Prime Minister Kyriakos Mitsotakis had a midday meeting, at Maximos Mansion, with the Secretary General of the Organization for Economic Co-operation and Development Mathias Cormann, in the context of the signing of a memorandum of understanding for the establishment of an OECD research centre in Crete, with the aim of connecting population-related and economic developments.
As part of its activities, the new centre will organize an international conference on population issues every year, in collaboration with the Municipality of Chania and the Delphi Economic Forum.
The Memorandum of Understanding was signed together with the Secretary General of the OECD Mathias Cormann, on behalf of the Greek Government, by the Minister of Finance Christos Staikouras and the Minister of State and Digital Governance Kyriakos Pierrakakis, in the presence of the Deputy Prime Minister Panagiotis Pikramenos, the Permanent Representative of Greece to the OECD George Prevelakis and the Mayor of Chania Panagiotis Simandirakis.
Mr. Cormann also presented the regular report of the OECD “Economic Survey of Greece”, which was published today. Immediately afterwards the Prime Minister made the following statements:
“Mr. Secretary General of the OSCE, dear Mathias, Mr. Deputy Prime Minister, dear Ministers and Deputy Minister, dear Mayor of Chania.
Dear Mathias, I would like, once again, to welcome you to Athens. I remember that 18 months ago, you honored us by choosing Greece for your first official bilateral visit immediately after taking office. It was then that we first discussed the idea of establishing in Greece, in Crete, an international OECD research centre on the global demographic challenge and the crucial issues of population movements.
Since then, the Organization cooperated systematically with the Greek team, under the guidance of the Deputy Prime Minister, Mr. Pikramenos. We examined together the findings of this cooperation last April, at the Delphi Forum.
Therefore, we had the opportunity a little while ago to officially sign the launch of this extremely important initiative for our country, but -I believe- for the OECD as well.
I want to express my gratitude for your consistency in promoting this idea and in your presence, I would like to thank the OECD Secretariat as a whole for the trust you have shown in our country.
This year’s report of the Organization also certifies this confidence, regarding the positive course of the Greek economy. I will have the opportunity later to come back to this issue.
Today’s development paves the way for the creation of an important international forum. Focusing on one of the most important issues of a strategic nature for the whole of humanity: the population. At the same time, its headquarters that will be in our homeland and the name of the centre, which will bear the name of Crete, also signify its transnational reach, as it is located in the heart of the Mediterranean between three continents.
In addition, the very important memorandum, which was signed yesterday between the Municipality of Chania and the Delphi Economic Forum, provides this new research centre with additional organizational capabilities. So that this unique, historical and geographical symbolism of it may henceforth be combined with the production of useful, tangible work for the entire planet.
Because in such an interconnected world the economies of countries can no longer be treated independently of their populations. Neither can the balances of societies be treated independently from demographic fluctuations and great pressures for population movements. Even more so when new parameters are constantly being added to this complex equation.
After all, this is emphatically illustrated by the unprecedented events that we have experienced: the economic crisis, rapid climate change, the coronavirus pandemic, the energy boom, the war with Russia’s illegal invasion of Ukraine, large population movements, many of which have their cause either in climate change, or in conflicts, in war conflicts in other continents, or in the great issues of global economic inequality. All these are huge new challenges, new stakes, which our era and our civilization pose.
This is exactly what this Crete Centre is now called upon to examine and investigate. Not only recording developments in numbers but also finding solutions for the convergence of economies and societies that will be based on cooperation.
After all, this is the purpose stated in the very title of the OECD: cooperation for common development. And let me close this short introduction by repeating that there is no better place that could, I believe, dear Mathias, be chosen for the study of populations than Greece.
First of all, it is a country with great experience on immigration. Let’s not forget that 100 years ago, in 1922, it welcomed more than a million Greeks from the east, to later acquire a huge diaspora in every corner of the world.
Even today, it is faced with the most dramatic version of the phenomenon, as immigration, in addition to being a field of miserable human trafficking, often becomes a lever for state and political expediency. Something that leads our country to protect the national and European borders, but also to save every day the lives of those who are persecuted.
