Prime Minister Kyriakos Mitsotakis’ conversation with the journalist Fareed Zakaria in the World Economic Forum

Fareed Zakaria: Prime Minister Mitsotakis, pleasure to have you on.

Kyriakos Mitsotakis: Thank you Fareed.

Fareed Zakaria: So I wanted people to remember that Greece was the country that everyone was worried was going to bring Europe down, bring the Euro down. It was really seen as a kind of sick man of Europe. And you’re in a very different position now. The Economist says you are one of the economic winners in their list. What happened?

Kyriakos Mitsotakis: Well, I think it is indeed a very interesting story of an economic transformation. We came into power in July 2019 and we inherited a country and an economy that was still traumatized, not just as a result of financial crisis, but also traumatized from our experiment with populism, which essentially unnecessarily prolonged the crisis for four additional years.

And we came into power with a very clear commitment to restore Greece to a high growth trajectory by implementing what I would consider common sense reforms, lowering the tax base, making the country more attractive for foreign direct investment, making sure that we digitize our sort of rather opaque and antiquated bureaucracy, while at the same time behaving in a responsible manner in terms of our obligations towards climate.

So we had from the very beginning a very aggressive approach on the issues of the Green transition. And in spite of the fact that we had to deal with multiple crises, I think we’ve succeeded in turning the country around. And if I look at the image of Greece today and I compare it to three years ago when I was again, I was pitching my story at the time, at the beginning of our term, then I sensed interest, but also skepticism.

Now we have the facts to support the argument that we have indeed turned the corner, that Greece is no longer the sick man of Europe and that we’re actually leading Europe on numerous fronts when it comes to innovative public policy. And this, of course, gives us strength and energy as we move into our election cycle to make a case that we should be given the opportunity to govern Greece for four more years.

Fareed Zakaria: That’s right. You’re going to go into election at.

Kyriakos Mitsotakis: At some point in the spring. Yeah.

Fareed Zakaria: Let’s talk some of the numbers. Greece’s growth rate now, I mean.

Kyriakos Mitsotakis: 5.6% for 2022, 8.4% in 2021. I expect a growth closer to 2% than 1% in 2023. And we may even surprise on the upside. But I think equally important, numbers of foreign direct investment, record years 21, record year again 2022. And we did that without compromising our fiscal sustainability priority.

So if you look at debt to GDP, we’ve had the fastest decline of debt to GDP than any other European country to the point where no one talks about the Greek debt being an issue, no one talks about Greek banks being an issue. I remember when we came into power, we had NPEs at 40% of the banks’ balance sheets. Now it’s single digits. So all of these were many clouds and they seem to have cleared, which gives us also room to plan for the future without being in constant crisis management mode.

Fareed Zakaria: The green transition is also quite impressive. Αt this point, what percentage of Greece’s electricity is produced from renewables?

Kyriakos Mitsotakis: Close to 50%. And there are days, today for example is a lovely day back in Greece. Sunny, windy, not too hot, not too cold. So we don’t have many requirements. Close to 90% of the electricity during the day will be produced by renewables. And there were days in October where for hours we produced 100% of our electricity from renewables. We have twelve gigawatts of installed capacity of wind and solar and a very aggressive plan to roll out wind and solar for the next years.

Fareed Zakaria: So when you look at, to me what’s interesting about the Greek case is you have a center right government pro market, but as you say, responsible on green issues, also on protecting the vulnerable. Is there a model here for how to stave off populism? Because I look at it, and it does seem even though Biden’s government is center left, there are similarities here.

Kyriakos Mitsotakis: I think the main cleavages today are not so much between the center right and the center left, but between those who believe in policy pragmatism and in our well functioning democracies and those who promise the moon while at the same time undermining democratic institutions. In our case, you’re right, I’m a center right politician, but many of the policies that we’ve pursued could be labeled as rather progressive.

And I’ve been making a case that the next phase of Greek growth cannot be funded by debt. That’s what we did when the country went bankrupt in the first place, but also needs to focus on innovation, on the green transition, on the digital transition, but also needs to be fair. So what we’ve done, and I think we’ve done successfully, was to make sure that all the support we provided our citizens and our businesses was always, and is always, means tested. So we resisted a temptation to horizontally cut, for example, VAT or excise taxes. But we do recycle, for example, windfall profits from our two main refineries. So we take 600 million and we recycle them into a voucher to help vulnerable households with the supermarket purchases.

