win-win situation for everyone? germany's growth rate goes up and the surplus goes down and to some degree it helps the whole eurozone. in my view the question is a little bit too thin. even if you pay low interest for a long-term very reluctant in this regard. even if you pay low in tryst, you increase your debt. sometimes you have to pay your debt or you try to create in increasing budget issue.

i tried to mention shortly, normally i speak longer but i would prefer to save time for question-and-answer is we have one of the major problem of all economies to increase. there are gross expectations for coming here. and they have given the recommendation not to increase

our expenses but to reduce our taxation. we will spend in our government anything available for increasing infrastructure. if i increase infrastructure investment germany will be better. we have federal government, we have state level that we have to keep in mind and we need to deliver more. i think we have a balanced way to increase investment. it has become better in 2005.

she has very much relied on strengthening the part of federal budget increasing federal budget for research and education. no government, never has increased the budget for research and education. even in this year and you know germany very well education is a great responsibility. but federal spending for states to raise money for education has never been increased in so i numbers.

having said this i think the balanced way the problem isn't only investments, even in germany i always have to be careful of this most challenging talk for me. i have the best intention. i have mentioned institutional framework. a lot of economists all over the world's are telling the most important thing i could tell you in some eurozone the weakness of institutions, the main reason of not sufficient growth, even in germany, if you look at how long it takes until you get the

administration license to build a new airport. [laughter] the institutional framework you have to make some sense of the licenses of investments to be implemented only for infrastructure in the so-called new group of lenders. when we asked parliament not to compared

to the same way of the senate but even more difficult for the government, if it's possible, i don't know, that we could use this good experience in germany. he said no no, not at all. some of the members said it's very difficult to get reform in relation to the labor market. it's like my french friend i can tell you a long story hoin france with public opinion to convince that reform in the labor market is needed. france would be happy if someone

could, but it's difficult to get. as long as you give them you will never get the distance you have to take. any democratic system in my long experience tends to take more complicated positions and you will only get them toughened long-term needed if there is no comfortable alternative. i'm thinking we must give it to them. >> let me follow up on that. germany has a large turn account surplus despite the investment program that you have all outlined and despite your calls for higher wages.

imf predicts it will be 8.4% of gdp this year. your output far exceeds the domestic spending. what responsibility or opportunity does germany have to address that imbalance in ways that would benefit german consumers and workers and make germ european more balance. the surplus thing is indirectly invested. 25% in liquid assets including the central bank and bring a

negative return. if you have an account surplus we would have more monetary union. until the last couple of months when we have more account surpluses and of course the beginning of the exchange. if we didn't have the surplus we wouldn't have the deficit. we need a balance.

number two the account surplus in the last couple of years. i think they are timely and i never mac or recommend monetary decision because in germany we strongly support the system and the bank. if we work to get by even by monetary policy not only by monetary policy, but other policies and the weakening of the euro exchange without any doubt there will be an increase of surplus. it's unavoidable.

it's not long-term sustainable. don't underestimate we are spending a lot. a huge part of our concept of direct investment again we are doing it. therefore we have in mind that now in line with

increasing pensions we have been too complacent. we should worry about our long-term competitiveness. we have to have in mind even in germany that the medium turf of competitiveness. the last remark if you ask my european colleagues, what do you prefer in economic germany

though say i don't know. even in the imf we will get european on behalf of germany. it's difficult to do everything right. >> speaking of doing everything right, yes it right, yes it today you said there has been very little contagion in the bond market. did you mean to suggest by that that europe is now strong enough to lose a member from the eurozone because it can do its homework? >> know i have been asked if it would be a danger for global economy. of course i felt myself ask do you and your german government

know your responsibility? not only economically but also politically. do you have a mind to tell all the instances that we know and we have our responsibility and don't care. i'm sure we will but whatever happened in europe we will not take the risk to endanger this bill stability of global economy. we know we will have my great colleague and he's a very experienced economist. you can listen to him what he's saying. we have ongoing precautions and

the program we agreed has been an anomaly. it goes till the end of 2014. we have extended this program twice and now we have to extend it from late february until the end of june. greece is trying to get the pending disbursement program to get 1.8 or 1.9 billion. we can only get a memo of understanding if they agree broadly it's not a hundred%. we never ask for a hundred%.

his programs have always been the key of these programs is that we have decided that we want to help any member that has lost access to the financial market. we want to buy time in taking liability. we did it for italy and ireland spain cyprus, and turkey. we have to have in mind how long will we take time until we can't get access to financial markets. this is year 2022 and you may

ask what is in the rules of the imf. we did it in the private sector and the access to markets is defined not over 100% of gdp. it's supposed to be achievable then. but of course you need a primary surplus if you want to exceed by 160% without any government you

have to tell what do you think when you get access to the markets. if you don't have access to financial markets who will lend you money? the europeans have said we are ready to do it until 2020. if you find someone else who lend you money, okay we will be fine. amounts of $200 million euros it's not as simple as it has been.

we are saying if you don't we can't allow spending. a great debt from greece and the competitiveness of greece. it will be long after 2020. it is financed for 30 years in general. the problem is regaining competitiveness to get primary surplus.