Especially Crete, my homeland, Chania, my city, is a timeless crossroads where people and cultures meet. But also a permanent laboratory of ideas, with a history, with an anthropocentric civilization that is lost in the depths of the centuries, but which can – I believe – give a spiritual tone to any one-dimensional economic or technocratic approach. This is why, dear Mathias, today’s initiative is indeed unique both for Greece and for the OECD”.
Prime Minister Kyriakos Mitsotakis’ statement after the presentation by Mr. Cormann of the regular report of the OECD “Economic Survey of Greece” follows:
“Thank you Mathias, and we thank you for this thorough analysis of the OECD report on the Greek economy.
You rightly pointed out from the beginning that 2022 was an extremely difficult year, which was marked by the global energy crisis and the inflationary shock caused by Russia’s unprovoked invasion of Ukraine. An energy inflationary shock which -I assure you- the European member countries of the Organization felt much more strongly.
And this, of course, in the wake of the Covid-19 pandemic, but I would also say in the midst of particular challenges concerning my country. I am also referring to the great difficulties of economic recovery after a long period of fixation, as well as of course to the particular challenges connected with our neighborhood, the Eastern Mediterranean, and the behavior of our neighbor Turkey.
The report’s conclusion is therefore noteworthy that during these extremely turbulent times, this turbulent period, the national economy, the Greek economy, exceeded the expectations and the very predictions made by the Organization. It proved to be a positive surprise for Europe on many fronts. Let me remind you that in 2021 we achieved growth of 8.4%, more than double the initial forecasts, the third highest (percentage) in the eurozone. In 2022, this percentage is estimated to exceed 5.5%, again almost twice the European average.
And our estimate for 2023 is that growth will be closer to 2% than 1%, a rate which – if confirmed again – will be three times the European average.
All of this is happening at the same time that, as you said, unemployment is falling and falling very fast. Almost 300,000 new jobs have been added to the total number of employed Greeks. And this means that public wealth increases, but social injustices also decrease. And that the central political choice of the Government for reasonable tax reductions, combined with the improvement of the business environment, the attraction of significant investments, finally brought the intended results.
Of course, you rightly mentioned the problem of the public debt of the country. But Greece is the European country that managed to de-escalate its public debt faster than any other country. This is a decrease that exceeds 35 points, while at the same time we faced another challenge too, which was the number of non-performing loans in our banking system. From 45% in June 2019, non-performing loans have declined to a single-digit percentage in September 2022. This progress is so impressive that today no one talks about problems in the Greek banking system.
On the contrary, we are talking about challenges like the expansion of the credit policy of banks and the way in which banks will get more competitive and raise deposit interest rates, so that savers can get better returns on deposits. Let me assure you that we wouldn’t be having these discussions some years ago.
And now, as you said, investments and national exports have significantly risen. The percentage of exports, goods and services in our country has exceeded 40%. It was 20% a decade ago. This is an enormous swift in the productive model of the Greek economy towards an economy – as OECD recommends – that is more competitive, more innovative and more extroverted.
In fact, I was checking some statistics, and this year was a record year in terms of patent applications submitted. This reflects the degree in which innovation has penetrated all aspects of the Greek economy.
And of course – as I said – it is this policy that allows us to create fiscal space but also return it in a targeted way, as the OECD recommends, and not horizontally, so that we can support those social groups that need more help in these hard times.
This is something that we have done not only during the Covid crisis. We are doing it now too, in the midst of the energy crisis, for example in electricity bills. Greece, after this support, has some of the lowest prices in electricity compared with other European countries. This is of course achieved through a mechanism of redistributions of profits generated by electricity producers and via the extraordinary taxation.
We consider these policies to be extraordinary but also fair and imperative, taking into account the extent of the energy crisis that we are called to deal with.
The good thing is that markets – as you said – share our view on this positive course. Since 2019 – let me remind you – we have achieved a total of 11 upgrades from rating agencies. We are now only one step away from achieving investment grade, which I think we will be able to do within the current year. And of course, our country is now moving beyond European surveillance, a status that the country had entered in the context of post-memorandum monitoring since 2018.
All these developments are developments that confirm the bold, but also wise policies which are being followed, but also offer more comfort in the exercise of fiscal policies. In other words, our country has left behind it for good the downward path of memoranda, now following a course of progress and covering the lost space in Europe really fast.