So I would argue that there is a template, yes, for a progressive approach. Whether you label it, you know, in our case it comes from the center right because we passionately believe in the power of innovation and the strength of the private economy. But at the end of the day, Greece is interesting because in this upcoming election, Greeks will compare between four years of the previous government, which was in my mind a populist government that didn’t really do the country much good, and four years of our government. So if we are going to win, as I believe we will, it will be a vote of confidence. But I think it’s also an election that should be noticed outside the borders of Greece because many democracies are struggling with similar dilemmas. So the old cleavages right versus left in my mind are no longer as relevant as a distinction between more authoritarian populists and more pragmatic progressive Democrats. I think this is the real dividing line today in many Western democracies.

Fareed Zakaria: Now, one of the things fueling populism almost everywhere in the west and Greece had this issue front and center was immigration. How have you dealt with it? Why do you think that that issue has not become as dominating as it was?

Kyriakos Mitsotakis: I think that’s a good question. Although in Greece, immigration became a big problem back in 2015 when the previous government adopted an open border policy. I’ll give you an interesting statistic. In 2015, 75% of all illegal migrants who entered Europe entered through Greece. In 2022, that number dropped to 5%. So we’ve reduced our immigration flows by almost 90%. And we said that we will protect our borders, but we will do so in a humane manner.

And I can tell you Fareed, because we do get criticism on this issue, that by protecting our borders at land, but in particular at sea, we are putting less lives at risk. The fewer people you have in the sea trying to cross into Greece, the fewer accidents you will have. So I think we’ve been good at eradicating the smugglers’ networks. And if you look at our islands now, when we came to power on a single island, Lesbos, which is a big island, they had 25,000 migrants and refugees on that island alone. It was a powder keg, now less than 1,000. So the local communities are happy, but it also gives us, sort of, breathing space to work more on proper integration policies.

We’ve cleared the backlog in terms of our asylum applications. And we also tell people, if we you give you asylum, don’t move to Europe. If you want to stay in Greece, there will be jobs in Greece. We are faced with the same labor shortage in many other countries. Our unemployment is coming down. It has come down by 6%. And we already have labor shortages, for example, in agriculture. So I think we have imposed a tough but fair migration policy. And right now, if you look at the public debate in Greece, migration is really a non issue.

Fareed Zakaria: But that seems to be part of the formula for a centrist pragmatic government to not allow immigration to turn into an issue.

Kyriakos Mitsotakis: Yes, because otherwise you will fuel the extreme right. In Greece, the way we’ve positioned ourselves is liberal in the economy, progressive on social policies, but rather patriotic when it comes to foreign policy. Defense, we’re spending more on defense. We have a difficult neighbor. I inherited a situation where our armed forces had not received any significant investments for more than a decade. So our defense posture is important in our part of the world.

So yes, I think this sort of patriotic, liberal, progressive approach and you can actually do all three. I don’t see any inherent ideological contradictions in what I’m describing to you. I think you have a case that you can actually appeal outside the narrow, outside your party base. And I was actually successful in bringing people to the party that never had voted for a Centre Right party in the past and I hope I’ll be able to replicate that in the coming elections.

Fareed Zakaria: Now you face a geopolitical storm in Europe. How has the Russia Ukraine war affected you?

Kyriakos Mitsotakis: It has affected all of us on numerous fronts. First of all, I hear sometimes lots of criticism about how Europe has reacted. Is Europe really in decline? I am very much against this logic because I think it’s wrong. I think in Ukraine we stood the ground. Greece is a country that has historical ties to Russia, cultural, religious ties. But we were very clear from the beginning: we want to be on the and we will be on the right side of history. And we supported Ukraine, we supported it on all fronts, including with military equipment and I’m convinced we did the right thing.