>> what should we ask him when he comes here? >> oh no i will not -- so often i meet my european colleagues sometimes more often than that i don't need any intermediary a. >> i thought i'd offer, thank you very much. >> one more question before we might turn to the audience. i've had the honor to follow your current career for quite a while. you are a great european. you believe in europe more than many others then i've seen now and i've had one meeting with you where you again reaffirm that strong belief.

i think what year up has achieved in the last decade is fantastic achievement when you think where they came from. at the same time it seems to have some how run out of steam. the participation rates in european elections are disappointing and falling. somehow the enthusiasm that you have and i am not a member but i also do have is very fragile. you have a situation where it's close to 25% with a program of wanting to get out of the eurozone and 25% of the large european countries is quite a figure. you have the fact that the greek government has 70% support of

its electorate. how can this debate took place but i have a feeling that most people i don't want to speak for you but something has to happen for the union to survive on the political sphere. that has to do in a way with europe regaining some enthusiasm, some dynamic for the future. how do you see that as a great european that you are? >> do we have another two hours? it's a key question. it's a question of democracy. if you know what's going on in the u.k. -- not to answer your

question is incomplete but i can only react on my assumption. i think in the substance of the human being, whatever you have is not as much as you want to have. we have a wonderful in this part of germany until 1990.

the first free democratic election the participation rate was far above 90%. people are sure they have the right to elect the democratic election. oh yes of course it's on behalf of all the public. in local communities when we elect mayors, it's often the case that they are not familiar with the party. they don't know if there member of the party or not. in local elections for mayor the participation rate is a problem of people saying democracy is

grounded. they must not pair care what's wrong? democracy is a little bit risky therefore that's my first response. response. what can we do, we have to care. we have to think about it. i'm asking again and again if we do it like an american or a westerner as a common discussion, how do -- how can we end this exchange of communication by the it revolution? it is not really understood what it means for our society and art democratic system.

it is united with communication. how can we find a pathway to take a modern communication system and modern technologies and have it fit with our values of democracy. i'm quite sure that democracy will only work on the basis that it's nonrepresentative. if. if there's no presentation there is no democracy. we have to find the link between democracy and the rule of law and separation of power and the relations between the different legislation, executive power.

not to mention the jurisdiction as well. democracy i'm quite sure for most people, and all over the world, if they have to choose they choose values so it's our responsibility not to forget that it's not forgotten but it's worth it. i am quite out optimistic as soon as it gets a little bit twisted it becomes better by the way. it has not been as successful as they expected in the last election. the result was too high but it

was not as high as expected. if you look at finland there will be general elections on sunday. u.k. doesn't play in the general election. :

you will see all over europe the european integration the basis is never disputed. if you're asking, do you want. to actually -- there is not many -- there is no his danger for the european union.

quite optimistic. so but then we have to care for whatever we do in europe command you can understand. difficult. to make it more efficient more transparent. the european commission that they have not liked it but you may have followed the role of the european parliament has been strengthened. if you told tell people whatever they agree they will defending to tell

people know we can. we have by far the most advantage commit economic integration. therefore it is clear. it is in our own interest to defend the european and therefore we have to grant solidarity. the solidarity is never one way. it's a doubling. before you have to those long as we don't have institutions have to work

for confidence in agreement. >> thank you. they we have time for some questions. please tell us what you're away for the microphone. remember questions and the ?-question-mark. >> brookings. that is to see you again. i have a question about the long-term competitiveness about german economy. a lot of major german companies are saying they are leaving germany because of the high cost of energy. some of them are stepping up the capitol investment. in your view that unless there is a radical change in the energy policy is there a risk that there will be a hollowing out of germany's industrial base? >> i no that energy is a problem with germany.

is not to be disputed. it's difficult to say. the government does care. i think we're moving in this direction. the change in a nuclear energy policy. too much renewable energy. as. as one of the reasons i said that easy to be collected. i think we will not. you must not believe any world.

i have to take interest. [laughter] the energy. it's not a problem. not only germany but all europeans risk-averse. one of them the most disappointing news i get in my time was in the beginning of 2011 to be a ss the major company in fruit implement technology moved off it's not only reserves but all the production from europe from germany to us not on behalf of german that on behalf of european. it's one of the key problems

we have a different view. manipulation. the best expert. they are risk-averse. how can we link the needed innovation capacity. if you look at the knew technology, we all know that it's a must. it was opened last monday morning this prime minister. and, of course teaches the economy. i think we have that will be successful. very engaged. successful. very engaged.

but when it comes to data protection. we should start to discuss how we can find a good relation between the revolution a communication system and the value. privacy and not to be manipulated. and to controls? not only only for your also for us. sometimes to fund normally -- normally us his forehead in the development and europe is following. following. but we are ahead. you follow. the real protection is increasing. but increasing. but actually european legislation. as a little bit. have to ask german.

a little bit bland. the feelings. in data collecting. collecting. it is not about is. i think i think this principle must be questioned because the history of freedom, freedom, normally it is allowed was not forbidden. the opposite of what happened with you. you can see. it's not easy. really i think we speed up. wait and see. a lot of people including the uk. new line sometimes too much. financial services.

they always tried to demonstrate the real protection and modernization. we will still be. >> from brookings. let us assume for a moment that the greek government does everything you wanted to do about this big in terms of fiscal reforms kind of structural reforms. if there is a question that about 175% of 175 percent of gdp. assume that greece does everything you wanted to do what do you see a viable path that greece can't survive and prosper within the euros on without a restructuring? >> the answer is clearly yes. yes. i do not want anything for free.

everyone speaks to what has been agreed memorandum of understanding that will be discussed as mentioned but three institutions. and the good program including this debt to gdp i don't know the actual number but it's about 100. in this in this program the presumption has been that until 2020 2020 this ratio will be below 120. in the year in the year since this program is agreed the number of the program. they have developed faster than expected. the deficit is developed faster than expected. earlier expected.

a very promising way. and then and now we have a knew government. is that okay? tell us how you imagine someday. maybe you will ask. but once again have already said, if you want to tell you how long he served as finance minister the next six years. his biggest his biggest problem will be enough the dead. for a long time very modest financing. therefore it may be a problem in future decades.

today. challenges computer challenges. quite happy. much more. but as long as you are telling the problem today is the day moving away that greek economy is becoming a little bit more effective. the company can deliver a part of what the greek people want to enjoy. you have to know how is that the inquiries bundle them is still higher ratio people is

still before this government has hired again people of the last couple of years is higher that it every than every other member state of the euro zone. it is difficult to become competitive economy, not to mention the very difficult challenge is not to be criticized as government. all these problems inherent. but then the real challenges and not to blame the europeans not to understand how the.