You are right and I think that what is useful about these reports is exactly the fact that they keep us away from the trap of complacency. We still have a lot of challenges ahead of us.
You have mentioned some of them. Inflation may be showing signs of significant declines, but it is still with us. Uncertainty, on a geopolitical level, influences the perspective of the global – mostly the European – economy and it is certain that these “headwinds” – the term used by the economists – will affect the performance of the Greek economy in 2023.
However, I am absolutely convinced that there are “embankments” so that our economy can show its resilience in 2023. The continuing growth coming from investments, the deposits that are still high, the constantly decreasing course of the public debt, and the important funds of the Recovery and Resilience Facility and the rest of the European financing tools are important “embankments” against the extrinsic crises we are called to deal with.
But the most important weapon of our homeland is that we are completely willing to proceed on this path that has proved that it brings results, with stability, consistency and continuity.
The State and the citizens joined forces and together we have accomplished a lot during these three-and-a-half years. As the report indicates, a lot more can and must be done.
From what you have mentioned, what jumps out, in my view, are the major reforms and investments that are already listed in the Recovery Fund, but also the fact that your report focuses – rightly so in my view – on the need to accelerate judicial procedures.
If Greek citizens entrust us with a second term of four more years, the reform of Justice will be our central political priority.
And of course, we will keep on fighting for the expansion of the taxation base. We have made some important steps in the digitisation of transactions and, in this way, we are reducing tax evasion and the avoidance of social security contributions.
And of course we will continue to move very fast in the non-negotiable target of the green transition. Greece is already one of the protagonists in Renewable Energy Sources, but it is becoming at the same time a hub of LNG transportation. Tomorrow it will become a hub for the transfer of solar power from Africa to the rest of Europe.
For us, all of our development policies should and need to have a green and digital dimension. These are the two policies that horizontally traverse our governmental plan for the Greece of 2030.
Let me point out and emphasize the part of your report that refers to the interconnectivity of productivity with the rise in salaries and remunerations. Indeed, we have repeatedly said that salaries in our country are still low.
This is why our first governmental concern has been to support disposable income, lowering taxes and contributions.
Our next bet will be better salaries that converge with European ones and reflect the progress of the Greek economy at all levels. And all these will, of course, take place in the context of an integrated social policy that will be framed by more affordable housing costs, especially for the young generation, and a system of public health with decent care for everyone.
Also with policies – I am happy that you mentioned it – of active aging. Because one of the sectors that will be studied by the new OECD Centre in Crete will concern these global imbalances between developed societies that are aging fast and developing societies that now offer to the global active workforce hundreds of millions of people, who will also seek the right to personal and collective advancement.
Summing up, we should be happy dear Mathias, for today, which – as I said – seals two important facts. The official OECD report on the Greek economy and the establishment of the new Centre of the Organisation in Crete, for issues related with populations and the global demographic issue. I think that these are some good pieces of news both for the OECD and for Greece, and I am looking forward to the continuation of our cooperation with the Organisation.
The government has proven that it always seeks the best solutions of applied policy and the OECD is an organization that can offer us the tools so that we can get better in many, different fields of policy, always for the benefit of Greek citizens.
Thank you for your presence here. I hope that next time we will be able to welcome you with better weather conditions.
The statement by OECD Secretary General follows:
Well, thank you very much, dear Prime Minister, dear Deputy Prime Minister, ministers, Ambassador Prevalakis, and indeed dear Mayor of Chania, colleagues, friends, all.
It’s great to be back in Athens to have the opportunity to discuss with you Prime Minister and some of your colleagues the many challenges and opportunities in front of us and how best to respond to them, to put Greece and countries across the OECD, around the world, on the best possible foundation and trajectory for the future. As the Ambassador has mentioned, today we meet for two important reasons. Firstly, the signature of the Memorandum of Understanding to establish the OECD Population Centre in Crete and also the launch of the 2023 Economic Survey of Greece.
Turning to the establishment of the OECD Population Centre in Crete first. Prime Minister, thank you so much to you and to your government for your commitment to this fantastic future-focused initiative. And thank you also to the municipality of Chania in Crete and to the Delphi Economic Forum for their support as two invaluable partners in this project.