But of course the big impact for Europe has been energy, in particular the price of gas. I think we were very naive in Europe for many years. Our overdependence on Russia caused us huge problems and I think in that case we were also slow to react. I was the first to advocate for a cap on the price of natural gas. Started back in March, finally convinced the Council and the Commission to adopt it in December. Since then, not only for that reason, I want to be honest, but the price of gas has collapsed.

Had we been able to move earlier, we would have saved ourselves a lot of money and we would have not given the opportunity to Russia to make money out of limited supply of gas, but at exorbitant prices. So I think if there’s one good thing that comes out of this horrible war it’s that it will push the green transition at a faster pace. It will force us to diversify our supplies of gas. Greece has a very important role to play. We are a sea country. We are investing in our LNG facilities. We want to bring in gas into Europe through Greece.

I was speaking, for example, now with the President of Moldova. We want to help our Balkan neighbors, we help Bulgaria and supply them with gas. So we want to be a provider of energy security for our region as they diversify, as these countries diversify away from Russian gas. But at the end of the day, we know that renewables are the cheapest, most environmentally friendly, but also geopolitically safe choice. So I think what you will see is an even bigger push towards renewables.

Fareed Zakaria: Right now, what I see there in Europe is massive energy subsidies. I’m talking Europe wide to the tune of almost $600 billion this year. And there still is a real reluctance to invest in, for example, natural gas because of a sense that it’s fossil fuels. Yet you do need the energy today. Wouldn’t it make sense to invest in actual, in natural gas facilities?

Kyriakos Mitsotakis: Look, I think we had this debate at the European Council. Some people thought that you can move from fossil fuels, in particular coal, to renewables at the flick of a switch. It was a fantasy. It was wrong. It is wrong. We will need natural gas for the foreseeable future. But investments that we make in natural gas also need to be hydrogen ready. For example, I was just in northeastern Greece, where we started an investment in a new natural gas electricity plant that will actually cover the Balkans. But it is hydrogen ready.

So when we invest in new natural gas infrastructure, we need to think what will come after natural gas. But we’re also starting serious exploration work in Greece. The Eastern Med has natural gas. We know that. There’s gas in Cyprus, there’s gas in Israel, there’s gas in Egypt. There could be gas in Greece. We’re working with ExxonMobil and very soon we will know if there’s something meaningful there that we can actually extract. So I don’t necessarily see these two trends competing in the short to medium term. We’re still far away from having the sort of storage, investments and technology to replace, you know, natural gas as base load.

And of course, the same is also true for nuclear. Nuclear is also going to be part of the mix. We are not a nuclear country. We will never have nuclear reactors. But we’re not going to hit net zero without nuclear in 2050.

Fareed Zakaria: But yet you say you won’t build one.

Kyriakos Mitsotakis: It’s difficult to start a nuclear business from scratch, especially in a country where it’s going to be even more expensive because of earthquakes. We’re looking at the new small modular reactor technology is interesting. If there’s a breakthrough there, maybe we could contemplate it. For the moment it may make more sense to import electricity from Bulgaria, Romania. They have an installed base of nuclear.

Fareed Zakaria: European Union and Russia, and sanctions. You know, there are concerns that, yes, Europe is united now, but over time, as the cost rises, will its citizens be willing to bear those costs? You’ve been privy to all the conversations. Do you worry about that?

Kyriakos Mitsotakis: No, I don’t, for two reasons. First of all, because I think we’ve seen the worst in terms of the gas prices. What we had to go through was horrible in terms of the spike of prices and money we had to spend. Things are better. There still may be volatility, but I doubt we will see the highs that we saw in 2022. This means that there will be less pressure in terms of inflation and less need to subsidize our energy bills.

And the second is because we see that our support is actually meaningful, that it can turn the tide. And I think we have a moral, but also a geopolitical obligation to continue supporting Ukraine. And in the case of Greece, I would argue for one additional reason. We don’t want to set any precedents in terms of aggressive revisionist powers, thinking that they can expand at the expense of other powers without suffering massive consequences.

Fareed Zakaria: So you’re raising a subject that I wanted to bring up. Greece is full of beautiful islands. One of them is Kastelorizo. I imagine you would not want people to vacation there because is there a danger you will go to war with Turkey over this tiny island?

