Made in Germany: The Business Magazine

Our studio guest today is Ansgar Belke, an expert on financial markets who works at the German Institute for Economic Research (DIW) in Berlin.DW-TV: We've got a financial expert with us from the German Institute for Economic Research, Ansgar Belke. Thank you very much for coming in. My first question for you is: why hasn't Greece managed to turn things around, despite this huge bailout? Ansgar Belke: I think the Greek government has chosen the wrong recipe to deal with the problems. It has put too much emphasis on increasing taxes, which by itself makes economies more inefficient than before. They should have put more emphasis on government expenditure, by cutting it to a significant extent. What I miss is, for instance, cuts in social expenditure, which has proven to be very difficult. And I also think the hardest things are still to come. They postponed some of the most difficult tasks until the future, and this is what we see at the moment. DW-TV: Okay, to show us what else is to come, let's have a look at the numbers. The yield on Greek government bonds has soared over the last two years. You're the expert. What does that mean? Where does that put Greece? Ansgar Belke: I think you see clearly, very clearly, that markets reckon on a kind of debt restructuring within two years - not earlier, because we do not have any experience dealing with sovereign defaults. We only have experience dealing with firm defaults, and also the ECB and the European Commission are very hesitant to agree to this kind of programme because the ECB has on its balance sheets an estimated amount of around fifty billion euros, and this makes it reluctant to agree to that. DW-TV: So how likely is it that Greece still goes bankrupt? Ansgar Belke: The markets say that the probability is around fifty to sixty percentage points if you look at the prices for Greek bonds, but this is not such a damaging effect, because the returns are also very high, as you just said. So the returns are on balance with the potential losses. DW-TV: So what can Greece do to turn things around? Exports are expected to boom, and also tourism? Ansgar Belke: Yes, I think they should still stick to regaining competitiveness by cutting imports, for instance. But if you cut imports and want to have an export surplus, you have to diminish your GDP by significant amounts -- for instance, by about ten or fifteen percentage points. And this is very harmful for the population and puts much self-discipline on the population, as we saw in the report. DW-TV: Okay, thank you very much for coming in, Ansgar Belke. Ansgar Belke: Thank you very much. (Interview: Ben Fajzullin)