European Stability Mechanism (ESM) chief Klaus Regling admitted errors in handling the Greek economic crisis, which he characterised as the worst since the Great Depression.
“It would be arrogant to say we did everything right in Greece. There was no script for this crisis, the worst since the Great Depression. Private sector participation, for example, in which private holders of Greek government bonds had to forego more than €100 billion in 2012, should have come earlier. But in principle, we acted correctly: following the example of the IMF, the euro countries granted rescue loans, which were tied to strict reform requirements. If the reforms continue, Greece is on the right track,” Regling told Spiegel Online in an interview.
The suffering of Greek society
Regling, asked what he personally learned from the crisis, underlined the huge social and economic impact of the adjustment programmes on Greek society.
“I have developed tremendous respect for the Greek people, who have had to accept painful adjustments. Wages, salaries, and pensions had to be cut by up to 30%. The number of employees in the public sector also had to be significantly reduced. I wish that this adjustment was more appreciated in Germany. These cuts were essential to restoring sound public finances and competitiveness. The Greeks have accepted them because they want to stay in the euro area,” said the ESM chief.
Perpetual tight fiscal surveillance
Regling stressed that Greece will remain closely linked to the ESM and under tight surveillance well beyond the formal exit from the bailout memorandums on 20 August.
“The end of the ESM programme for Greece on 20 August is the epilogue. But Athens will remain closely linked to the ESM. With €204 billion in rescue loans, we are Greece’s biggest creditor. Given our long maturities and low interest rates, Greece saves around €12 billion in debt servicing costs on its budget every year. In addition there is our debt relief, which comes without cuts in the debt or costs for other taxpayers. For these reasons, Greece will be under closer surveillance by the ESM and the other institutions after its programme end than the other programme states,” Regling said.
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