OPPORTUNITIES AND CHALLENGES IN GREECE TODAY.

Speech of former P.M. of France Laurent FABIUS

Publisher of www.Apodimos.com Fafoutis Xenofon

Despite the current economic situation and awaiting the decision of solving the problem of Greece to implement the activation mechanism of support in Greece today there are challenges and opportunities in Greece and we will know the following information to us. This will update all the Greeks, Cypriots and our Emigrant brothers that successfully held the conference organized by the Research Centre for Progressive Policy (CFSP) in cooperation with the Capital Links in Athens on: «Challenges and Opportunities in Greece Today», Friday , April 23, 2010 in Athens Concert Hall (D. Mitropoulos Hall).

The Conference was held under the auspices of the Ministry of Economy, Competitiveness and the Marine and was designed to explore the prospects for investment in Greece towards exit from the crisis. The current difficult conditions create a number of challenges for both government and businesses, but also present major opportunities for those with long term. Topics discussed during the event was the investment environment and experience of business, investment in the energy and innovation and the prospects of foreign investments in Greece.

So this interesting conference will present it in two sections, the first the speech of former Prime Minister of France Laurent FABIUS and updating the new articles we will present the issues discussed during the event was the investment environment and business experience, investments in the energy and innovation and the prospects of foreign investments in Greece.

Let us know now the organizers of the Conference:

• CENTRE FOR PROGRESSIVE POLICY RESEARCH (KEPP)

KEPP was founded in November 2006, aiming to study and initiate progressive ideas and policies that reliably answer the problems of public life nowadays. KEPP realizes research projects and public events, organizes meetings of reflection and dialogue, and coordinates the production of policy oriented papers and books.

Until today, KEPP has organized numerous events with different thematic contents (economy, international policy, reforms, health, environment, welfare state, shipping, globalization, education) and has published four books – thematic volumes, on various policy issues: For a Progressive Policy – Kastaniotis publishers, 2007, Orientations for Progressive Governance – Papazissis publishers, 2009, Interventions for Europe – Papazissis publishers, 2009 and After Ten Years: Euro’s Dynamic – Papazissis publishers, 2010.

• CAPITAL LINK

With its headquarters in New York and presence in London and Athens, Capital Link has been active since 1995 in the field of Investor Relations and Financial Communication.

Its activities focus mainly on three areas: 1) Linking companies with strategic and institutional investors, bankers, analysts, and the financial media in Europe and the United States, 2) American Closed-End Funds and ETFs, 3) Listed shipping Companies. Capital Link's programs combine IR, IT and financial media in one comprehensive package enabling Companies to maximize their penetration and recognition in the global investment community (www.capitallink.com).

Capital Link maintains close collaboration with the three main US Stock Exchanges (New York Stock Exchange, American Stock Exchange (now part of NYSE) and Nasdaq), the London Stock Exchange, the Athens Stock Exchange as well as numerous companies in Greece, Europe, US and Chile. Capital Link has a leading position globally in the area of Investor Relations with respect to shipping, as it cooperates with 25 shipping companies listed on the three US Stock Exchanges, as well as in London (LSE and AIM) and Milan. It maintains a shipping portal with information on all UK and US Listed shipping Companies (www.capitallinkshipping.com ) . It also organizes annually in New York, London and Athens a series of Investment Forums focusing on its main activity fields (www.capitallink.com) and has also introduced a series of maritime indices (www.maritimeindices.com).

At the Conference on «Challenges and opportunities in Greece Today» witch organized by the Research Centre for Progressive Policy (CFSP) in collaboration with the Capital Linkstin Athens, keynote Speaker was former Prime Minister of France Laurent FABIUS, who before the start of his speech had a discussion with former minister and President KEPP Yannos Papantoniou.

ATHENS April 2010

Let us follow the speech of former Prime Minister of France Laurent FABIUS

Dear Minister Yannos Papantoniou,

Ladies and Gentlemen Presidents,

Ladies and Gentlemen, dear Friends,

I am pleased to be among you today at the time of this conference on “Opportunities and Challenges in Greece Today”.