Kyriakos Mitsotakis: We will not go to war with Turkey, although we’ve witnessed a lot of tension over the past three years. Kastelorizo is only one of the beautiful Greek islands. And speaking of vacationing, we’ve had a fantastic tourism season in 2022 and it looks like we will have a bumper year again in ‘23. And of course, tourism is very important for our economy. But look, we should be able to sit down with Turkey as reasonable adults and resolve our main difference, which is the delimitation of maritime zones in the Aegean and the eastern Mediterranean. It’s a complicated issue because of the geography of the Aegean, but we’ve been able to resolve similar problems with our neighbors.

We did it with Italy, we did it with Egypt and with Albania we’re contemplating taking the issue to the International Court and let the Court decide on our behalf as long as you agree on the playbook. And the playbook is you resolve your problems according to international law, and in particular the United Nations Convention on the Law of the Seas. You don’t provoke, unnecessarily provoke your neighbors. You keep channels of communication open. And I think it’s also never helpful to sort of weaponize foreign policy for domestic reasons. It’s usually not a good approach because you end up poisoning your public opinion.

Kyriakos Mitsotakis: And I’m more concerned with -because there’s a lot of noise in Turkey about Greece building up its armed forces. And I ask, does anybody reasonably believe that the Greek islands are a threat to the Turkish mainland? Or is it more realistic to believe that the Turkish mainland is a threat to the Greek islands? Especially keeping in mind the Cyprus story -in 1974 we had an invasion and a third of the island is still occupied. So I think that after the elections -it’s interesting that they will take place around the same time in both countries. I don’t know which government will emerge out of Turkey, but certainly I think there are ways of lowering the tension, working on issues of common interest, agreeing to disagree. But even if we agree to disagree, we can do so in a civilized manner. We don’t need to threaten each other or engage in overflights or other very provocative activities, increase the risk of an accident.

Fareed Zakaria: Do you think President Erdogan wants to resolve these issues?

Kyriakos Mitsotakis: I’ve spoken with President Erdogan many times. Although we’ve had our very, very difficult moments, I don’t think that… I do not consider it impossible to find a solution with President Erdogan.

Fareed Zakaria: You said in a previous interview that first he has to give up his Ottoman fantasies.

Kyriakos Mitsotakis: Yeah, I mean, that’s important because at some point there are issues which are simply off the table. We cannot discuss the issue of sovereignty of Greek islands. We cannot accept, for example, the fact that Turkey signs a memorandum of understanding with Libya that denies Crete any right to maritime zones. These are completely unacceptable premises. So if we narrow the discussion to the real issues, yes, we can find a solution. But if we broaden the discussion to issues that I’m not willing to discuss, then we cannot have a discussion.

Fareed Zakaria: President Erdogan is currently holding up Sweden’s membership in NATO. As I understand it, the main issue is with Sweden. Greece has been a member of NATO from the beginning. Do you think his objections are valid?

Kyriakos Mitsotakis: No, and I think he’s not helping the Alliance at a time when we need to be rock solid. But I also need to point out that Turkey is not imposing any sanctions on Russia. It’s the only NATO country that is not imposing sanctions on Russia, which is also an issue because there’s significant sanctions leakage. So, I understand that every country has a right to formulate its own foreign policy. But I do need to point out that when it comes to making sure that the Western alliance is strong, Turkey is not exactly consistent with what all the other NATO member states have done. And Finland and Sweden, apart from the fact that they have made a difficult decision to abandon decades of neutrality to join NATO, will also be valuable additions to the alliance.

Fareed Zakaria: Do you believe that -you think about this in terms of, you come from a background in markets and such. It seems very unlikely that the sanctions against Russia are going to be lifted anytime soon. So, we are in a world where Russia is simply isolated from the world economy and the energy markets. Global commerce will just have to adjust to that. Right?

Kyriakos Mitsotakis: Exactly. This is what’s happening. And I think this is… Regardless of what will happen -and we all hope that the war will stop because it’s horrible what’s happening. And every day people lose, young people in Ukraine lose their lives defending their country. But I think Russia’s isolation from the world economic order is going to be a long term pattern. For example, I don’t think anyone will, even if something miraculously were to happen and the war were to stop, I don’t think that Russia will find that many customers for its gas in the future. Everyone is looking to diversify and diversify in the long term, not just in the short term.