The creation of this centre for the OECD is a major step towards better understanding some of the complex linkages between population dynamics, migration and economic and social developments. The intention is for the centre to serve as a hub for capacity development, Peer-to-Peer learning and indeed high-level policy dialogue.
It will expand the OECD’s cross country work, data and analysis on the relationship between population and economic challenges across six policy areas, in particular, the economic, social and political causes and consequences of intergenerational issues and the implications for childhood, youth and aging populations, the labor markets and economic development and growth. The promotion of economic development in lower income countries with a rapidly growing population, the improvement of migration management, including the linkages between development cooperation and migration policies, and the efficient and effective integration of immigrants and the safe reinstallation of refugees and the empowerment of diasporas to promote economic and social change in both origin and destination countries as well as the understanding of the impacts of demographic change at the subnational level.
The centre’s activities will build on two main pillars: The Digital Observatory of Population Dynamics, which will monitor the changing composition and distribution of the world’s population, and the annual Crete Conference for Dialogue on Population, which will seek to promote dialogue and understanding of different population and migration challenges and opportunities.
The centre will also support policy implementation and advice through educational training and research activities. To advance its work, the centre will convene various stakeholders, including national and local governments, international organizations, the private sector, civil society, academia, as well as relevant think tanks.
The creation of this centre clearly comes at an important time in our shared history that the world is facing highly unbalanced demographic prospects. In most advanced economies, populations are aging rapidly. At least one in ten people will be 80 and over in nearly half of our current 38 member countries by 2050. In Greece, as in many other countries across the OECD, the working age population is expected to shrink by at least one third by 2060.
Population-aging related reductions in workforce participation are a drag on productivity and growth and consequently government revenues. And this at a time when public spending on pensions, health and social services to cater for an aging population will continue to increase.
Population aging is a structural challenge for many advanced economies around the world, with far-reaching implications for growth, productivity, the labor market and for intergenerational equity. We need to develop and implement reforms to optimize growth and opportunities in the context of an aging population. Boosting workforce participation by younger, older and female workers has to be part of the answer.
Ensuring education and skills development caters for both our youth and through a commitment to lifelong learning and skills development our older people. We need to pursue those improvements by both taking into account and leveraging the major labor market transformations associated with the digital and green transformation of our economies, which is happening at the same time.
At the OECD, we have already started developing recommendations to address these challenges. For instance, the Recommendation on Aging and Employment Policies, which focuses on strengthening incentives for working at an older age, encouraging employers to retain and hire older workers, and promoting the employability of workers throughout their working lives.
In parallel, while the population aging is taking place in advanced economies, most middle income and less developed economies will see their working age population grow in the coming decades.
In non-G20 countries, the working age population will increase by about 1.2 billion people by 2050. Africa alone will account for three quarters of this increase. This will most likely continue to drive international migration to OECD and European countries in the decades to come. Already in 2021, 4.8 million new permanent migrants arrived in OECD countries, a 22% increase compared to 2020. Russia’s war of aggression against Ukraine has created the largest migration of refugees to OECD countries since the Second World War.
By mid-September 2022, close to 5 million individual refugees from Ukraine had been recorded across OECD countries. Potential future geopolitical crises could push refugee inflows up further, as was the case in the context of both the wars in Ukraine and Syria. Migration, if well managed, can be and has proven to be beneficial for migrants’ countries of origin and of destination. OECD work shows that immigrants contribute more to tax and social contributions than they receive in individual benefits. And beyond this fiscal contribution, migrants bring skills and a dedication to build a better future for themselves and for their families.
But that said, there is more we can do to tap into the potential of migrants through good public policy. The OECD Population Centre in Crete then will seek to leverage and advance the OECD’s knowledge on population dynamics and the interlinkages with economic development to support better policies for better lives.
And we very much look forward to working closely with all of you in this much-needed endeavor and to make the OECD population centre in Crete a highly successful project for the benefit of people not just in Greece but across the OECD and beyond.
Now moving on to the findings and recommendations of the OECD 2023 Economic Survey of Greece. Firstly, a very warm and sincere thank you to the Ministry of Finance and to Greece’s delegation to the OECD for the support in the preparation of this survey.