I don't intend to add my name to the long list of experts currently busy advising Greece. I'll limit myself to emphasising that the efforts already decided by the Greek government are courageous and that Europe must support a member of its family. Even if the member countries don't do it out of generosity, they should at least do so selfishly : no or almost no countries are safe from the fearsome conjunction of the global volatility of economies, the errors of some policies, shortcomings of European construction and the forces of international speculation. I will simply say on the major topic that, to me, European solidarity with Greece is an absolute necessity. I'll focus rather on an adjacent topic, forming a kind of backdrop to the Greek crisis and the economic situation of various European countries: 'what European economic government?'

I use the expression 'economic government'. Others prefer the expression 'economic governance'. You can speak for ever on terms and differences. I feel that 'governance' is in fact a 'government' that doesn't dare to secure the means to govern. If you prefer the expression 'economic steering', why not? But even by substituting 'steering' for 'governance' or 'government', and since we share an economic union and even a monetary union, we cannot dodge the issue of knowing about who 'steers' it and how. This is what I wish to talk to you about.

I'll recall first of all in a few words, these subjects being familiar to you, the main mechanisms of the operation of the Economic and Monetary Union (EMU).

Referring to the European Union (EU), as you know, it was legally set up by the Maastricht Treaty of 1993. The latter has since been amended by the Treaties of Nice (2001) and Lisbon (2007). The member countries came to an agreement on quantitative criteria to bring their economies into convergence with a view to a monetary Union. The basic principles were defined at the outset : there are called the single market and free competition, subsidiarity, tax autonomy of member countries with the no bail-out principle which bans Member States from assuming the financial commitments of a national government, and the almost total absence of financial transfers between member countries (joint spendings which stood for 1,18% of GDP 10 years ago, fall to 1%). Some of these principles appear, through time and experience, less relevant than others. According to J. Delors' wise remark, the EU forms an 'unidentified political object', backed up by an institutional triangle: the Council, Parliament and Commission. I want to add that an aid mechanism has been provided for by the EU in the event of a balance of payments crisis. But this facility, which can be used for EU Member States cannot be mobilised for EMU members. It is a joint EU, IMF and World Bank facility and is therefore subject to strong economic and budgetary conditionality. Three countries - outside the EMU today enjoy this aid: Hungary, Latvia and Romania.

Referring to the European Economic and Monetary Union (EMU), it is characterised by a shared currency and monetary policy, today grouping 16 countries. EMU admission rules have been defined precisely but no exclusion clause has been laid down. As you know, the ECB is in charge of EMU monetary policy and all euro banking operations. It is independent. Its main aim is to ensure price stability, defined as under but close to 2%. European Union countries can join EMU if they comply with the five economic convergence criteria, the famous 'Maastricht criteria': stability of exchange rates, stability of prices, low long-term nominal interest rates, budgetary balance under 3% of GDP and public debt under 60% of GDP. The Eurogroup, which provided itself with a President gathers the Ministers of Finances of EMU Member States.

This description, albeit rapid, of the observation of practical functioning underscore a certain number of problems epitomised by the Greek situation. First, there is something of a legal grey zone, and even some contradictions between these various instruments. For instance, Article 125 of the Lisbon Treaty (former Article 103 of the European Constitutional Treaty) excludes any bail-out by the Union or by a Member State regarding the financial commitments of another Member State. However, Article 122 of the same Lisbon Treaty (former Article 100.2 of the Constitutional Treaty) specifies, for its part, that 'where a Member State experiences severe difficulties... owing to exceptional occurrences beyond its control, the Council, on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the Member State concerned. The President of the Council shall inform the European Parliament of the decision taken'. By reading these two articles, it seems like we are hearing the former chairman of the US Federal Reserve Alan Greenspan who, when he used voluntarily obscure speech, used to explain: “if you understood exactly what I meant, it means that I have not said it the right way!”

