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DERMOT MURNAGHAN: Now Greece joined the euro more than eleven years ago but today’s elections could lead to it being forced eventually to drop the euro. Joining us now from Athens is the man who was Finance Minister when the euro was adopted, Yiannos Papantoniou and very good of you to join us, Mr Papantoniou. Can you tell us first of all before we move on to the elections about those reforms that you helped to implement back in the 1990s that prepared Greece to enter the euro, do you feel that they were actually badly designed or that they were just not implemented properly?

YIANNOS PAPANTONIOU: No, neither one. The fact is that Greece undertook an enormous effort to join the euro in the year 2000, during the 90s, by a very dramatic and drastic piece of consultation, inflation fell from 15 to 2% in the course of five years, privatisations took place, enormous effort was undertaken. The problem is quite the reverse, is that once Greece – and not only Greece, the other southern European countries joined the euro and therefore stopped because southern European joining a strong currency union of low inflation, low interest rates and financial stability was enough to guarantee endless prosperity and this was equal for Italy, for Spain, for Portugal and Greece of course. Greece was a more extreme case but the same pattern occurred elsewhere as well so there was fiscal laxity, there was enormous wage growth, Greeks and the Spaniards and the other southern Europeans did exactly the reverse of what the Germans had done during the last decade where there was fiscal rigour, fiscal discipline and an essential wage freeze, the reverse happened in the south. So bubbles have emerged and these bubbles have erupted with the global financial crash in 2008 so we pay the price of a lost decade. This is the actual truth regarding the Greek reform process. It was very dynamic in the 90s, it stalled completely in the years after the year 2000.

DM: It’s interesting, that analysis, because what you seem to be saying is with that dynamism in the 90s, it would have been better if Greece, although it was preparing to join the euro, if it had stayed outside it then.

YP: Well there was no point in staying outside because the efforts of the 90s did very good to the Greek economy because it improved competitiveness and ensured ten years of very high growth and we had growth rates equal to 4% with inflation being as low as 2% so it was very good for the people. The problem was, as I said, in the last couple of years of that decade of high growth there was no real growth, it was financial growth with lots of bubbles and the bubbles erupted, but this was not possible to forecast in ’98, ’99 or the year 2000. All this happened after the year 2005.

DM: Okay, well that’s the history and now many people say the Greeks have the future of the euro in their hands. How are you reading these elections, do you think that the outcome will be any different from six weeks ago, that a government can be elected and then a coalition formed that will deal with these pressing issues about the austerity package?

YP: …the two main parties, the two parties that emerged victorious at the last election will be very reinforced today from something like 36% sum total they got a month ago, they will probably be getting something like 55% at the expense of the smaller parties. The critical question is which comes first, New Democracy which has a pro-European line or Syriza which opts for a confrontation with the eurozone which risks leaving Greece to default and eventual [inaudible] so essentially the second difference is that this election is a referendum about staying in the euro. People know precisely what they are voting about today, whether they will vote for policies that will ensure or guaranteed continued membership or offer policies that will lead Greece out of the euro.

DM: And do you believe there is any room for manoeuvre? You say it is a referendum on the euro, it’s also a referendum on whether the Greek people want the newly elected government to re-approach Europe and to re-approach the German Chancellor, Angela Merkel, and say loosen things a bit, we can’t grow, we can’t possibly grow our way out of these problems with these austerity measures in place.

YP: This is very right what you say but all parties believe in this, the difference is that Syriza wants to achieve this through confrontation with all the risks that this entails, while the other parties, the pro-Europe parties, want to achieve this by negotiation but of course negotiation has much more limited demands that confrontation would carry. The demands or the aims, objectives of a negotiated deal, a new negotiated deal with the eurozone are these, first of all extending the timetable for fiscal deficit reductions so as to give Greece time to breathe. Secondly, to achieve a commitment on the part of the Europeans that there will be no further income cuts and pensions, salaries and no further tax rises, in fact an immediate tax reduction is important symbolically. And further European Marshall Plan with development assistance, investment aid plans, loans from the European Investment Bank to sustain economic activity, create new jobs and also orient regrowth towards new sectors, not necessarily the traditional ones like shipping, like tourism, like construction but the new sectors like high value added services, like renewable energy, sectors which are more promising for Greece’s future so this is the aim of this negotiation provided of course we get the agreement of the Europeans. I believe a new context is being shaped in Europe with Francois Hollande in France, with the pressure of almost everybody to the Germans to loosen up the austerity stance. There is substantial space for achieving a satisfactory new deal with Europe.

DM: Ah, but you know as well as I do that the buck stops, the euro stops here in Berlin and you know as well as I do, I’ve been here for a couple of days and I’ve been talking to people in politics, people in economics, people on the street here and there is no talk of that. They say Greece and others signed up to these plans, they must carry them through. There is no sign of anything being re-negotiated or any relenting in that message.

YN: Right, if you talk about the relationship with the two peoples, the Germans and the Greeks now are sour, there is no question about this because they are divided by problems of substance and . Substance because this excessive austerity has effectively done great damage to Greeks and also the of certain articles in the German press or certain references by German politicians have thought to be very offensive and insulting to Greeks and this is essentially why Greeks and Germans exchanged insults in recent weeks and months. However, the leaderships of both countries have a definite responsibility. They should try to calm things, to cool things and achieve a reasonable agreement and I believe with the help of our French partners and other partners and with a reasonable talk with Mr Schaeuble and Mrs Merkel, Greece can achieve an honourable compromise so far as the new deal is concerned.

DM: Mr Papantoniou, thank you very much indeed, Yiannos Papantoniou there, former Finance Minister who helped prepare Greece for joining the euro.