Marcel Fratzscher (DIW): There will be a political solution for Greece at the highest level

Marcel Fratzscher (DIW): There will be a political solution for Greece at the highest level

Athens, June 9, 2015/ Independent Balkan News Agency

By Spiros Sideris

The belief that there will be “a political solution at the highest level” for the Greek issue, expressed in an interview to AMNA, the head of the German Institute for Economic Research (DIW), Marcel Fratzscher, one of the most important economists in Germany and with one great influential in Berlin.

“The German government is paying close attention to what the institutions say, but eventually there will be a political decision. It is now time to find a solution. The challenge is so important that there should be a solution at the highest political level”, Fratzscher says and adds: “For four months now negotiations take place at a technical level and now there is the need for a political decision, which naturally should have a content. The fact that Mr. Tsipras, discusses with Mrs. Merkel, Mr. Hollande and now with Mr. Juncker is both necessary and important”.

The President of the Economic Research Institute, supports the development clause in the repayment of Greek debt. “My suggestion is to link the payment of interest on loans to the growth of the Greek economy. If there is no growth like things are now, Greece will not pay taxes. I am neither friend nor opponent of Mr. Varoufakis. I am a friend of good ideas that improve the situation and that is why I think the proposal is correct, because the Greek government in this way assumes more responsibility, alleviates the burden of Greece’s debt and also makes sure that at some point in the distant future, when Greece recovers, it will be able to service its debt and interests, while the Greek people will be able to stand the burden of debt. This I think is a good compromise”, he notes.

Fratzscher is convinced that there will be another haircut on the Greek debt. “Even if the issue of a haircut is taboo at this moment in Europe and Germany, I am deeply convinced that there will be another haircut. There is no alternative for this, if not immediately later, when it is made evident that the debt burden is simply too big. Part of the EUR 240 billion was used for the repayment of debt and interest. Yes, one can say that they didn’t remain in Greece… I do not know the exact figures, but certainly more than half have been used to repay the debt to lenders.

Marcello Fratzscher argues that the new Greek government is “an opportunity for a new political beginning. Greece needs a political earthquake, a political renewal. That is why I think it is sad that they did not use this chance… the Greek Government rightly argues that we must deal with social injustices, to see how people will ensure minimum living conditions. In this the government I think is right. As a failure I consider not giving a clear message that they want to renew the country economically and politically. I have not yet seen a concrete plan on how they wants to move the country forward… The main problem in Greece is the management. A modern economy needs sound, efficient public services. The global financial experience shows that 70-80% of long-term success depends on the quality and operation of government agencies. This is the main problem in Greece and one that can’t be solved in 2-3 years. It is an evolutionary process that takes years, if not decades, but has to start… We have reached a point where the economic damage of Greece is so large that it can hardly be reversed. That’s why we made a call (the German Institute for Economic Research DIW, of which he is the head and the two groups Glienicker and Eiffel, which are constituted by eminent intellectuals from Germany and France) entitled “Help Greece”, published 2 weeks ago.

“Absolutely convinced that a Grexit in all scenarios, even in the case of internal default is the absolutely worst solution. For this sound I sound the alarm within Germany as well, because there are some who want to expel Greece from the euro. And to them I say that a Grexit is the worst solution for Greece, Germany and Europe. Greece is preferable to remain in the EU and the eurozone, because such reforms are difficult and are easier implemented and better applied in a community, which has the same objectives and democratic structures”, Fratzscher concludes.