In practice, the Maastricht criteria are flagrantly undermined. At the end of 2009, almost no longer any Member State complied with them regarding public finance. The same will apply in 2011. And yet applicant countries are obliged to comply with them! In fact, from a purely arithmetic viewpoint, the 3% public deficit rule stabilising public debt at 60% of GDP is applicable only if real EMU growth is 3% ; this is unfortunately not the case. Further, these criteria scarcely address the real convergence of economies ensured by lesser differences in the trade balance or balance of incomes. Nor, by fixing uniform ratios, do they take account of certain asymmetries between countries, related in particular to production specialisations. This is a very important aspect. Eurozone countries are more or less industrialised. They have more or less large construction sectors, and have made more or less intense efforts to upgrade their industry, which can be measured by their research and development expenditure. These various production specialisations can lead to various shocks and cycles but above all to various medium term evolutions of economies. Countries of low industrial size and that have not upgraded their industry much have more limited prospects of productivity gains than others, and therefore more limited potential growth. This is true in Spain, Italy and Portugal. However, when the long term growths of Member States differ, there is no corrective mechanism: no common tax, no public transfers between countries, no true genuine labour mobility between countries and, of course, no devaluation.

Before the crisis, the real situation was frequently hidden by the rise in private indebtedness: all of this has now come to light. And monetary speculation has taken advantage of it. Of course, the European Union is trying to secure the means to react to financial crises and speculative attacks – this is essential –, but we have still not settled the Eurozone issue, and the lack of mechanisms allowing the avoidance of excessive diversity, in other words a high disparity of per capita real income. Also, the financial markets appear as the only means of transferring savings in Europe, which is questionable in a monetary union. Current account differences should not be significant since they can be funded in the last instance by the ECB. And yet, as the financial markets – and maybe some member States - have not assimilated this mechanism, such differences are imposing a harmful additional funding cost, which could be eliminated by another organisation, in the public sector, transferring savings between EMU member countries.

These factors alone show how difficult it is for EMU to remain in the actual situation, that is to say at 'midstream'. A single currency cannot co-exist in the long term with overly disparate economic realities. We need, if not a totally and rapidly unified economic policy, at least a clearly more effective economic harmonisation, including to preserve what we have already achieved. This is where European economic steering, the European Economic Government can play an essential role. It requires changes in several fields: the budget, trade policy, emergency support mechanisms, stability and growth pact, and a political counterweight to the ECB. I will merely address here the first two aspects. I will make a few proposals which do not come from preestablished schemes but from my practical experience and observation of the facts.

Ladies and Gentlemen, the budget, – both European and national – forms a foremost economic policy instrument. More generally, it is the main instrument of all public policies. Of course, at a European level, coordination procedures do exist but they are general and not really coercive. The Commission sets forth the broad guidelines of economic policy. The most significant phase – the transmission by each government to the Commission of its triennial public finance projections - has been a quite limited and barely reliable exercise. It is the situation in France anyway. My conviction is that there will be no Economic Government without a change in the present budgetary procedures. The difficulty is to combine the necessary harmonization with the diversity of procedures and especially the respect of national institutions, notably the fondamental rights of Parliaments. In concret terms, a first harmonisation step should concern the economic hypotheses adopted to build national budgets. Everywhere, the choice of these hypotheses partly determines the results, so it is important that they be established together. The price of petroleum, euro-dollar exchange rate and the level of exports and of international trade, the general growth assumptions are some of the data framing the construction of any budget: this data should be discussed at European level and jointly established. This supposes, insofar as national budgets would be voted in autumn (a harmonisation of schedules would be necessary), that joint hypotheses should be defined in May-June by a Eurogroup meeting. They should be defined on the basis of a Commission proposal, during a meeting open to the press. The chosen hypotheses would be immediately notified to each Eurogroup country and would serve as the basis to establish national budgets.

The second step, after the budgetary elaboration work carried out in each State, would take place in September. Each draft national budget would be transmitted to the Commission, which would verify the credibility, efficacy and compatibility of the proposed budgets with the European approach as a whole. Each minister would present his draft and his arguments. A detailed opinion would be adopted by the Eurogroup on each of the budgets, requiring changes if necessary. The draft, where applicable corrected, would then be transmitted to each Parliament to be examined and voted. Here again, the sittings concerned would be public.

A third phase would concern the execution of budgets. This would be the subject of a quarterly examination by the Eurogroup. Each time, an opinion would be given by this body, which could be combined with proposals for action. On the basis of these opinions and the decisions taken or not to comply with them, the Commission could decide various sanctions against a country. The sanction could consist in a refusal to pay all or part of the funds intended for a given State. It could even take the form of a fine. The same procedure would be renewed every year.

