Prime Minister Kyriakos Mitsotakis’ remarks at the opening debate of the 60th Munich Security Conference, entitled “Currency for Change: World Politics on a Budget”

Prime Minister Kyriakos Mitsotakis participated in the opening debate of the 60th Munich Security Conference, entitled “Currency for Change: World Politics on a Budget”. Also participating in the discussion were German Finance Minister Christian Lindner, Argentine Foreign Minister Diana Mondino, President of the Liquidity and Sustainability Facility Vera Songwe and Managing Director and Vice Chairman of PIMCO John Studzinski. The discussion was moderated by Zanny Minton Beddoes, Editor-in-Chief of “The Economist”.

The Prime Minister’s remarks follow:

“First of all, thank you, Zanny, for your kind words regarding the legislation on marriage equality. I’m here with a few hours of sleep and I think it’s a milestone decision for my country and I am very proud to be able to introduce it as a leader of a central right government.

Now, coming back to your question, when I look at many European countries and I observe the fiscal position over the past 30 years, I think a lot about the fact that Greece never really had a “peace dividend”, in the sense that we were constantly faced with geopolitical threats in our neighbourhood.

And even during the very difficult years, we were always spending more than 2% of our GDP on defence. So in our case, it didn’t really take a lot to increase our ability to finance our defence spending because we faced very particular geopolitical challenges, which maybe other european countries, clearly after the collapse of the Berlin wall, didn’t feel the need to spend that much on defence.

But to the point of this debate, “can you do foreign policy on a budget?”, the simple answer for me is no. And we will all need to be able to spend more on defence, but also be much smarter in terms of how we allocate funds to defence.

I was reading an article by the President of the Commission, or an interview actually she gave to you and she was very clear about the necessity to mobilise more funds, both at the national but also at the european level, which is going to be a challenge at a time when our budgets are under pressure because we also need to finance the climate transition and the technological transition. We’re faced with higher interest rates and we’re coming out of COVID. We had to spend much more to recover from the pandemic.

So at the end of the day, Greece has been able to achieve what you described as a situation where we can spend more in defence while bringing down our debt to GDP ratio, simply because our economy has been going much faster than the eurozone average.

At the end of the day, if the economy does not grow, you will not have the necessary funds to finance either defence or climate. So underlying growth and competitiveness of our economies, in my mind, is absolutely critical. True for Greece, I think, true for Germany, true for all European countries. We have been constantly overshooting our fiscal targets and this growth has been able to allow us to do more, not just on defence but also on social policy.

Now, when we look at the European scene, I think one of the challenges for the next European cycle is how do we do more on defence? Does this mean more fiscal capacity at the European level? Does this mean giving the EIB a mandate to finance more defence related projects which may be longer term and involve a higher risk?

What it certainly means, and I’m speaking from the perspective of a defence buyer, is a clear streamlining of the European defence industry, which is currently incredibly fragmented. For example, when we sort of are looking to purchase a new ship, a new frigate or a new corvette, we’re faced with five or six different offers from different European countries, different European ships. That doesn’t make much sense.

We need to agree which are the projects where we need to pool resources and where we can actually be competitive also vis-a-vis the US. If you look at planes, do we really have a plane now that can compete with a fifth generation US-made fighter? The answer is probably not. So at some point we also need to take some strategic decisions, where do we pool our resources? And this will allow us actually to purchase European defence systems.

One final point, very important, that in the new fiscal rules we agreed to treat defence spending in a slightly different way. In other words, under certain circumstances, defence spending will not count towards the excessive budget calculations. This is something we insisted on. And this also makes the case that when we look at all the spending portfolio, defence because of its critical importance, is something different and something which is existential and that important to be also treated differently from an accounting point of view. So I think this is also an important step in the right direction. Hopefully we won’t be able to use these exceptions, but it’s good to know that this possibility actually exists”.

“Look, what we did after Covid was incredibly important and I remember my discussions with Angela Merkel at the time. She was very sceptical at the beginning but I think we managed to convince her and the NextGenerationEU is in my mind a milestone European project.

We’re using these funds to drive the green transition, to drive the digital transition, to make our economies more competitive. And, of course, I understand the scepticism by “frugal” countries, “how do you actually use the European funds”.

But, at the end of the day, if we make a good case out of the NextGenerationEU, I think we will have a convincing argument to be able to not necessarily create a new NextGeneration EU but to contemplate in a more convincing manner what does it mean to actually create more own resources at the european level”.

“When we look at the way our defence departments make procurement decisions, they’re really not at all thinking about the changing of future course. It’s long term projects, big ships, big plane purchases.

But we need to make sure that the Departments of Defence and Finance already take into account the changing nature of warfare and incorporate new technology which may be much cheaper, much more innovative, much easier to deploy. And this requires a different mindset when it comes to very sort of traditional public departments that have been trained to think only in one particular way”.

“I was thinking, as I was listening to your comment, about our particular context. Again, we had our own geopolitical challenges facing an aggressive neighbour to our east and we always felt, and we continue to do so, that we need to spend enough to have a credible deterrence.

However, we are certainly trying to reach out to Turkey to establish normal and better relations. And in the long term, because this is a long term process, yes, this at some point could lead to a permanent “Dayton” that would force us to slightly, but I stress the word “slightly”, rethink the way we allocate funds to our defence industry.

But I think when you are in very complicated geopolitical positions, the risk of being too naive as regards your long term planning can actually lead you, in a few years, to find yourself in a very compromised position.

I think we all strive for peace, but at some point there’s also this well known axiom that “if you want peace, prepare for war”.

And I think that the mindset right now in Europe is very much along those lines, because we just cannot underestimate the trauma of a war in the European heartland, something which was completely inconceivable three, four years ago, certainly to a generation which grew up after the collapse of the Berlin Wall and went through the sort of optimism that the dark continent had left its darkness sort of behind it. This is sort of a shock and a very rude wiggle”.

“Greece is not in the G7 or G20 countries, so it does not participate in those gatherings where the very, very important decisions are taking place.

But I would like to come back to the point that you made before regarding fundamental trust and the ability at some point to distinguish between those areas where we have to work together, and those areas where it’s only natural for us to be strategic competitors.

What I do know is that when these issues become very politicised and become part of the domestic debate, then usually we don’t take the most rational decisions. And that’s why it’s good to come to these sort of gatherings, because I think it puts things into a much clearer perspective.

And it is also a great opportunity for us to talk to our counterparts from China, to understand how we can find this admittedly very complicated balance”.