Lord Bilimoria: Welcome back to Day 2 of the CBI annual conference. I’m delighted to welcome the Prime Minister of Greece, Mr Kyriakos Mitsotakis.
Kyriakos Mitsotakis: Hello!
Lord Bilimoria: Prime Minister, good to see you. The Prime Minister has focused relentlessly on green and digital job creation, a strong economic growth, sustainable tourism and tax reform. He has prioritized foreign direct investment, enhanced Greece’s credibility amongst the rating agencies and has been a strong and respected voice at the heart of the European Union. He has been at the forefront of Greece’s widely praised response to the Covid-19 pandemic.
So Prime Minister, welcome. If I may just ask you: the pandemic. You were – with Greece – in the whole world looked up to the way in which you dealt with the pandemic in the early days. Could you just talk us through how you did that? Why were you so successful and what is your strategy now?
Kyriakos Mitsotakis: Well, thank you very much for having me and thank you for your kind introductory remarks. Indeed, I think Greece was particularly successful in essentially completely containing the first wave of the pandemic. I remember back in March of last year, when we were looking at the data, it was painfully obvious to me that we needed to act very quickly and communicate our message without any flip flops in a very succinct and specific manner. And we did take the decision to shut down the country, probably earlier than most of our European counterparts.
We had to take that decision because I was very much aware that our national healthcare system was the victim of ten years of underfunding. So, the number of intensive care beds that we had in Greece was much lower than the average EU number. We needed more time to strengthen our healthcare system and imposing a strict lockdown was the obvious solution. We succeeded, essentially, in completely avoiding the first wave.
Obviously, things got much more complicated after that. We suffered more during the second and the third wave. We’re seeing a fourth wave, as are most European countries, but we have put in place a fully digitized vaccination system that runs impeccably. So we’ve done our part of the job in terms of delivering vaccines in a timely manner to the Greek population.
And of course, we are constantly struggling to convince more people in Greece to get vaccinated. We’re probably around the EU average when it comes to vaccination rates. We’ve seen a significant pickup over the past weeks, but we’ve also imposed significant restrictions on unvaccinated Greeks.
Essentially, if you are unvaccinated now in Greece, you have no access to any indoor facility, be it a restaurant, a theater, a gym. So we’re nudging the unvaccinated towards getting vaccinated. We’ve also made it very clear that your vaccination certificate, if you are above 60, will expire after seven months, and we see a significant uptake in third dose vaccinations, which our experts tell us is absolutely critical to contain this fourth wave. Obviously, our healthcare system is under pressure, but we’ve also made it very clear that there will be no lockdown.
So, we are doing everything in our capacity to keep the economy running while containing to the best of our ability the current pandemic. And frankly this approach, as far as the economy is concerned, has worked. I’m sure we’ll talk about economic performance in a bit, but overall the economy has responded very positively to the policies we’ve put in place. The last thing we want is to inflict additional damage by imposing additional restrictions, which, frankly, I’m not even sure are going to be effective given the mood of our societies at present.
Lord Bilimoria: Excellent. Over here there is this constant question: are we going to go to a plan B? And we are saying that we don’t want any more lockdowns. We’ve got a very good vaccination program. We’ve got a booster program in the way that you’ve spoken off. We’ve got a lot of testing available free for our businesses and our individuals, our regular testings are working well. And now we’ve got treatments like the Pfizer antiviral, which has shown to be 89% effective in preventing hospitalizations and death. So we are hoping that we also will not go down the lockdown route at all. And thank you so much. Moving on to the economy. Recovering, you took over Greece, Prime Minister, with a pretty serious financial situation that had built up over the years.
I think your debt to GDP was 200%. What was your strategy at that time? And then how has that changed since the pandemic in terms of recovery?
Kyriakos Mitsotakis: I would argue that we are still pursuing the same strategy that was the foundation of our electoral platform back in 2019. We made it very clear at the time that we need to change our fiscal mix, gradually reduce taxes on business, on capital and on labor. We’ve done that. We have delivered during Covid – I would say significant tax cuts – that have improved the business environment. We’ve made it very clear that we need to make Greece an attractive destination for investment, domestic and foreign, and we’re delivering on that front as well.
We’ve seen record inflows of foreign direct investment in Greece during the pandemic, in 2021. So Greece is becoming an attractive business destination. We’ve made significant structural changes to our labor market. We’ve simplified licensing processes. We’ve essentially followed the basic playbook of how you make a country attractive to foreign investors. And we’ve also addressed the problem that we have in our banks. We have significantly reduced NPLs and NPEs to the extent that we do not consider the banking system to be a systemic problem for the country any longer.
