The new Greek government
Prime Minister Lucas Papademos has no party affiliation

Added on November 23, 2011 at 16:03 Italian time
Finally, the Greek ND leader Samaras has changed his mind and is now in “full” support of the austerity and reform measures as requested by the EU. The letter to the EU, the Eurozone group, the ECB and the IMF was made public today. Without a written statement by all Greek leaders, the EU threatened not to pay the next 8 billion euro in aid needed by December 15 in order to avoid bankruptcy.

Article added on November 10, 2011 at 13:41 Italian time
Finally, the new Greek unity government has become a reality. Lucas Papademos (*1947) is the new prime minister. Papademos has no party affiliation. From 1994 to 2002, he was the governor of the Bank of Greece. From 2002 to 2010, he was the Vice-President to Jean-Claude Trichet at the European Central Bank. In his position as Vice-President of the ECB, Lucas Papademos warned EU countries, including Greece, of the dangers of excessive sovereign debt. Together with Trichet, he was instrumental in the ECB's buying of sovereign debt of eurozone countries heavily affected by the debt and financial crisis. Papademos acted as the head of the Bank of Greece when his nation joined the EU zone with manipulated data. Despite those “mishaps”, notably the ECB leaving the field of monetary policy for the field of fiscal policy and increasing the European towers of sovereign debt, turning the ECB from a monetary into a political institution, Lucas Papademos is considered an able economist. As head of the Greek government, he financial expertise will be in high demand. However, even more importantly will be his assertiveness skills, his enforcement capacity to carry through the structural reform Greece needs. Described as an affable, kind person, Papademos will have a lot to do. Greece - much like Italy - does not lack ambitious plans, decisions and laws. It lacks the practical implementation, the enforcement of reforms.

As Prime Minister, Lucas Papdemos will be the key figure to carry through a program of debt reduction and revitalization of the Greek economy. Greece has to become more competitive by adopting even lower salaries and pensions. The companies need to produce with lower unit production costs. The quality of products and salaries has to increase. Foreign direct investments by competitive companies are desperately needed.

There is no more time for Greek hobbies such as tax evasion, corruption and strikes. The shadow economy has to be reduced. VAT and other taxes cannot be further increased. The rich with their villas, pools, yachts, fancy cars and bank accounts in foreign countries will have to pay their fair share in taxes in other to improve the infrastructure, including schools and universities.

The tax authorities need to get their act together, buy new computers and hire competent employees who can bring order into the bureaucratic mess. A land registry for both public and private properties is needed to assess both the taxes to be paid as well as to know what the state owns and therefore can sell aka privatize.

Greece has to reduce its bloated bureaucracy. State enterprises have to be privatized. State buildings will have to be sold to raise capital. The new government of national unity can only start further political, economic and financial reforms. On February 2012, early elections will take place and lead to a new political constellation.

The countries of the eurozone are no longer ready to support the Greek theatre without consequences. Already a few days ago, after a meeting of the finance ministers of the eurozone, the leader of the Euro-group and Prime Minister of Luxembourg, Jean-Claude Juncker, made clear that the new Greek government would have to give written guarantees that it will continue on the path of austerity and reform measures as agreed in the bailout. Without the fulfillment of the agreed savings and reform targets, there would be no new credits for Greece.

With its public debt at 165% of GDP, the Greek future won't be sweet and candy. The Eurozone reform plan for Greece with its voluntary 50% haircut of privately held Greek sovereign debt is far from being ambitious enough. The cut on the overall public debt should reach 60% to 70%. This would allow Greece to bring its public debt down to roughly 60% of GDP as requested by the Maastricht Treaty. The eurozone countries themselves will have to adapt to reality too.

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