Fareed Zakaria: When you think about this issue, that Europe has been very united and in lockstep, really, with the United States in confronting the issue of Russia. How do you think Europe will react to America’s increasingly belligerent views on China?

Kyriakos Mitsotakis: First of all, you’re right to point out that Ukraine has strengthened the transatlantic bond. But there are some other issues which have caused turbulence. China is a difficult problem, and I do sense and my belief has always been that of course China is a strategic competitor or rival on many topics. But there are issues the world needs to work with China, such as climate. The climate issue cannot be resolved if we don’t bring anybody (everybody) on board. And in that sense, China’s role is important.

But there’s also another issue which in my mind is more imminent and is causing us a lot of headache in Europe, and that is the Inflation Reduction Act, which is an important piece of legislation in terms of driving the US. towards carbon neutrality. So it’s good from that perspective, but it’s causing us a lot of headaches because it’s also protectionist legislation. And I’m sure that Europe will need to come up with a response. We already had our response to COVID, which was significant and in my mind, a milestone for Europe. The Next Generation EU Fund, what we call the Recovery and Resilience Facility, €750 billion. If you just look at Greece, 31 billion for Greece alone, 19 billion in grants and the balance in low interest loans. We’ve already received 11 billion. This is a lot of money to invest in digital, in green, in skills, in competitiveness issues. But I would imagine that there will be a response, or I would say there should be a response to the IRA.

Fareed Zakaria: But do you worry… You’re right, that the United States has taken measures that are flatly protectionist, “buy America” provisions and things like that. If Europe puts in place a series of provisions that are flatly protectionist, aren’t we going towards a world that is very different from the one that people wanted to be in, which is more open, more…?

Kyriakos Mitsotakis: I think you’re right. I think that there are ways to work around the legislation in terms of how it’s implemented. I understand the point made by many of my US friends that this was not done to punish Europe, but certainly there are consequences for Europe. Maybe in the implementation of the legislation there are ways to work around this. But at some point, we also have a responsibility to protect our own industrial base. And if we talk to companies that tell us, “look, frankly, with the incentives that were in place, I mean, I’m contemplating moving my production from Europe to the US”, we can’t just sit and look at this problem. And the solution for it is not just to relax state aid rules, because if we were to just do that, the big beneficiaries are going to be the big economies. If you look at state aid, post COVID, 50% of all state aid went to Germany when we relaxed the COVID state aid rules. So it is important that we keep the cohesion of Europe intact. And that is why, in tandem with the relaxation of state aid, which I think is going to happen, I think we need a bigger European facility similar to what we did with COVID to add additional firepower to invest more specifically in clean tech.

Fareed Zakaria: You have been a successful businessman, and I think, fair to say, a successful politician. Which was harder?

Kyriakos Mitsotakis: There’s no comparison. Politics is extremely complicated, especially in times of crisis. We had to go through very difficult challenges because in our case it was not just Covid and Ukraine. We also had migration and Turkey. So we had the whole package. But at the same time, it’s a tremendously rewarding job. When you see real results and when you improve people’s lives, at the end of the day, we’re in the solutions business. And if anything, I hear a lot of talk in Davos about business being in the solutions business, but we’ve proven that politics, we also need to be able to deliver real results and be rather pragmatic in our approach. That’s where the business background can be helpful if you aspire to be a politician. But the last three and a half years have been challenging. Extremely challenging. Sometimes very difficult, very painful when you have to deal with issues such as Covid, where lives are at stake. Very stressful. But at the end of the day, when you look back at your record, when you make your case to the people to be reelected, if you feel good with yourself about the fact that you’ve tried very hard, you’ve done your best, you’ve given it your best, you acknowledge your mistakes because mistakes were made. You sleep well at night, and that’s very important when you have to run a campaign.

Fareed Zakaria: Prime Minister, pleasure to have you.

Kyriakos Mitsotakis: Thank you Fareed. Thank you very much.

Fareed Zakaria: Thank you all.