And we did that during Covid. And if you look at the results, I think they speak for themselves. Greece has had the sharpest decline in unemployment during COVID of all European countries. So this fear that once we remove the support mechanism for businesses, that unemployment would spike, if anything, unemployment is continuing to come down -albeit from a relatively high level – because we still have the overhang of a ten years of crisis. And if you look at our growth projections, cumulative growth for 2021 and 2022 to be projected at 12.5%. That’s pretty good for a country that was trapped in a depression, essentially, for the first five years of the crisis and in a very low growth trajectory between 2016 and 2019.
So, my goal is very simple. I’ll use an expression that is very popular in the UK: leveling-up with Europe. We want to make sure that we’re no longer the laggards of Europe. If anything, I think we’ve demonstrated that we can be rather innovative in terms of our public policies. So the message that I want to send to your audience is that the Greece of 2021 has no comparison to the Greece of the past decade. And do contemplate, as you no longer are now a member of the European Union, if you’re looking for investments in the European Union -especially if you’re interested in our part of the world, southeastern Europe, but also the Middle East Africa- Greece could be a very attractive destination for also British investments within the European Union.
Lord Bilimoria: Fantastic. Can I just ask you a little bit more? Because in the UK we’ve always prided ourselves as being, historically, one of the top two or second or third in the world for inward investment. And yet at the moment, we’ve got a tax burden that is the highest in 70 years. Could you tell us a bit more about the sort of fiscal measures that you have put in place to make you so attractive as an investment destination? Your tax rates and you’ve got all sorts of incentives. Can you tell us more about this?
Kyriakos Mitsotakis: What I think happened during the previous government was a systematic attempt to really tax the middle class and businesses to create surpluses that were afterwards distributed quite frequently -I would argue- with political criteria. We said that this is the wrong policy. We need to grow the pie. And eventually we also want to focus on making sure that we reduce income inequality.
So we reduced the corporate tax rate from 28% to 22%. It’s going to stay there for the foreseeable future. We think that this is a good tax rate that strikes the right balance between fiscal concerns and having an attractive tax rate.
We’ve reduced taxes on dividends from 15% to 5%. We’ve given significant additional incentives, sort of super depreciation incentives for investments in green and in R&D. We’ve reduced taxes on labor, which was particularly important in Greece, social security contributions by 3 percentage points. There was a solidarity surcharge, which was an additional tax on middle-income salaried Greeks which we also scrapped.
Hence, a lot of Greeks who left Greece during the crisis suddenly realized that it makes financial sense for them to actually return because the tax burden is actually lower.
And we’ve also put in place a series of incentives to bring people to Greece. Be it through a non-dom scheme for wealthy individuals who want to set up a tax residence in Greece. Pensioners who want to have their pension taxed in Greece, employees who return and start working in Greece -whether they’re Greek or foreign.
So we’ve been able to attract companies but also talent to Greece. And in that sense, the pandemic actually helped us because the pandemic made it clear that you can work from anywhere, and I’m sure that we can be rather competitive in terms of offering good quality of life when it comes to working from anywhere. Be it Athens, which is really booming now as a city, but also our islands. We have in place a digital nomad visa scheme that makes it easy to obtain a work permit in Greece. We constantly hear stories of people who actually spend more of their time in Greece, working from Greece.
So we don’t just want Greece to be a destination for summer holidays, which is how it was known, maybe in the past, in Britain. This is a destination for full time employment, a destination for investment, a destination possibly for retirees. I have quite a few friends, especially in my home island in Crete. This actually is a trend that started some years ago. You spend your winter in Greece, we want people to spend their winter in Greece and maybe their summers in the British countryside.
So Greece is becoming more, I say, multifaceted when it comes to its economic and business footprint.
Lord Bilimoria: The super deduction that we have over here, 130%, to empower investment, you have got a similar one.
Kyriakos Mitsotakis: 150%. It actually works quite well. Our concern was always how to drive investment. One of the legacies of the crisis and the austerity policies that were imposed upon Greece was a collapse in investment. So, when we look at the composition of our growth, this should no longer be a growth that is almost exclusively driven by consumption. Of course, consumption is always important, but we want more investment, we want more R&D, we want more exports, we want to change the fabric of the economy, and we really want to aggressively drive the twin, digital and green transformation. This is a big theme for us. And of course, it’s also a theme that’s attracting significant private but also public capital, European but also domestic.
Lord Bilimoria: Income tax rates, where are they now?
