Pavlopoulos: Greece’s smooth growth course depends on public debt relief

“Greece’s smooth growth course depends to a large extent on relieving its public debt so that it becomes manageable and not just ‘sustainable’ in technical terms,” President of the Republic Prokopios Pavlopoulos said on Thursday. The president made the statement while announcing the opening of a conference organised by the Economic Chamber of Greece on “The Greek Economy After the Closing of the Third Adjustment Programme,” which is being held at the STAVROS NIARCHOS Foundation.

In his address, the president referred to the Greek economy in the context of the European and international economic environment, pointing out the need to ease Greek public debt and recalling the obligations and commitments made to Greece by its partners, including the proposal of the French President, Emmanuel Macron, which links Greece’s public debt repayment to a “growth clause.”

The Eurozone must understand that its real “enemy” today is not the deficit but the debt, he said, adding that the growth clause changes the rationale for public debt servicing, according to which repayment was made irrespective of the rate of GDP growth, without taking into account whether the country’s growth rates were below the target.

Macron’s proposal is based on the assumption that the most sustainable way of dealing with debt is primarily through an increase of growth rates. The aim is to provide sufficient flexibility in debt repayment so that annual burdens do not depress the economy, as unfortunately was the case in the first few years of the memorandum. In this context, Pavlopoulos said, there could be an agreement for lengthening repayment periods and reducing interest rates, while also offering sufficient guarantees to lenders, as well as intensifying reforms and changes to boost growth within the country.

Macron’s proposal is as modern and effective in ensuring the manageability of Greece’s public debt, as it is common knowledge that the most appropriate way of dealing with a sovereign debt crisis is to stimulate growth in a country: The higher the growth rates, the more a country’s public debt management is reinforced, given that the size of the public debt depends, directly and absolutely, on the magnitude of its GDP,” Pavlopoulos noted.

At the same time, he described Greek debt relief as an important reform for the Eurozone’s defences in general, noting that it would be another mistake on the part of European institutions to view the Greek public debt problem as “foreign” to the more general problem of the Eurozone, given that at least a significant part of the Greek sovereign debt problem is also due to the generalised debt crisis within the Eurozone.