Such a method would represent a deep change from the present situation. It obviously raises many questions. Will the Member States accept such discipline? It should be part of the very conditions for joining the euro. Will the Eurogroup and the Commission have the authority and sufficient means to act? Today, it is very uncertain, but still we must do it if we do not want difficulties to be repeated or even get worse. Similarly, progress must be made in the field of national tax systems harmonisation. The best method, which is progressive, seems to be the one of the European “fiscal snake”, that is to say the setting for different national taxes, on a comparable tax base, of a ceiling and a floor between which national rates could fluctuate. It would protect national sovereignties while reducing excessive disparities. In technical terms, the control of figures authenticity should be reinforced. A European rating agency could be created, in relation with the Eurogroup. Moreover, the project of creating a strengthened Secretariat within the eurogroup should be reactivated.

From a political point of view, it is unquestionable that these procedures imply a revival of the European construction, indispensable to prevent Europe from disappearing from the continents which play a major role in the world. Which role will the Parliement have to play? He will have to be associated to each step. The most simple solution would be to have some of his qualified members participate in ministerial budgetary work. I also insist on the necessity of transparency and communication throughout the debates; only this transparency can prevent governments from negotiating among themselves – just like they have done it before- through negotiations contrary to the European interest, a sort of good exchange of bad practices.

On top of these measures, there should be a more substantial European budget allowing effective intervention. Economic government indeed entails the capacity to raise tax revenue. You know that today the European budget stands at only approximately 1% of the EU's GDP, coming from Member States' contributions and above all allocated to agriculture and structural aids for the poor regions. This leaves no true latitude for action to intervene. Obtaining an additional 1% of European GDP, in other words approximately 100 billion Euros, would form a budget strike force. Where could these billions come from? We could think about VAT or green taxes. Over the past twenty years, income from capital above all has taken advantage of European integration, so I feel it would be fitting that it should be the first to be mobilised, after taxes bases have been harmonised. The main difficulty is obviously of a political nature: who would raise this tax revenue? Logically, it's the EU, but it will be necessary to convince hostile countries like Great Britain. An additional tax to national taxes or one substituting for them? The second solution would, of course, be easier to support. Experience shows that this necessary evolution will be difficult to bring about. It also shows that the EU makes progress only at times of crisis. In this case, the present situation promises... future progress.

Finally, let us precise that most of these changes will have to take place within the eurogroup framework, which is the example of what we call in legal terms “a reinforced cooperation”. Some may spread to all EU countries, gathered within the Ecofin for economic and financial matters. Heads of State and government should meet at least once a year in a “Eurogroup configuration” in order to take stock of the overall situation and set directions up.

It is difficult to think of a European economic government without having a relatively precise idea of the economic relations, especially trade relations, between the EU and the rest of the world. The problem here is not that of institutions, because in the field of competition and also in that of foreign trade, the Union, through the Commission, indeed already exercises most of the competences. The “economic government” is not only an institutional affair, but above all an underlying affair. Basically, great differences of approach exist between Member States, that it is vital to clarify and if possible overcome, without retreating into endless institutional debates which have shown their limits over recent years.

According to some influential players in the governing circles of the EU, the famous 'free and undistorted competition' enshrined in the European Constitutional Treaty which never came into being, remains the keystone of the Union and its basic principle. Everything should be done to encourage this competition, and limit rules, protective mechanisms, and aids that could encumber it: within the EU as between the EU and the rest of the world, liberalism must remain the dominating philosophy according to this approach. The economic and financial crisis we have experienced – and which is not yet over for European countries – admittedly leads to taking some precautions; but these ideologists feel it in no way challenges the validity of their doctrine.

For instance, according to them, our trade relations with China, although massively in deficit, would not require any specific global action: the euro should continue to 'enjoy' market management even if the yuan, and the dollar moreover, are, for their part, managed 'politically'; at the very most, regrets should be expressed as to our massive imbalances with emerging countries, but no question of specific 'protective mechanisms', as any protection could well lead to 'protectionism' presented as the absolute evil. With respect to China, we should therefore continue to believe that with more European research and investments efforts, and more commercial consistency on our part and owing to the very quality of our innovations, we could re-establish balance.