Greece is a highly valued founding member of the OECD and we are proud of our work together with and in support of Greece for the challenging but successful structural reforms pursued over the past several years. Greece’s reform efforts are paying off. The Greek economy is on the right track and it will be important to stay the course. The strong and rapid rebound in economic activity from the COVID-19 crisis is testament to these efforts. This rebound has helped Greece to further overcome the legacies of the earlier financial crisis.
Employment has grown at a spectacular pace with a sharp drop in unemployment. There are a quarter of a million more Greeks in work than before the COVID-19 pandemic. The unemployment rate fell to 11.6% in October 2022, to the lowest since 2010. Businesses are using up their spare capacity. These developments are laying the ground for firms to invest and raise their productivity.
Significant and timely fiscal support measures have helped protect the Greek economy and people through the COVID-19 and through the energy price shocks caused by Russia’s war of aggression against Ukraine.
Over the coming years, the announced budget plans foresee a return to modest primary surpluses as this support is unwound. Surging energy prices in Russia’s war of aggression in Ukraine have, though, created strong growth headwinds, not just in Greece but all around Europe and in other parts of the world. After a decade with low inflation rates, prices have surged, driven by the rise in global commodity prices.
Inflation peaked at 12.1% in the twelve months to September 2022, its highest rate in 25 years. Since then it has come down to 7.6% in December as subsidies and lower global energy prices have reduced electricity prices. With these headwinds, confidence among firms, though, has also fallen. High frequency data show that spending and activity are slowing. Against this backdrop, we expect GDP growth to moderate to just over 1% in 2023.
And as these headwinds abate and investment will rise and help to lift the economic growth back towards 2% in 2024, which is still above the European average.
How can Greece best navigate through these headwinds and onto a course of sustainable growth? In our report we’re emphasizing three priorities. First, Greece must continue to pursue reductions in public debt ratios while promoting a dynamic economy.
The economic rebound and the surge in prices have brought the public debt to GDP ratio down to its lowest level in a decade. But at 175% of GDP at the end of 2022, public debt is still very high. Three factors can help keep it on a downward trend: maintaining the government’s reform and investment momentum to sustain stronger economic growth, maintaining hard won fiscal credibility to reduce the interest rate premium on Greece’s public debt. Achieving investment grade sovereign rating will limit the cost of financing of the debt.
Running modest primary budget surpluses, even a moderate increase in the primary surplus by 0.5% of GDP, can lead to an important improvement in debt dynamics. And of course, I fully appreciate that over the last three or so years there has been quite a rapid fiscal consolidation in the context of a very challenging overall environment.
Greece can sustain primary budget surpluses while supporting growth. Currently, Greece spends less than most OECD countries on those areas that are most supportive of growth: Infrastructure, education and research. Reviewing how well various forms of spending and investment support the economy can help to better allocate public resources. We therefore welcome the government’s ongoing efforts to better review the performance of its spending.
And of course, Greece is also cutting many tax rates, improving the tax mix, making the tax mix more growth friendly with well targeted cuts to taxes on labor and corporate income encourages increased investment, leading to stronger growth and more jobs.
At the same time, maintaining revenues is key, so improving tax compliance is a necessary part of the solution. And here the digitalization of many transactions with the COVID-19 crisis and through the dedicated efforts of the government, has improved VAT collections, as has more effective revenue administration. Limiting exceptions and special reduced rates and making more use of taxes that have the least economic cost also helps generate more revenues without harming growth.
The second priority is to achieve stronger GDP growth by further boosting investment and employment growth.
But the government is putting in place many of the investments and reforms set out in its Greece 2.0 Recovery and Resilience plan. Fully implementing these measures and ensuring they improve the day to day conditions for businesses and households across Greece will be critically important.
Now is also the time to prepare the reforms and investments that will follow and build on Greece 2.0. Improving access to finance will be important to reviving investment. Banks will need stronger capital bases if they are to restart lending in sizable volumes, especially for more innovative and riskier projects.