>> thank you very much. the other help for the brookings institution. obviously most of the questions your presentation has been about europe the euros on. you are here because the backdrop of global meetings for the imf. i'm wondering if you might make some observations about germany and europe is a global economic player. we just had this rather unfortunate apparently between the united states and many of its european partners on the knew asian investment and development like set up a check. you mentioned the uk just a few moments ago. the uk and other european countries are very quick to join in this institution. a lot of questions about the implications of this. i just wonder if you could give us some of your observations and thoughts on this general set of issues. thank you. >> i think of course we europeans tried to explain.

if you think the chinese have to explain what they are doing in china. explain. explain what they want us to do. therefore we're speaking course of what we're doing europe. i am strongly in favor that we strengthen our atlantic partners. a very much in favor to use the g7 umbrella and implement to make it efficient. in this very strategic case as time goes on i would say

we are in a it would be possible someday to convince u.s. congress to implement reform. very difficult. we always try not to blame. but it makes things difficult. he can't lead economically and politically only by. it soft power. soft power needs. the convention a lot. and i could give you a lot of examples. [inaudible]

would have been much in favor. we didn't achieve it. but what we managed to do it in a closed context. a lot of very complete and open discussions how we can manage always in your. [laughter] france, italy, germany have decided to give. now we have, position for negotiation but we also communicate and will do it in the occasion of this meeting today and tomorrow

to not only discuss under this g7 member which has decided to join but also the american friends and also canada. with australia this issue cause any additional problems in the transatlantic relations because we have had too much none of this problem has been needed. no necessity for it. too many problems. we will succeed only on the basis of cooperation. if we want to work decided to ?-question-mark that

80 percent of the 70 million people deserve to live in line with democracy, rule of law. economic sustainability. and you can know dictators a very nervous. much more confidence in this periodic. and if you. the motivation european people the question of who was never think that we have achieved. >> right here last question.

>> thank you very much. i represent greece. greece. native greek. >> hold the microphone closer. >> i have two questions for you. greek media and international media reports a lot of the members of the greek government to the electoral process have been -- have demonized as representative of the german policy. according to the news. trying to impose. how do you perceive that? what is your reaction to this argument back also i think that also i think that the greek people need a clear answer to that the potential. do you think it is on the team is a big government and

is don't reach any agreement >> look if you want to stay in politics and i do it by enthusiasm you have to know you will be good at it. if you don't think they'd witnessed in the kitchen. it is not a privilege. the media has been quite a lot. i have -- go meetings you can read all of this. perhaps a 22.

please my fellow countrymen don't make creek. people in greek suffer much more than. i could tell you even in german media and not been pleased. i don't -- i have not learned greek language. i can't read greek newspaper [inaudible] >> and 72 years 72 years old. i we will not learn. [applause] i have a good relations. i have never -- if he didn't

make a personal offense to. not at all. we had different political opinions. i have a lot of people in germany are good friends very different political opinions. i can and knowing complaining political parties, political leaders including myself tend to say things if they will be asked federal. i didn't say this. of course i am not -- of course sometimes real story, until you secret. in the last in the last couple of years in my own

party for a long time soon as amendment will be too general, spending too much money. and i have often been recommended by people from the imf that i should be have in mind as soon as i have friendlier discussion with the great college. misunderstood. germany will not support. it doesn't change anything. and once again i have to be very careful. all the media. there is no news. his greece wants to get more money and in the given

program you may know the great prime minister doesn't want the program. nobody will ask me to take program. as different situation. continue to have negative interest rates. you don't want everyone ask for money. but if great want. greece has to fulfill to deliver the letter what has been agreed. if not it is fine. up to greek to decide what we will happen. of of course with my greek colleague as my opinion i advised. but not publicly. no.

the decision of the greek. and therefore you have to ask. >> about the exit from the euro. >> it is only a decision. >> thank you. our time is up. if i can ask your place to stay in your seats so that the minister can leave hollywood appreciate that. as you know we have a quick turnaround time. if you get one of those little risktakers have a seat. i recommend you keep it. if you don't, your supposed to leave. you will be personally escorted out of his day. thank you. please join me me in thanking the minister for his time. [applause]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] and.

>> coming up tomorrow, the chinese vice minister of finance we will discuss the impact of his country's economy on the asia-pacific region. you can watch the event hosted by the atlantic council live at 3:00 p.m. eastern. >> this weekend is full of live event coverage. but politics on c-span la times festival of books and historians discuss the end of the civil war on american history tv. on saturday morning beginning at 10:00 o'clock eastern live all they coverage of the new hampshire republican party 1st in the nation leadership summit. speakers include ted cruz, scott walker, john kasich and rand paul. saturday on c-span2 teesixteen's life from the university of southern california for the los angeles times festival of

books the panel's on panels on journalism and publishing an author: programs throughout the day. ..

we have had trouble accommodating everybody that wanted to listen to you. we are very grateful that you took time to share your perspectives.

you are a well-known ph.d. in economics from essex many books, 15 books. i don't know all of them but i know two in particular america or europe and the future of the world economy two years ago and a modest proposal were resolving the euro crisis two years ago also. you were elected to the parliament in january of 2015. mr. ambassador,. [laughter] the brookings family welcomes mr. ambassador. and also personally and i can't help say that i also welcome the minister's sub one as a neighbor neighbor. it's your floor and then we will have a discussion.

