Prime Minister Kyriakos Mitsotakis’ introductory statement:
Well, first, thank you so much for hosting us and thank you, Friedrich, for agreeing to this conversation. I was looking at this splendid photo of the Acropolis, all very nice and very sunny. As I was coming in, I remembered a cover of The Economist magazine during the years of the financial crisis with the helicopters flying over the Acropolis and with a very ominous title “Acropolis Now”, making a reference to the “Apocalypse Now”, a movie of the ’70s.
I was thinking, yes, indeed, we have made a lot of progress since these days and it was not that far ago, back in 2015, where Greece essentially found itself on the precipice of a massive catastrophe. We managed to avoid it at the time because the populist government realised the consequences of leading Greece down that path. But even when we came into power in 2019, we knew that we had a lot of work to do in order to restore Greece’s credibility. Our first goal was always to restore the soundness of our public finances and to achieve growth rates which would be significantly higher than the rest of the European Union, to follow a prudent fiscal policy, but also to drive growth-friendly measures that will make Greece an attractive investment destination.
I think four years later it is probably fair to say that this policy has been overall a success. The economy is growing faster, significantly faster than the eurozone average. Our debt to GDP is declining at the rate which even we could not have anticipated a few years ago. We’ve brought down unemployment significantly. The country has been able to attract record foreign direct investment over the past three years. We managed, as you pointed out, to regain investment grade over the past weeks, which of course for us was a big achievement and marks probably the end of a very painful cycle which lasted for more than a decade.
Now that I think a significant part of the difficult job of bringing Greece back to normality has been achieved, the next goal is how do we bring Greece closer to Europe. If I were just to put a one sentence title to what has happened over the past 10 years, we tried and succeeded in keeping Greece within Europe, now we need to make sure that Greece actually converges with Europe and we make up for a lost decade. We should not forget that Greece lost 25%, 25% of its GDP during the difficult years of the crisis.
Let me stop here in terms of my introductory remarks by saying to you that the Greece you remembered during the fiscal crisis is not the Greece that exists today. I think this overall transformation also is attributed to the resilience of the Greek people. It’s not just the government, it’s society that has been able to hold together during very difficult years. And of course, an electorate which voted us back into power with an increased share of the vote, because I think they recognised very rationally that basically we’ve done a good job and they believed in what we would do for the next four years, in our programme.
On the european economy
That is a complicated question and a sensitive one, I recognise, especially when I speak in Germany. But let me first start by agreeing with what Friedrich said: in order to be able to maintain a monetary union without a clear central fiscal capacity, one needs fiscal discipline in the member states. Of course, one also needs to make sure that we avoid mistakes of the past, because I think the biggest mistake that was made during the years of the Greek fiscal crisis was to push for probably more austerity, draconian measures, which essentially created a death trap of a depression that further brought down revenues and made fiscal targets unattainable.
I think that when you look at the future of the Stability and Growth Pact, which is, as you know, currently being negotiated, the initial approach of the Commission, more flexibility in exchange for reforms and ownership in terms of the medium-term fiscal policies by the member states, is the right one. I understand that progress has been made by our finance ministers over the past weeks, and I would expect us to agree to the new rules. I think we need to agree to the new rules before the end of the year.
These rules are important. But of course, there is another outside auditor of our fiscal performance, and that’s the markets. When you look at, for example, Greek debt now, it is trading close to the level of Spain’s debt. Our 10-year bond is significantly below that of Italy’s. Who would have thought that this would have been possible four years ago? As much as I believe in the fiscal rules imposed by the Commission, one should not forget that the markets are constantly looking at us. And especially for those countries that have a high debt, they will keep us honest in terms of us being able to produce primary surpluses and have a clear path towards reducing our debt. But these primary surpluses, in our case, need to be produced through a growth-friendly policy and not by overtaxing the Greek people and the Greek business sector.