Alternative sources of finance should also be developed. Improving access of medium sized firms to bond markets through transparent information sharing and supportive regulations would broaden and strengthen financing for investment. A high share of firms in Greece remain very small. Ensuring markets are competitive can help more dynamic and productive firms to expand, as does minimizing unnecessary regulatory burdens. Interactions with the public sector in Greece are becoming much more straightforward, more efficient, with great strides in the digital transformation of Greece’s public administration.
The justice system also needs to embrace this broader progress and reform momentum. Civil and commercial litigation in Greece takes too long to resolve. The backlog of pending cases means some current cases are only scheduled to start trial in 2026 and are then expected to take several years to resolve.
These delays are despite a justice system in Greece which is comparatively better resourced than that in most other OECD countries. Extending the same reforms that are improving the efficiency of the broader public services through the systematic application of digitalization and the review and streamlining of processes could help improve the performance and efficiency of Greece’s justice sector too.
More women have moved into work and the gap in employment rates between men and women has narrowed. Since before the COVID crisis, the share of adult women in work has risen by four percentage points to 51%, though it is still 19% below the male participation rate and it is still well below the OECD average of about 62%. So there is further opportunity for improvement there.
Government measures to drive further progress by expanding access to high quality childcare, support for caring for elderly relatives or extending leave to new fathers, for example, are very welcome steps in the right direction. Encouraging workplaces to adopt more flexible work arrangements building on the lessons of the COVID-19 pandemic can also help close the gap further. For adults, more opportunities to engage in upskilling and reskilling programs can help raise employment and workers’ willingness to seize the emerging opportunities.
The third priority is ensuring the recovery is sustainable in the face of a changing climate. Greece has cut its greenhouse gas emissions by almost half from their peak in 2007, setting it on a course to its goal of achieving a 55% reduction from 1990 levels by 2030 and to become a net zero emission economy by 2050. But Greece still produces more greenhouse gas emissions per unit of GDP output than most other OECD countries. A mix of policy tools will be needed to continue the transition to net zero.
Part of the solution is to price emissions. Greece already does this for much of its emissions, but the price is not consistent for different emitters or sources of emissions and consistent price signals, though, help businesses and households find the lowest cost ways of cutting their emissions.
The other part of the solution is a tailored mix of investments, financial incentives and regulations for the sectors responsible for the bulk of emissions, namely transport and buildings. Reducing emissions from road transport is a particular challenge. Greece’s car fleet is old and most vehicles purchased are secondhand.
Relying on the shift to no emission vehicles is likely to take a long time. Taking traffic off the roads should be part of the solution and Greece at this point is making less use of its railway network than other European countries. Relatively modest investments, we believe, can help shift modes of transport.
Similarly, buildings are comparatively poorly insulated and are a major source of greenhouse gas emissions. A relatively large share of the population cannot adequately heat their home, adding pressures on households at a time when energy prices are high. Expanding home renovation programs, incentivizing the private sector to take action by laying out a clear timetable for tightening energy efficiency standards can help drive progress.
All of these measures change the relative cost of what households consume, and they mean a loss of purchasing power, especially for the lowest income households. But according to our estimates, revenues from a consistent emission price that is high enough to materially cut emissions would be sufficient to compensate low income households.
The climate is already changing in Greece, as evidenced by the increase in wildfires and winter storms in recent years. And so far, much of the cost of these disasters have been borne by the public purse. Expanding property insurance at affordable premiums would allow a sharing of cost and better protect people from the effects of a changing climate. Requiring insurance can encourage private investors to minimize their exposure to climate risks, and it can provide faster access to support if or when a disaster strikes.
In closing, Greece’s policy response to the COVID-19 pandemic has secured a strong and a rapid recovery. The Greece 2.0 Recovery Plan is already laying the foundations to optimize Greece’s ability to tackle future challenges and to seize all of the future opportunities in front of you.
Ensuring the effective implementation of this ambitious reform and investment agenda will help to improve the investment climate and public services for businesses, workers and households. And as population size, growth, age, structure and geographic distribution continues to influence and shape our economies, we look forward to the Crete centre’s insights about how to best optimize the benefits and address these implications.
Thank you again, Prime Minister, to you and to your government for your invaluable engagement with us at the OECD and for hosting us here today. It’s my real privilege to be here. Thank you.