>> think you kemal. it is with deepest gratitude that i wish to thank you for this honor and privilege to be at such a fine institution at a crucial moment when our government is shouldering a momentous task areas as soon as humanly possible negotiations with their partners both european and international. the reason i should be focusing on these negotiations is their global significance. not so because of the contagion through the financial circuits that frightened people so frightfully back in 2010 and then again in 2012 but because the outcome of our negotiations with institutions would influence i believe heavily europe's attitude toward a larger problem located in the

five of our democracies and within the foundations of our real economies. after all, lest we forget the greek debt drama of 2010 was the harbinger of much that followed throughout large swathes of europe. indeed of countries further afield. it is resolution 1 way or another in 2015 now will surely prove equally influential at the global level. one may be thinking influenced by the dominant narrative that europe is on the mend. it has overcome its crisis and the combination of large bailout loans and austerity especially in the peripheral economies has worked. and that only greece has failed to jump on this bandwagon

towards recovery. for reasons that have to do with our own peculiar failures. the great public and private sectors have been for a long time replete with malignancies which require urgent and expensive and intensive treatment, there's no doubt about it. indeed the greek themselves were so incensed by lack of reform that they even went as far as to elect us the party of the radical left to lead the country. nevertheless greece's chronic malignancies cannot explain the depth and stubbornness of our current crisis. of what has become sadly greece's great depression, our 7-year-old and long winter of discontent. to explain this one needs to

cast a critical gaze upon our monetary unions design and how they went, the beast design folds of the eurozone went into an unholy alliance with their nations combinations failings to produce a monster. one that is degenerated into a humanitarian emergency and one crisis and emergency which has local significance as i was saying before. now take a look at the rest of europe. even nations portrayed as a shining light, the beacons on the hill, what you will find his investment productivity growth and improvement in living standards that can only be described as dismal even when compared to the american recovery over the last few years. europe's powerhouses, forget

greece for a moment, europe's powerhouses the surplus economies of northern europe countries who are turning the corner rely almost exclusively for doing so on building up either in relation to whether you're some member states this is an intra-european zero-sum game or against the rest of the global economy. a global zero-sum game of the kind that we have thought was confined to the distant past around the bretton woods conference. the combination of high public and private debts of low investment, blow interest rates and generalized austerity is causing europe to address its crisis by exporting it to the rest of the globe while undermining further the real economy of its own peripheries

come at the of the eurozone and peripheries within the dash put simply the current policy is turning europe into a capitalist force that behaves as an exporter of savings and an exporter of deflation but even more singly if china's external balance was if problem a few years back i believe there is good cause to think of europe as a greater concern for the global economy. none of these are well per europe or the global economy. i submit to you ladies and gentlemen that the outcome of greece's negotiations with the imf, the european commission are partners our fellow europeans the outcome of this negotiation will pay a meat -- play a major

role in determining whether europe impedes the rest of the world's efforts and united states efforts to put behind them the crash of 2008 and its repercussions. within this context, the context of the global significance of negotiations with the european institutions and the imf. let me turn to capital questions. i'm often asked why are you being so difficult for these negotiations negotiations? y. cage is subtly quick lay? rest assured ladies and gentlemen that our government is keener than anyone to bring these negotiations to a successful and quick conclusion and that we certainly do not believe that we have any kind of monopoly on good ideas regarding the kind of reform program which is necessary in our country and in the rest of the eurozone.

the longer these negotiations go on to greater the expectation of our social economy and the greater delay of essential reforms so we are certainly more eager than anyone else to conclude however the operative words here are a successful conclusion. not yet another version of extending and defending of the sort that for five years now has been turning a drama into a crisis of local significance continuation of the extending opportunities that give greece a deflationary spiral. let me share a thought with you. nothing would be easier for me personally nothing would be easier for my prime minister nothing would be easier for our government than to sign on the dotted line of the existing memorandum of understanding, the existing problem.

nothing would be easier than pledging to do as it says like reduced government that's always pledged everything that was asked of them. and in that way to collect several billion very quickly and immediately answer the questions that the good people of the financial press are posing full of angst for us regarding our liquidity situation. except that it would be the wrong thing to do. if it's the wrong thing to do by our creditors wronged by her partners in rome by her people and when i say are people i mean not just the people of greece that equally every citizen of every member state of the eurozone. we are one people. why would it have been wrong to add our signature to the logic of the philosophy of eggs -- existing problem? ladies and gentlemen this problem constitutes a recipe

that no person can consider to have been successful. the insistence we should continue with this logic and policies is bound to reinforce an image that we need to expand. the image of greece has a bottomless pit an image that causes much frustration on our global partners while it involves our nation and in bearable hopelessness. unbearable hopelessness. the track record of this problem that we inherited from the previous government is a sorry one. to paraphrase john maynard keynes the economic consequences of the peace, we are not going to sign up to targets. we know that our economy on

policies that are partners should wish to impose him on us not just for sake but for the common and european global interests. ladies and gentlemen 2010 the greek state ceased to be able to serve on nominal gdp was falling. europe's banking system had become more or less insolvent the growth prospects of our trading partners were abysmal and the global credit crunch in sure that interest rates will be going up. how we would deal with this problem is europeans by means of the largest low never of condition of a massive internal internal -- which was found to shrink incomes. those loans were extended to the greek government in the context of their debt system. i don't have a diagram to show to you. i had one but it turned out that we don't have the facility to

protect it. but if you look at projections of nominal gdp growth in 2010 by imf ended in 2011 and again in 2012 in reality you will realize seen dispassionately we are talking about a massive predictive failure. in an important sense, these are heavy words. greece went from a period before 2008 of ponzi growth, of growth fueled by unsustainable growth to a period of hysteria which i called austerity funded by unsustainable -- i am asked also these things. why did other countries on which the same policy was tried not experience a catastrophic collapse? like greece's.

