Hardouvelis Says Greece Rebounding

ATHENS — The man who will head a team of Greek officials in a Paris showdown with international lenders  – Finance Minister Gikas Hardouvelis – said his aim is to get rid of the overseers who’ve put an austerity stranglehold on the country.

Hardouvelis and a cast of top ministers will negotiate from Sept. 2-4 with envoys of the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) who are expected to press them to continue harsh reforms that have created record unemployment and deep poverty, but which the government said has brought the country to the edge of a slow recovery.

In a wide-ranging interview in The New York Times, Hardouvelis, a banker with little political experience, said, “Greece has done most of the reforms; the next phase is to solidify them, to make sure they don’t reverse.”

He added: “I think it will be done in a more efficient way in the future, precisely because the Troika is not right on our neck. They’ll be staying in the background.” He hopes.

The Troika has shown no sign of letting up much on the pay cuts, tax hikes, slashed pensions, and worker firings it demanded in return for putting up 240 billion euros ($317 billion) in two bailouts, only 1.8 billion euros from the European partners and 15.6 billion from the IMF which is left to be disbursed.

Hardouvelis isn’t deterred. “A pessimist would say, ‘Everything is difficult around the world — in Europe, how can you grow?’  ” he told the Times in his Athens office in his  first interview since joining the government in a cabinet reshuffling in June.

“An optimist would say, ‘Once you’ve fallen so much, it’s easy to pick up,” said Hardouvelis, a Harvard-trained economist and banker with international experience.

His job, though, is easier than that of his predecessor, Yiannis Stournaras, who left a prestigious think tank to take thankless job and steer Greece through brutal negotiations with the Troika before leaving to take over the Bank of Greece.

The Greek economy, now 25 percent smaller than in 2009, is expected to grow 0.6 percent this year and because Greece recorded a primary surplus in the spring — a budget in the black before debt repayments — it is eligible to begin exploratory talks with its international creditors about easing its huge debt burden, which stands at 174 percent of Gross Domestic Product.

Hardouvelis will have to also convince Greeks to stay the course with austerity they have despised and protested against to no avail for four years.

The regimen will include modernizing an antiquated tax system, introducing a new property tax that aims to spread the burden more evenly and continuing a crackdown on tax evasion.

The second overhaul of Greece’s retirement system since 2010 is already in progress. It involves consolidating dozens of pension funds into three. An effort is underway to cut about 6,500 jobs from the Civil Service.

Privatization of many state-owned assets, which has long been on the to-do list but has yet to show much progress, is back in focus, as potential buyers — chiefly from China — eye airports and other infrastructure.

A widely cited academic, he has advised private and state banks, including the New York Federal Reserve, and has engaged in politics and diplomacy during critical moments in Greece’s recent history.

“He has a strong reputation in international economic policy circles, which should be extremely helpful in negotiating with international creditors,” Kenneth S. Rogoff, a Professor of Economics at Harvard and a former adviser to the IMF told The Times. “Of course, his task of trying to restore growth in a country with weak institutions that faces strong creditors is not an easy one.”

Hardouvelis says he has some ammunition for the Troika. “They have an incentive to allow us to let the economy grow because then we can better service our debt,” he said.

He said he was eager to draft a growth plan, investing in promising sectors like agriculture and shipping to create jobs and to diversify exports beyond the economically anemic EU, all words that Greeks have heard before but which turned to nothing.

Greece also hopes for a debt restructuring, including lower interest and more time to pay although the idea of giving a so-called “haircut” to the Troika – walking away from a big chunk of the debt – seems unlikely because it means taxpayers in the other 17 Eurozone countries would have to pick up the tab for generations of wild overspending by the New Democracy Conservatives and its coalition partner, the PASOK Socialists.

Our debt is big, but it’s also very long term, so it’s easily serviceable,” Hardouvelis said.

He added that the government planned to tap international markets with a new bond issue in the coming weeks, the third round of fund-raising in three months after four years during which financial markets were essentially closed to Greece.

Greeks are overtaxed, he said, but he added that tax relief would need to be preceded by growth. There may be action, though, to temper some “extreme cases” — like a tax on heating oil, which has fallen short of revenue targets while having a negative effect on the environment because Greeks have turned to burning wood to heat their homes.

He said Greeks will go along, although they haven’t yet. And, he added, perhaps ironically: “Greeks don’t buy promises anymore. They know they will be the ones that have to finance them.”