Q&A with George Papandreou

Optimistic after negotiating an emergency bailout deal with fellow E.U. member states, Greek Prime Minister George Papandreou sat down with TIME contributor Nicole Itano in his office at the Maximos Mansion in Athens this week. Highlights:

How much did you know about the situation Greece was in before you came to office? How big a surprise was this crisis to you?
We all knew, and I knew personally, that Greece was going through a crisis, but the level of the impact of the crisis on the economy was not known. (See pictures of Athens threatened by wildfires.)

But the underlying causes we had very much pinpointed and understood way before the elections. So in fact, it only strengthened our will — and my will — to say we really have to change this country: Issues like how the public administration is run, issues like lack of transparency, clientelistic party politics (which would mean doing favors to your friends and voters and so on, rather than putting down rules) which undermine a sense of rule of law. (See pictures of immigration in Europe.)

That then translated into the economy — how we use money, whether we invested it correctly, whether we invested it in the wrong things, whether we just wasted it, whether it was lost through lack of transparency. And that just created the whole problem of the huge deficit and the huge debt. So putting our house in order is actually reshaping and re-launching Greece, but reshaping the whole political system. In many ways this crisis should be seen also as an opportunity.

When this crisis began you talked a lot about these larger issues, tackling corruption and tax evasion. And then there was this demand from the markets for immediate cuts. Did that force you to abandon efforts on some of the bigger structural changes?
What the markets were saying is we've heard this, we don't believe you. Greece has lost its credibility. What I was saying all along is we have to bring back our credibility. That did in fact work. Credibility for Greece has come back. Of course, those are short-term changes. We have to get down to the deeper changes, which we're already doing. So that's this phase. Now getting beyond this immediate crisis — getting a breathing space to actually get down to the deeper — and I would say even more creative changes, in our society. (See TIME's Greece covers.)

Is it Greeks who are expecting this change or the international community?
Both, I think. First of all, the international community because in a sense in the European Union we have become a test case of both the euro — its survival — and how to deal with this high deficit in a time of crisis. It's not only a Greek problem. Our bad ways, if you like, or our difficulties or our wrong decisions, have exacerbated the problem of the international crisis in Greece. (Read: "Germany: Tensions at the Top.")

So how do you deal with this? In fact, I think you'll see in these crises two different types of political responses. One, which I would say is a more polarizing and more populist and even scapegoating kind of leadership role. And one which says, no, lets get down to the real issues, lets work together, lets be more collective in our response. Let's be more democratic in our response.

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