the reason ladies and gentlemen is very simple. they suffered significantly less less. we are the champions of fiscal conciliation. we have more than 11% of a reduction in the deficit. this is unprecedented in peacetime and if you block a diagram with fiscal austerity fiscal consolidation on one axis and what happened you will find it raise is falling pattern but because fiscal austerity is a negative relationship between the two because ours was so much more -- than anybody else's all the repercussions that come with that was much greater. in this sense greece is a classic outlier having been the first to be paid out in a eurozone in which let me remind you in 2010 bailout for band

our country ended up an experimental lab in which much and improvisation -- and provides asian occurred. because of our own economic and social figures we took a hit on europe's behalf because of our economic and social failures to make sure we were the first domino to fall and of course due to the eurozone's design faults. so our particular phase were exacerbated by the hit we took for the team. this will tell the story of how a series of insolvencies in the public and private sectors were pushed onto -- under the carpet portrayed as cases of illiquidity. history will understand this was abuse of the national solidarity. this was never really bailed out out. only 9% of the bailout loans we took lasted a few years went to the big states and the wet -- restaurants of banking center.

the full program of loans was precisely wrong. if one is to rank all the cases of malignancy of rent seeking of oligarchic practices increase from a worst-case to the least offensive one you will find the reform program over the last five years started from the bottom, not from the top and the interest that lurked at the top where they were once backing the government pointing moralizing fingers that the majority of greeks who may have been -- but nevertheless it could not be easily persuaded to reform themselves when being told to do so by the greatest rent seekers whose reforms were never for them. unsurprisingly as a result of this practice both private and

public skyrocketed banks ceased to function as credit for biting institutions. investment dried up and all we have had over the last few years was a slowing down of the rate of shrinkage as all the went and then the muscle and then we were proceeding to the bones of our economy. it's often said that 2014 marked a recovery of sorts very mild fragile recovery but a recovery. i beg to differ on this. what happened in 2014 was nominal gdp, gdp and market prices continue to fall by that market prices are falling even faster. that is not my definition or

anybody's definition of recovery. it's the definition of what happens when you go through a recession into a depression. but that's all past history. we are now negotiating a very simple principle. on the one hand we have an existing problem that the greek state is committed to legally, legally bound. surely states have a -- and therefore there is no doubt that our government even though we were elected to challenge the philosophy the logic in the essence of those policies we are bound to them. this is the principle of democratic states that there's another principle. democracy should matter in some degree at the fact that we have a mandate to challenge the philosophy of the problem that we inherited should also make a difference. what happens when you have two

different principles that clash with one another? that was what democracies are for. you have various principles of clashing with one another the principle of liberty and principle of the individual of the collective. this is what we do and democracies. this is precisely what we try to do upon our election. we try to convince our partners in the hero group, and the european union, at the imf that what we need to establish as a common ground on which to build a new set of conditionality is a set of conditionality is that we would all am sure have a -- had we started afresh. so that we overcome the inertia

the institutional inertia of the program which i am not sure where i actually am quite sure that almost everyone had they had the chance to start afresh would have considered to be a failure and would not want to continue along those lines. but you know how bureaucracies are, how complex bureaucracies are and there's nothing more complex than the eurozone system or lack thereof managing our collective economic prospects. they tend to develop a life of their own and they intend to be subject to inertia and it's very difficult to shift once you have embarked upon a certain path. we will not be putting ourselves in a situation and is very harsh negotiations if we didn't think the path we have embarked upon for greece is a path that could

get us to a good place. we are convinced that it can't. the greek people did not vote for us because they believed in the success story of last year. they voted for us because they knew that it was smoke and mirrors. in this negotiation we are not trying to impose our will upon our 18 partners. we have a mandate, said today. i accept this fully. what we are asking for is for the opportunity to do two things. firstly to be heard to have our proposals for the way in which the greek social economy must be reformed discussed in good faith and the second thing we are asking for is for the time and the space in which to allow these conversations to take place so that we can do the one thing that needs to be done and what is that one thing?

we need to condense our partners especially in northern europe that this government is not about going back to the profligacy of yesteryear and they need to convince us that they are serious about rebooting a series of measures and programs and fiscal consolidation plans. these negotiations must succeed and the reason why it must succeed is because as mario gallegos said a couple of months ago for the euro project to succeed anywhere it must succeed everywhere. greece insists on being part of it everywhere. greece believes that a new government that the greek people have elected is offering our partners, despite a significant

clinical differences, a chance for pluralism and democracy to prevail within the monetary union that knows how to acknowledge errors and do what the united states has done the such great success in the 19th and 20th centuries. and what is back? create consolidation out of the crisis. in europe we like to think that we have achieved it that we have learned a lesson, that we have consolidated that we have created new institutions which are allowing our monetary union to evolve and to develop the mechanisms that we lacked by which to counter a major earthquake shock like that of 2008. i do not believe we have done that. i believe in many ways we have proclaimed the name that which we have denied in practice. for instance the proper banking

unit. this government with our quirky left-wing backgrounds i admit is to come to an arrangement with our global and european partners that europe consolidate in a manner that creates greater efficiency, genuine growth overcomes a major productivity failures and investment failures of the last two years, not just for greece but for everyone in a way that allows all europeans especially those who are critical of the institutions of the euro to remain within the european test account which is where our government firmly locates itself. thank you very much. [applause]

