Is early debt repayment necessary or an idea of government? How possible it is to provide 13th and 14th pensions and salaries to the State as proposed by the opposition. The professor at ESCP Business School, Pntheon – Sorbonne and lecturer at University of Bocconi explains to Liberal why the next bankruptcy is closer than we imagine and analyzes the reasons why early debt repayment unlocks the dynamics of the Greek economy.
Interview with Nikos Tabakopoulos
Early debt repayment is at the forefront of the news. The opposition accuses the government of idealizing and how it could channel this money into benefits. What do you think?
In the case of Greece, the option of early repayment of debt is the most economically appropriate one. When you have a heavy past like Greece and have managed to build trust in the markets with budgetary discipline, the move of early repayment sends a signal of credibility. It's not much of the years we've returned to the investment level and no one forgets the period of the memos.
The timing of early repayment is flawless in financial conditions. From the point of view of economic marketing, it was and remains a good choice, especially in the period we are going through with bond markets and general uncertainty in the investment public.
Soon, by the end of the year, I believe we will be borrowing cheaper than Italy, the total debt position of which we will leave behind with the planned early repayment. At technical analysis level we need to see when the debt paid and in what terms was issued. When Greece borrowed the debt that is now being repaid prematurely the country was at the limits of bankruptcy, in the nadir of its financial credibility and the interest rates imposed on us were accordingly. In general, the opposition refers to cash flows that will be absorbed in the short term by debt repayment, but overlooks the savings in cash flows over the coming years guaranteed by traffic. I think the move to early repayment is strategically and economically sound.
But the opposition is proposing benefits instead of early debt repayment... 13th and 14th wages and pensions are asking.
There is also the budgetary ceiling, let us not forget it, even though we are talking about a government strategy. The truth is that our temporary flexibility is reduced by debt repayment, but this move allows us to borrow in more favourable terms than markets in the future by showing a much lighter exposure to debt in our books. We can improve the country's image, but also develop in the coming years with lower lending costs and more extensive access to investment categories.
To be sustainable, debt must be trusted by the markets. Financial reliability is built so with the right «numbers» support you, as well as with intangible capital, such as stability, track record you record with your creditors over time, showing strong strategic orientation. I think that one of the great comparative advantages of the current government is the restoration of image abroad, the network of relationships it has created and fed with historians and new partners and with international markets. The image of Greece abroad has changed radically.
The benefits requested by the opposition, what do you call them?
I find the benefits that the opposition tends to have reduced and obsolete, heavy myopic. All this parochism, populism creates conditions to lead to the next bankruptcy. The benefits of this favorite for decades I find it impossible to implement with the characteristics and structure that we have as a country fiscal and demographic and we are not the only ones among Western economies with these characteristics. The Greek opposition today reminds me of a 13-14-year-old child who has never been out of the country, does not understand financially and how markets think and simply suggests what she considers to be popular in the most attractive numerical social strata they vote on.
You know what? I could easily understand the opposition's proposals to give the money that premature repayment will commit, for example, to investments, serious productive investments. To maintain the present debt because we choose to invest in Artificial Intelligence, industry, improve the skills of Greek workers, not again in non-viable benefits that simply stress the budgetary limits. Especially to the left of the centre, the opposition is talking permanently and exclusively about benefits, never about creating the cash base that will secure benefits. Money doesn't come out on trees...
Have we learned anything about recent bankruptcy?
I'll definitely say what mentality we don't have. The example of the teenager is a feature I mentioned above. This teenager does not understand particularly from an economy and inexperience along with his dreamy young man of his age excludes any serious view of what will happen in 10 or 20 years. He understands little mathematics and makes suggestions based simplistically on five. «beans» on a small table beyond which it has no visibility. But the economy doesn't work that way. There are very concentrated dynamic, complex international conditions and variables unknown.
So you agree with the government, Kyriakos Pierrakakis and more generally with the early repayment of the debtth.
Absolutely. It has become a fine reconstruction of our international image. I see this very important and it shows that there is a design. We have built important international relations not only at economic level, but also at geopolitical, strategic and energy level. I see a plan clear and serious and commitment to its implementation.
In the recent bond crisis we saw that our country had a better deal than France or Italy. What's that because of?
As long as one looks at where we are on credit rating today and we have surpassed countries we used to see with the binocular. Large houses the outlook they give (for example S&P) are excellent. And all this when Italy, France and even Germany are in trouble. Greece has a completely different picture, a reality that seemed unlikely a few years ago. For our data, the management we have seen in recent years has restored relations with markets. I live abroad. I know how we were seen and what we represent today, the news that is praising us in an international press at last. Jumps have been recorded.