Kyriakos Mitsotakis: It starts at 9%, up to 10,000 and will go up to 42%, if you include an additional surcharge that we still have scrapped. So 42% is the highest bracket that we have.
Lord Bilimoria: We just had COP26, which I attended for about one and a half weeks out of the two weeks. Your views on how COP26 progressed and how it relates to all the measures that you’ve got in place and what you’re doing in Greece.
Kyriakos Mitsotakis: Well, I think COP26 was an important step in the right direction. Of course, we would have liked some countries to be more ambitious, but I fully understand the complexities of negotiating with so many stakeholders. And I think that the UK did a very good job in terms of putting together the conference and reaching the conclusions that we all saw a few days ago.
A lot of the focus on COP26 was around coal. We made our decision to move away from coal two years ago. So we were very dependent -and still are to a certain extent- on lignite, which is the dirtiest form of coal.
We had already decided, before COP26, to close down all our lignite electricity plants by 2023, all the old ones. We will keep one active. Until 2028 at the latest we will be moving completely away from coal, using natural gas as a transition fuel, and of course aggressively moving into renewables. We’re blessed with wind and sun, and there’s still a lot of room to progress when it comes to the penetration of renewables.
We’re looking at offshore wind, which is a topic that you’ve done very well in, in the UK. And we’re very much looking at your regulatory framework but also to possibly attract companies that have been active in the UK to develop our offshore wind potential. It’s significant, as you can imagine, in Greece. For anyone who’s been to the Aegean, I think they know what I mean.
And of course, we’re focusing on certain sectors where we feel we can be sort of leaders in terms of the climate agenda. Let me just give you two examples. One is shipping. Greeks control 25% of the global merchant shipping. They should be at the forefront of shipping decarbonisation. It’s not clear how this is going to happen, but we want to make sure that we’re leaders and not laggards.
The second topic that I really care about a lot is decarbonizing our small Islands, and we’ve launched a couple of pilot projects to really demonstrate that this is possible, with a relatively low amount of investment. Because obviously small is beautiful when it comes to decarbonization. We’re looking very much at protecting our very special ecosystems, our marine habitats. We have an aggressive plastics strategy. So protecting our seas is very important, obviously for a country such as Greece.
And what I would like to add is that there are significant funds available from the RRF, which is a Recovery and Resilience Fund put together by the European Union. In total, we have €32 billion available for Greece in loans and grants -most of it is actually in grants- and more than a quarter of this will be directed towards green initiatives. For example, we have a very aggressive program to retrofit our buildings. These are great programs because they create lots of jobs, they support local businesses, they reduce the carbon footprint but also the energy bills of households.
And now that we’re facing this crisis, with the natural gas crisis, if anything we need to double down on all these initiatives. Be it rapid move towards renewables. They are by far the cheapest form of energy. And of course, any program that reduces the energy consumption of households in my mind is a clear win-win. And there’s a lot of European money to support these programs and make them economically attractive.
We actually have done two of them, and we do want to involve the private sector. On Astypalaia, which is a medium-sized island in the Dodecanese, we teamed up with Volkswagen, so this is primarily an electric mobility project. And on the island of Chalki, which is close to Rhodes, we teamed up with various companies to offer a more complete solution. So there’s a small PV 1MW station that essentially provides almost free electricity for consumers. We’re setting up a network of charges to encourage the islanders to replace their cars with electric cars. The good thing with the small island is that you don’t need big electric cars. Small cars with relatively small range can actually do the trick.
Putting in place a complete strategy regarding the circular economy for water and waste is also an important aspect of the strategy. And of course, also making sure that we upgrade the digital infrastructure of the island. Chalki has a 5G network, so that really helps not just the people, the students there have access to fantastic programs to support their digital skills. But also, if you want to work from Chalki and have access to a 5G network in this small island, it really changes the perspective of what actually we can do from these islands and also makes them much more attractive year-round. Because of course, one of our challenges for our tourism is to make sure that we get more year-round visitors to Greece.
And again in terms of changing our tourism product, in my mind there’s only one way for tourism to go, and that is towards sustainability. So we’re going to be ruthless in terms of making sure that we protect our prime tourist destinations and make sure that we drive all the new investment in tourism towards sustainable tourism. And of course, also make Greece a more attractive destination, as I told you, year round.
Athens, but also Thessaloniki and other cities are fantastic weekend destinations, really booming year round. And of course, people from abroad are just beginning to discover the beauties of mainland Greece, which is also a fantastic destination to travel year round. So you don’t just all have to come in August to Greece to enjoy a great holiday.