What we have achieved, which I think is a key component of our success, was to create growth by reasonably reducing taxes, but also going after tax evasion. The second term of my government will focus much more on tackling tax evasion than bringing down, further bringing down tax rates, which I think are probably going to stay where they are for quite some period of time. If we bring down tax evasion, then we can start also bringing down VAT and indirect taxes, which would be my goal towards the end of my second mandate.
Now to your question regarding the ability, the capacity of the European Union to issue debt jointly, this is what we did for the NextGenerationEU programme. I think it was an important milestone, and it was very important that Germany and Angela Merkel at the time agreed to what was in my mind a very important decision taken by the European Council that gives Greece almost €36 billion of grants and debt to finance the green and digital transition. If we make that a success, then we can talk about possibly repeating what we did in the future.
But I don’t want to open this discussion before the timing is appropriate. The Next Generation EU programme has a lot of conditionality attached to it. It’s a difficult and complicated programme to execute. We know that the bar is high, and we know that we have to push our bureaucracy to make sure that we’re consistent with what has been asked of us to do because at the end of the day, we are borrowing as a Union and we’re giving the poorer countries money to spend.
I understand that the threshold is high. If we make this a success, then maybe in three, four years we can have this discussion again. But my focus right now is to ensure maximum absorption capacity of the significant European funds that we have at our disposal.
On Greece’s growth prospects and the challenges of the EU:
Well, again, coming from a country that is just exiting a very traumatic period in our modern history, my one commitment to the Greek people is that we will never, ever go through what happened to Greece starting in 2010. Fiscal discipline cannot be challenged, and that is non-negotiable for me. I know that it is also the basis, the foundation for a growth-friendly policy. Because when I come here to Germany and explain to German businesses why there are significant investment opportunities in Greece at a time when German industry is facing challenges in its competitiveness and maybe the German Middlestand is looking for places within Europe to invest, the first thing that the German businesses will ask me, is it safe? Is there a country risk? Have you left the difficult years behind us for good? That is why fiscal discipline and healthy but sustainable primary surpluses are non-negotiable for us.
Having said that, we need to recognise that as Europe, we are facing serious competitiveness issues. How will we address a United States which is becoming more protectionist and which is spending a lot of money to support this domestic industry and which seems to run a very high deficit without the capital markets being too concerned about it, at least for the moment. On the other hand, you have China with its own model of state capitalism, and you have Europe in the middle that needs to invest and can do so either by mobilising European money or by mobilising national funds.
But you cannot allow countries such as Germany, within Europe, within the single market to make excessive use of state-to-state exemptions because at the end of the day, you will create an uneven playing field because we cannot do that because of our fiscal rules. Germany can. But then the German industry is going to become more competitive than the Greek industry or the Italian industry.
Preserving the cohesion of the single market, strengthening the single market, resolving issues around the competitiveness of the European business environment should be a major priority for the EPP for the next four years. This is very, very important. If you look at, for example, our digital competitiveness and you talk to start-ups, for example, in Greece, we have a very vibrant startup ecosystem and they will tell you that we talk a lot about the European single market, but it doesn’t really exist when it comes to digital services. We’ve made a lot of steps, we’ve taken steps in that direction, but these steps need to be completed.
I would urge us thinking about the agenda after the European election to focus on these issues of competitiveness because they are absolutely critical for Europe as a whole.
Energy: We are faced with significant challenges. How do we drive renewable energy, which can be cheaper and also needs to be more reliable, is critical. When you look at, for example, the energy production pattern from renewables, you will realise that the north of Europe produces a lot of wind energy in the winter and we produce a lot of solar energy in the summer. Do we have the north to south interconnections to make this market work more effectively for both the north and the south? The answer is no. Not yet. How do we structurally address the issue of energy competitiveness without resorting to short-term subsidies, which are not going to do the trick?
You’ve taken a decision vis-a-vis nuclear, and it is right or wrong? It’s up to you to decide. But at the end of the day, will we, for example, as Europe, invest in new nuclear technology? We have zero interest in this because we’re not a country that has any nuclear heritage. But where are we going to place our chips as Europe in this global competitiveness market? What are the new technologies? Are we simply going to try to produce solar panels or wind farms cheaper than the Chinese? That may be a struggle at the end of the day.