Similarly, according to this approach, there would be no question of questioning the performances of Germany and their consequences on the rest of the EU. Germany would have taken 'courageous' decisions in the past, in other words wage compression, it would maintain spectacular dynamism of its companies thanks to that, and therefore this 'model' should be generalised so that competitiveness throughout the EU improves and its place in the world strengthens.

The problem is that these simple ideas are not necessarily true. Admittedly, China's economic development has been based in particular on great efforts of its population which should be praised. But how can we fail to see, also, that it has based itself and still often bases itself on a massive specific public policy: competition distorted by the undervaluation of the yuan promoting Chinese exports; weakness of wages and limitation or even absence of social, health and environmental protections; frequent disrespect for the rules of law and of industrial property. This is why I believe, with an ever higher number of observers and players, that the EU must strengthen its dynamism with respect to China and also provide for some protections, by investing more in the Chinese territory and also by implementing what I would call ecological, social and health locks at the EU's borders. I will sum up the new approach that a European economic government should retain by these words: rather “fair trade” than “free trade”; an open Europe, yes; an Europe for free, no.

A similar problem exists with the 'German economic and social model'. It would be unfair to deny the high quality of German products notably in the equipment goods, or the effort of our German friends to strengthen their place in Europe and their exports. But, contrary to what is often claimed, it is not for the most part with Asia that Germany achieves its surpluses, but with its European neighbours, namely France, Italy, Spain... Almost 2/3 of German exports are done within EU against 4,5% only with China. These surpluses are partly obtained by compressing the pay of German employees. This model is not 'cooperative' with other European States, it feeds rather on their problems. How indeed can the other European States react in the face of the German performances? Not by adapting their exchange rates, as our currency is now the single currency, the euro. Nor by an additional cost of inflation, which would be a false and short-term solution. The probable reaction of European countries faced with Germany is to compress, in turn, their own salaries; but this is then likely to affect the entire European economic and social dynamic, support for internal consumption and even the European social model. The German strategy is therefore a “niche” strategy; it is not extendible to the other States without reducing the living standard of Europeans as a whole. And the theoretical outcome which, owing to these tensions, would consist in an implosion of the euro, would not only be a mess but a likely disaster for Germany itself since the re-introduction of the DM would lead to a massive rise in the parity of this currency and therefore a reduction in German exports. About this, we must – especially us, the French- discuss with our German friends because the Franco-German couple, today very fragile by both countries’ fault, is historically indispensable to the deepening in EU policy, particularly to the implementation of an economic government.

Futher more, the Eurogroup should be able to discuss with the ECB of an objective of exchange for the Eurozone every half-year, which would allow the latter not to be a simple adjustment tool of the world imbalance and other central banks’exchange policies.

I now reach my conclusion. In the recent period, analysis and action have above all focused on the emergency measures to be taken to overcome the crisis and speculation. This is perfectly justified. Recovery and support had to be combined. Bankruptcy and gift-giving had to be avoided. Prevention and management had to be improved. We are not at the end of our efforts and we know it particularly here in Greece. For instance, I feel it would be very useful to create a European debt instrument, a Eurobond which, on the basis of a list of strategic investments, would allow a multiannual funding strategy. But such essential analysis must not divert us from engaging in long term overall analysis on the European economic policy model. We must be more dynamic and more ambitious in our investments, our scientific research, our education but also- I dare to use the word-in our protections. We must reduce our internal disparities. We must provide ourselves with the means to become a genuine Europe-power. Lessons our governments and European Monetary Union must learn from recent events are numerous. The new President of the European Council M. Van Rompuy is responsible for this task. I wish he would ensure that, in the short term, decisions against international monetary speculation are implemented and propose audaciously the implementation of a «European economic government» with a more long term view. I wish for it and I ask for it. This economic government will imply both convergence and solidarity. This is a part and parcel of the new European economic piloting I wish to see implemented. »

Laurent FABIUS

We as Apodimos.com believe that this Conference will help explore the prospects of investment in Greece towards exit from the crisis. Because investment is needed in the current difficult conditions and create a series of challenges for both government and businesses, but also present major opportunities for those with long term. The issues discussed during the event which was the investment environment and experience of business, investment in the energy and innovation and the prospects of foreign investment in Greece, such as investment overseas our Greek and Cyprus emigrant brothers.