>> while we get wired i want to thank again mr. varoufakis for his very excellent speech i would say. i want to say two things. i want to introduce david wessel a partner and friend here today on the panel. he joins brookings about a year and a half ago. he was at "the wall street journal" and most recently in economics editor. he is the author of two "new york times" bestsellers 2009 and 2012 in said we trust ben bernanke swore in the great panic published in 2009 in red ink come inside the high-stakes politics of the federal budget 2012. he shared two pulitzer prizes won for the "boston globe" series of the persistence of racism in boston and that was

1984 and in 2003 for stories on corporate scandals so i'm glad that david is here and i'm also very glad that you are here to make this possible. thank you very much. now we will have a discussion and we all at or tuna. i will let david asked the first question. >> thank you for your very clear remarks. to an outsider it seems as if there is very little overlap between the policies that fall within your cerese a mandate and the ones on which the imf and the european partners are insisting. so it's hard for us to see how this comes a happy conclusion and there has been speculation that one option here is to have some kind of referendum on the state of the eurozone or the election of return coalition.

is that part of your game plan? >> this is an easy question, absolutely not. let me be precise. in terms of the first part of the question, you mentioned or you alluded to the great gap between the policies being pursued by her government and the policies acceptable to our partners. remember the word that i use pluralism. we used to live in societies where we tolerated differences of opinions and different mixes of public and private virtues. you were called in the 70s and even in the 80s we used to take great pride that we were living in a mixed economy where we have the public sector and

where we had conventions and norms of collective bargaining that created a safety net in the workplace, where we had the social welfare net but also play the same role in many issues. we have public enterprise and public-private enterprises in our member one of the great arguments in favor of capitalism back then in the cold war base was for cicely this pluralism. now what we are thinking is the notion that this monoculture where we can public must by definition be problematic in everything private must necessarily be on the road to virtue. that doesn't work very well. it does work great well here in the united states and has worked very well anywhere.

what precise mix we use is another matter. that may be a bit more precise regard except the policies and this is where i'm going to be specific privatization, pensions and labor markets. just the big three out of the hat. take privatization. let me tell you what our policy is on this. firstly we look at privatizations that took place in the last few years. they were disasters. firstly they were the point of view of legal public rights so a number of significant ones collapsed when they were taken to the high court the great high court. the european competition commission so you have private investors to go through the arduous process of blending in auction. they make an investment and the

whole thing goes belly-up. this is neither left nor right or it's a question of efficiency in the security. we want to change that. i can give you many examples. secondly we are in the middle of the great depression. how clever is it to try to sell assets when asset prices are through the floor cracks at such a time to take these few pennies that you get in but the men to the bottomless pit of an unsustainable debt i don't think this is an apt use of public assets. we are not against privatization. we are against this -- that doesn't bend bend even a little bit art that situation. our policies are simple.

we want to impose investment levels on the winning bid so as to give a developmental dimension to nationalization and privatization. secondly they want to have a deal with the winning bidder regarding minimum labor standards, minimum environmental standards. we also want to ensure that the local economies are -- with a deal so there is national and developmental effect. is this something we can't discuss sensibly with the amf and european partners? we to privatizations within the government. there is no doubt that our pension system is in trouble but how could it be otherwise? we have a collapsed economy and

a massive reduction in numbers of people who work and who are capable of making pension fund contributions. we have more than 30% of paid labor and undeclared labor so when we look at the problem of the pension system in the labor market our government is simply saying cutting and pasting from the imf blue book the ideas of labor market deregulation we have the most regulated market in the world. we are as i keep saying -- 90% of unemployed people receive unemployment in the pits. nine, nine okay? 91% of the unemployed have ever received one euro of unemployment benefits.

workers at its been working for more than five months and haven't been paid a cent. why? because we are in a recession and they keep reporting to work in order to not lose their dignity and ordered not to lose their claim to the company and have the company survived so that they don't lose everything. what we are we are saying is that environment's markell to bargaining agreement similar to the ones they have in germany that they want to hammer out in unison together will help reregulate markets not in an efficient way but a way that brings the labor market into the labor market. at the same time to deal with the pension fund. one of the things that is impeding a conclusion is quite well-known and i'm not preaching preaching -- breaching confidences by saying this is that demand that we do not stop an automatic clause voted in by the previous government that would have pensions cut by

almost 9%. that can mean somebody on a 600 era among the pension will have to lose 180 euros and the middle of this recession. we want a freeze on this. we are accused of rolling back reforms. why reduce low low pensions? i don't see any serious reform. we want to reform prices. of course when i asked us, how do you envisage the pension system to function within the next 20 years i have to admit to you i don't have an answer that goes beyond a general description of principle but when france germany and the united states answers that question we will answer that question too. it may take a bit more than a few weeks but what we are asking

is for the absolutely sensible principle that we are in a new government. we need to come to terms with our partners on four or five large reforms that need to be instituted tomorrow which we can do because we have commonalities commonalities. if there are disagreements we will compromise. we are perfectly prepared to compromise. introduce these reforms, come up with a rational fiscal plan for the next five to eight years, not the one we have now. for .5% surplus. once we get this agreement going to make and keep negotiating and their intention is in good faith to reach the new contract with their partners by the end of june that will create a

