the political consequences in view of the shallow analysis and selling of the message by certain extreme groupings, at home and abroad, to the effect that there is a simple solution to the Greek problem and, therefore, a simple solution to our debt problems in this country.
I agree with Senator Bradford. I too was encouraged by the op-ed from the now Greek Prime Minister in the Financial Timeslast Wednesday. While I do not agree with every word he wrote, I welcome the fact that he referred to wanting to engage, work constructively, make debt sustainable and seek restructuring. This attitude of wanting to work with partners in Europe is what the Minister, Deputy Noonan, and the Government are keen to see happen above all. We cannot have any unilateral steps. I welcome the fact that the Greek Government is committed to working with partners.
It was interesting to hear some Members of the Oireachtas, or, certainly one, talk of wanting to take not only an aeroplane but a bandwagon to Athens. Ireland is not Greece. I am going to say that again and I believe it, because no matter how many times someone wishes to try to make a direct comparison between Ireland and Greece for the purposes of short-term political populism, it does not serve the taxpayers or the citizens of this country, nor, for that matter, does it serve the citizens of Greece.
There is no magic wand solution. I am not suggesting that this Government has necessarily gotten everything right, but the people have shown that by working together and pursuing the policies that the Government has pursued relating to growth, job creation and investment, where possible, as well as reducing tax on work, we can actually grow our way out of fiscal and financial difficulty. This will now be the challenge for Greece. The efforts of some in recent days to use the opportunity of a Greek election to score cheap political points in Ireland does not serve the interests of Irish taxpayers and I do not imagine it will do too much for Greek taxpayer either.