No discussion in Germany these days is complete without the reference to migration. I understand. That was actually the case in Greece back in 2019. It is no longer the case, and I’ll tell you why. When we came into power in 2019, we inherited a catastrophic situation when it came to migration, essentially an open-door policy and an inability by the Greek government to quickly process asylum applications. We had both a stock and a flow problem. We had a lot of people in Greece, most of them on our islands, and we kept bringing in more people. We didn’t know what to do with them. We decided that we needed a dramatic rethink of our migration policy.
What did we do? We became much stricter in terms of managing our borders, always in line with international law. But we didn’t make it easy for people to come into Greece. I was very open and outspoken from the beginning. Our Coast Guard is not a welcoming service to encourage people to come into Greece. The same is true for our land border agencies. I remind you, in 2020, we were faced with an open attempt by Turkey to instrumentalise migrants and send them across the border into Europe, and we managed to defend the Greek border and the European border successfully.
So where are we now? We are at a state where we can manage the flows and we’ve also addressed the issues of processing asylum claims much more effectively. Yes, I’m very honest. There are still secondary movements, especially for those who actually receive a positive asylum decision. A lot of this has to do with the reforms that you have to undertake in Germany, because if Germany, at the end of the day, is so attractive as a destination for migrants, it is very, very difficult to manage the external border. If you have a huge magnet in Germany that is so strong that it overcomes all our efforts to manage the external border.
At the same time, we’ve made it clear that we need legal pathways to migration and we need partnerships with countries with whom we can cooperate and we need a more effective return policy. Pieces seem to fall into place also at the level of the European Council because there is a better understanding that we cannot have an effective migration policy without managing the external border. What we’re doing, other countries are trying to do. We need more help. We need more money. We will be discussing the revision of the MFF, the Multiannual Financial Framework.
I’m very clear and outspoken here. We cannot just agree to 50 billion for Ukraine. We need to also add to the table more money for migration, more money to work with partner countries. You may ask me afterwards about our situation and our relationship with Turkey, but we need to work with Turkey when it comes to migration. This also involves some continuation of the financial payments to Turkey because they do manage a large number of migrants. Overall, I’m slightly more optimistic than I was two years ago that at least we have a better understanding at the level of the European Council of how complicated the situation is and how important it is to make sure that you address the external aspects of migration much more effectively.
On the Greek-Turkish relations
Let me just quickly take you back to 2019 when again we came to power. We had to deal at the time with a very aggressive Turkey, both on the migration front. Again, remember what happened in March 2020, but also in terms of our bilateral issues, there was constant revisionism and an attempt to encroach upon Greece’s sovereign rights, especially when it came to activities at sea.
Eventually, I think we were able to convince Turkey that this was a counterproductive approach. Over the past months, we have seen a significant detente in terms of our relationships. I’ve met President Erdoğan twice. It was before the recent flare up in the Middle East. And we’ve agreed on a path towards normalising our relationships. We will meet again in Greece in December with the aim to set a positive agenda and not let our longstanding differences escalate to a point where we risk a military conflict. So manage our difficulties and build upon a positive agenda. This is the approach I’ve taken.
Now, of course, I completely disagree with comments of President Erdoğan regarding Hamas. I don’t think I’m the only European leader who will say that. At the same point, this is no reason not to welcome President Erdoğan in Greece. We will talk about our bilateral relationship. We’ll talk about our relationship between Turkey and Europe, which again is very clearly defined by decisions taken at the European Council. I always try to be constructive and solve problems rather than add more difficulties. My principle has always been it is always better to talk to all parties involved.
And at the end of the day, in spite of what President Erdoğan said about Hamas, I think we all have an interest in making sure that this conflict does not escalate beyond the horrible situation we’re currently in, we already have… I’m sure that Turkey also has the same interest. No one wants to see a further escalation of the conflict. So in my mind, no one is ever losing when they engage and when they talk, even when they have to have difficult discussions and difficult conversations.