Lord Bilimoria: 10% of the 20 million tourists are going to Greece.
Kyriakos Mitsotakis: Very much so. We had a very good summer season. And when we talk to your big tour operators and your companies, the first indications for 2022 are extremely promising in terms of the numbers of visitors we will have next year.
Lord Bilimoria: And you touched on the power of government and business and academia working together. And how do we see that balance in rollabout. I gave you an example of the University. We’ve developed the world’s first recommended Hydro power chain and learning hostels with University developing it with a stock company Porterbrook and with government finance. How do you see that role of balancing government and business working together?
Kyriakos Mitsotakis: Well, that’s a very interesting, philosophical and ideological debate. I consider myself to be a sort of a Liberal in the 19th century definition of the term, but there is a role for bigger government. I wouldn’t say big government in times of crisis or when we need to drive through long term change such as Climate. For example, we spend tens of billions of euros during the Covid to support our businesses, but we try to do it in a smart way to make sure that our number 1 priority was to protect jobs.
We will also need to spend a lot of money to fund the green transition, and this will have implications for our public finances. So striking this balance between making public capital available to leverage private investment, especially for long term transformative projects, is going to be the key. But we, in Greece, unfortunately for decades, we were victims of a very sort of anachronistic approach regarding a concept of business that was essentially rather negative. And we’re trying to change that. Business is a partner in growing the country. And sometimes we put in place very interesting collaborations between the public and the private space, which were inconceivable a few years ago.
Let me just give you one example. Microsoft, which is actually investing heavily in Greece in data centers, just launched a pilot project in Olympia, where they teamed up with the Ministry of Culture. It doesn’t get more traditional in Greek bureaucracy, when you talk about the Ministry of Culture. They developed a fantastic tool of augmented reality to really view Olympia using your cell phone in a completely different light. So these are the sort of new partnerships that we need to forge with the private sector. We have tons of ideas in terms of how we can do that.
And we’re also always open for ideas. So sometimes it’s the private sector that needs to come to us and pitch to us ideas. And we “praise ourselves” in being rather innovative in terms of our public policy. So we’re always open for new ideas and suggestions in terms of what we can do with the private sector.
Lord Bilimoria: I always see the government creating the environment for business to flourish and business being a force for good. And what you’re saying is music to my ears anyway. How do you see the relationship between the European Union and Britain? Any views on Britain and the EU?
Kyriakos Mitsotakis: I think most, if not all, European leaders were sad to see Britain leave. But we respect the decision taken by the sovereign British people. We have a framework now post Brexit framework.
I was in the UK a week ago. I publicly said that we need to be very careful not to endanger the framework we’ve put in place. And I was specifically referring also to Article 16. I think it would be the worst case scenario if we see a disruption in what has been agreed as a result of sort of a complication when it comes to the situation of Northern Ireland.
I think this dispute can be resolved in good faith and, of course, within the overall framework of the Trade and Cooperation Agreement. We have a traditionally very strong relationship with the UK. We want not just to preserve it, but strengthen it. But again, what we would not like as Greece – I’m speaking as a Prime Minister of Greece – is any disruption regarding the big relationship between the European Union and the UK, because this will inevitably spill over to what we can do bilaterally.
Lord Bilimoria: Thank you so much. We – from a business point – we want to normalize relations as soon as possible in every aspect. And is there anything final that you would like to say? We’ve covered so much ground. We’ve talked about investment, we’ve talked about fiscal measures, we talked about the green economy. We talked about so much. Is there anything before I conclude the session? This has been absolutely amazing.
Kyriakos Mitsotakis: Well, thank you, Lord Bilimoria, thank you for inviting me just again. An encouragement to your members to think of Greece in the context of what we can do in the future and not necessarily in the context of what happened over the past decade. Let me just reiterate the message that the Greece of 2021 is a very different country from the Greece of 2011 or 2015.
Lord Bilimoria: Thank you for the time I met you. You’ve been inspiring. You’ve been inspiring today. And I want to conclude with this. I was chairing a CBI conference some months ago. And your relative, I think he’s a relative – the Mayor of Athens, Kostas Bakoyannis. He was on this panel that I was chairing. He said something that I love. He said that in Athens I don’t talk about building back better. I talk about building forward better. So I look forward to building forward better with you, Prime Minister and the UK-Greece relationship, which has huge amounts of potential. It’s been wonderful being with you. Thank you so much. And thank you from the CBI. Thank you.
Kyriakos Mitsotakis: Thank you for having me.