sustainable greek economy so we can cease having these conversations. let me make two points and ask a question. two points i think which you partly are they covered but i want to emphasize them that balance sheets are more important than flaws. we had this same discussion with the minister. if you focus on the flows of one year you miss a lot of the story. the country and we are talking about germany can invest negative interest rates and create positive aspects expenditures may go up but in fact the balance of the public sector improves and that is the point that larry summers makes all the time. one of the issues between the funding programs in the discussions not just on greece but in other countries is the importance of having immediate

frame -- framework rather than an annual expenditure and i think you alluded to that. the second and i can't help wanting to support yanis on this is privatization. when i was in kind of your job in turkey yes i was in your job, they wanted to privatize everything immediately. at whatever price they could fetch. that is not good for public finance. we were asked to privatize and allow a foreign strategic investor to buy it. we refused and today turkish airlines is the airline that flies to the greatest number of countries in the world and is quite profitable and is still a state in a state in the price but open private investors. when we talk macroeconomic policy we always discuss primary

surplus and when we see structural reform somehow there something under there which i think we have to get into the details up to see whether they are good or bad. replacing the public monopoly by a private monopoly even if one is a perfect liberal economist is not a good idea so anybody to think that i had to get off my chest. but i think yanis there's one thing you made a very strong point, very very strong by saying the people of greece are the same as the other people in the eurozone. we are the people of the eurozone. don't you think at the beginning it would have been better to somehow get the message may the message and maybe the press distorted the message, i don't know that there are two sides to being part of the eurozone

that they have to respect day meaning creditors have due respect the will of the people and realize the suffering people have gone through but at the same time the greek government if it wants to be in the eurozone and the european union cannot just do whatever wants and the message came out we have been elected we have the support of the people, we will do whatever we want and you can do it outside of europe but inside europe you do have to kind of stress that the european agreement is needed. >> let me start with the last one and go back to some of the earlier ones. you are quite correct. i did mention it before that having one mandate in the

election of the 25th of january i mentioned -- but the point i made was that it gave us that mandate to put a hand up and say we would like to be heard about issues of the utmost importance to ourselves. we want and my request that the first year your group i attended i asked for four weeks during which in peace and quiet without the threat of the various reports and actions that gave the background to sit down to be allowed a month to have control of our ministers, to come up with a plan it to our partners

and then i asked for another month during which an agreement agreement -- we never said we are not irresponsible. we have the right to do anything we want. that was never the point. but we have the right to be heard and we have the right to challenge the program that is clearly failed grade i believe not to ask for them the moon. on the other two points you mentioned regarding prioritization's we are unfairly undogmatic about privatization. the answer to this question is which privatization? if you asked me about the railway about electricity generation and distribution, if

you ask me about the horse racing outfit i will give you different answers depending on the particular case. and lastly and this is very important, you mentioned balance sheets versus stocks close. we are very particular. we have governments without central banks backing them. we have a central bank without a federal government backing it. this is a unique state of affairs. ideally creating a federal government and they fed but of course and this is a sad realization that i am sharing with you. this crisis that began in 2008

nine and 10 instead of helping us come closer together creating centrifugal forces that is making the political process even harder and that is something we should lose sleep over. as germans, as greeks as portuguese as slovaks and french french. i left out the irish. please forgive me. once you are caught up in this monetary union that has very peculiar forms of governance you end up with the complete lack of corporations -- cooperation. so the argument that you mentioned earlier that you discussed, i wasn't here that i was aware about germany's capacity to invest and borrow

that negative interest rates. that is very different if i understand your argument but i also understand the fear of a government that does not want to have the gdp rate of 60% in the case of our government is absolutely no fiscal room for a standard deficit spending. however and this is a big however europe as a whole, the eurozone as a whole is typified not only by a mountain of private and public debt which we do have but there's another mountain hiding behind it a mountain of savings with nowhere to go. should be a joint project to energize and motivate those savings to help them overcome their rate fear and channel them

into productive investments, investments into the protective capacity. how do we do this? we have the european investment bank that could do this and we have the european central bank. why can't they fund a major new deal for europe that channels investment to the private sectors of the countries in the regions within countries that have a major gap great inflation of forces with the ecb standing by ready to jump in to purchase these bonds if they start going up. have you noticed there is no mention of the government here? there is no need for government to be involved. this is not deficit spending by germany or greece or portugal. it's all money borrowed by the taxpayer. it's money borrowed on banking

principles as it has been doing but playing the role that simulates the federal government in the context of smart -- so i'm only mentioning this because we need t. need to have an answer to the question. you don't have the political dynamic. how can you respond differently and i just wanted to give just one small example of the kind out of the could get us there but to do this we need to begin trusting one another. i come back to the original question. we increase have to earn the trust of our partners but they must also acknowledge the fact that for five years now the problem has been imposed upon our nation.

>> okay so let's say i buy your analysis but there's a certain reality here. you owe some money yet you can afford to pay unless they open the spigot's. it's up to them, they made my conditions and i'm not going to let them have any money. he says look what's going on the greek yields are rising the bond market and there's no contagion to torture go over spain. they won't be smooth sailing if you have believed the euro. it could probably be done though. aren't you inexorably walking here to a point at which you have very little leverage left and you basically have to default and then what happens after that? >> i would willingly eagerly and enthusiastically accept any terms if they made sense.

i would have no problem with the memorandum of understanding if it was founded upon a reform program that the worst case made the reforms that were necessary in order to enhance efficiency and social justice. it became from planet mars, the came from berlin or came from brussels portugal czechoslovakia, i don't know where comes from, i would embrace it. the problem with that we have is not so much the authoritarians. it's the fact that we have tried it and it hasn't worked. >> but what happens if you can't come to a -- >> i'm coming to that. it's the suspect in question. these days i'm told the quiddity is drying up. but do you know what, there's a reason why it's drying up to the

reason is the previous government in its infinite wisdom decided to try to obtain power by saying in no uncertain terms if we win the games will be stop the next day. how possible is that for sitting government when the process clearly showing -- he knott at the very same time you had voices from within the system the euro system the european central banks warning that if we win there would be liquidity restrictions and liquidity restrictions start happening.

the ecb move the waiver and started imposing restrictions on the commercial banks capacity to participate. so liquidity was being squeezed while at the same time the demand due to the fear that was being propagated within the system increased. so it's like imagine you have abandoned you tied around her are very tightly and i say you know you have a liquidity problem with their blood vessels. what are you going to do about it? i don't think that this is the way that our european union was meant to function. our answer to your question is very simple. we will compromise we will compromise and we will compromise in order to come to a. >> agreement but we are not going to end up in compromise.

this is not what we are elected for. we were elected to put an end, to drive line after the debt deflation spiral and the reform problem that was perpetuating increase was badly designed and administered by those who had to be reformed but were worried refusing to be reported. if this means that europe is going to stand idly by while young government is snuffed out then i have to say are only rationale pro-european responses to spend every waking hour moment, second trying to reach an honorable agreement with our partners to endeavor to come to reforms along the lines that i mentioned with organization intentions and at the same time

make a commitment that is cast in stone and even penned in our own blood in order to increase its credibility but we shall never slip again into a primary deficit. this is what we are committing to. we are inviting our global partners in european partners to meet us not halfway, one fifth of the way and we expect them to do this. why? because toying with the deficit which is something we don't do. we are refusing to discuss it because as i said before worrying about it is like worrying about them hit by a comment in the universe were comments are attracted to you if you are worried about them. going with the ideas of greece is profoundly and european because anybody who come claims that they know what the effect is our deluded. >> but me come in here.

i must say when the minister was here an hour ago he also ruled out and expresses confidence that a solution will be found in i was happy to hear that. he said it quite strongly. i think he's trying to find a solution. let me ask you, in the experience of the imf and of the world bank and it that issues there is the president of saying to a country or group of countries bring up your reform program. we will suspend your debt payments but the final that agreement will calm two or three years later provided that your

reform program and it can be changes negotiated for years but are biting that your program has been carried out. in other words greece would suspend payments with the agreement of the creditors including by the way imf agreements in exchange for an agreement of reforms but would also commit this is not restructuring done upfront. the real legal restructuring or reap profiling if you like or whatever you call it what calm after two or three years of it period during which programs are carried out. and there is this experience that has been successful for a group of low income countries. it has never been used for middle income countries but i kind of wonder whether this

seemingly unreachable gap because when you make the debt payment you run out of money and you don't have the time to build the whole program so that way you could have the time to build up the program. in the meantime your debt ridden will be relieved. your primary surplus could go down. the same time the international institutions would not write off the market and a complete way or agree to any change in interest rates and a final way. >> this is such a radical proposal that i didn't even think about myself. >> our proposals are extremely moderate by comparison. i can assure you i'm going to look at it firstly with disbelief and a few minutes later with glee. we don't need that generosity

from our creditors. what we need is to stay faithful to the spirit of the 20th of february agreement that the europe rep level which allows greece to be the author of his reform agenda. we would dearly like to get down to discussing the actual bill that will go through parliament. we have been pushing for this. instead however we keep hearing there has to be a comprehensive review the kind that never happened over the last two years. it has to happen within a few weeks but nevertheless we would go along with that. and what would be i think. would be two separate the conditionality's for closing the final review. on the basis of major reforms

that need to be done and can be done in the space of a few weeks because let's face it this is a time frame. by the end of june nevertheless we are prepared to do this and by the end of june come to an agreement. that is what we are proposing. that is what we want from the beginning to affect. the separation therefore of the talent from the medium and long-term is i think essential for avoiding and creating circumstances for government which by the way let's say a few things on an optimistic note. if we make this, and i believe we will, and i'm greatly encouraged by what was said an hour or so ago. if there is a declaration

similar to that of 2012 that the eurozone will do whatever it takes to remain indivisible and at the same time there is an announcement of an agreement as international partners. firstly fiscal matters. let's agree on appropriate fiscal services that are not exorbitant as they are now. substantially -- and the european investment bank the way of writing off nonperforming loans from the banking or that clog this credit circuits privatization policies that are aimed at and of social security. it doesn't have haircuts and in the end gives up -- gives back more to the creditors and the same time attack what i call the

trilogy of sin increase which is procurement, bureaucracy, the political system the way that has such a cozy relationship with the oligarchy and the media that play a toxic role in greek society. at the same time we have for forms that percolate down to the level of product markets supermarkets and then we go down to pharmacies before we attacked a major sources increase. it would be quaint if it were not so tragic. these are things that i believe we can agree upon in one afternoon. the announcement of such an agreement will unleash such a wave of optimism and remember asset prices suddenly greece would be a great field for

bargain hunting. there is going to be such a relief amongst reach investors and foreign investors and we have excellent human capital and potentially growth industries that we can do the one thing we have not managed to do and that is create a developmental model that would be borrowed by this initial enthusiasm and to which we will fuel by a never ending sequence of great reforms.