Prime Minister Kyriakos Mitsotakis participated in the Greek Investment Conference co-organised by Morgan Stanley and the Athens Stock Exchange in London. Excerpts from the conversation between the Prime Minister and Morgan Stanley Vice Chairman Luigi Rizzo follow:
In his introductory statement, speaking about the course of the Greek economy, the Prime Minister noted:
First of all, thank you very much for hosting me. This conference has become an institution, and it seems to bring good luck to me and to the Greek economy. I’ll keep coming as long as we do well, and I do anticipate that this trend that you described is going to continue.
The question you ask is interesting. Let me start by offering an interesting piece of statistics. I do like to compare Greece to countries of similar size. If you compare Greece to Ireland or Portugal, two countries of similar size that joined the European Union around the same time, it is very, very clear to me that in spite of the progress that we have made, we’re a clear laggard. Ireland has done spectacularly well. Portugal has done much better than us.
In order to try to explain why this happened, I think we need to also look at the politics of Greece, the inability to forge the necessary consensus to take real steps to modernise the country, the fact that, of course, we suffered unnecessarily during the financial crisis because of political choices that were made.
I think that now we are in a position to actually make up for that lost ground and become a true modern European country that also punches above its weight, that can make up for the lost ground, but can also be a leader in sectors where we feel that we have a natural comparative advantage.
This fight between the forces that want to take Greece forward and those that actually were content with maintaining the status quo is a continuous fight. It’s also taking place in many other countries.
If I were to describe my vision of Greece, I would use the example of the Thessaloniki Metro, which we inaugurated two days ago. A spectacular public works project that went through lots of difficulties because there was lots of resistance by all sorts of forces that didn’t want it to be built. It’s a state-of-the-art Metro that protects our cultural heritage. This, for me, is an image of the Greece of the future. We will remain fully committed to this path.
I think we’ve made good progress so far. I think it is important not just to convince the financial community, the big companies, but also to ensure that the broader public is on board and that they understand that they will also have something real to benefit from this growth story that we’re telling. This has not happened yet to the extent that we wanted. For one for a simple reason, and that is cumulative inflation, which has essentially eroded the significant increases in wages and the reduction of taxes.
But I do expect that the next three years are going to be rather different, and it is important for people to understand that they actually have a stake in this, so they can be part of this transformation story for the country, that they should not be afraid of change, and that in this turbulent and confusing world, we provide the necessary stability and direction that the country needs.
Referring to Greece’s priorities for the coming years, Kyriakos Mitsotakis stated:
First of all, who would have thought that Greece would risk being contaminated by France and not the other way around? I mean, not many people would have expected this four or five years ago.
Our priorities are very, very clear. The first is non-negotiable, and that is to make sure we maintain fiscal stability, deliver on our budgetary commitments, stay within the expenditure benchmarks as they have been agreed with the European Union, and make sure that we focus on convincing the capital markets that Greece has left the difficult years behind us for good. I think this is something that the markets understand and appreciate. It is very much reflected in our spreads, but we know very well that we need to be vigilant because there’s always pressure to spend more.
We are now in a new fiscal framework, and we need to explain that not just to the markets. I think the markets understand it, but we need to explain to our population that the expenditure benchmark is fixed. So even if I bring in additional revenue, I cannot spend that revenue and go over the expenditure benchmark. What I can do is use structural changes in revenue collection to lower taxes.
So if we continue, and we will be continuing, we will continue to be successful in tackling tax evasion. This is a structural change. This is not a one-off tax. It’s a structural change. I can use whatever surplus I have to convince the European Union that I can use that to actually further lower taxes. For me, this is the number one priority.
The number two priority is to make sure that we use this stable fiscal position as a foundation to continue to focus on productive investment. Domestic investment, foreign investment, we have lots of important Greek companies here. We have provided them with a stability, the access to capital, also through the RRF loans, but also the opportunities to invest in the country. If you look at, for example, manufacturing. Our manufacturing is up 25% since 2019. It’s pretty remarkable compared to what has happened in Europe. The Greek economy is not just a one-trick pony, meaning not just dependent on tourism, leading manufacturing companies that continue to invest in the country because bridging the investment gap is critical.
The third, I think, very important challenge is to manage skills and technology. We need to make sure that we are at the forefront of the AI revolution. This is not just relevant for the state. I’ll be having a very interesting three-hour workshop with Tony Blair and Demis Ηassabis, who is the Nobel Laureate working for Google to understand better how we can use AI to improve government policies.
But this is also very relevant for the companies. For the big companies to use AI to improve their productivity, for the ecosystem startup in Greece, and we’d like to see also Greek technology companies that are interested in listing on the Athens Stock Exchange. We have a big opportunity there.
Of course, in terms of skills, making sure that we have the proper labour force to offer companies that want to grow the talent to do so. There was an incredible event taking place in Amsterdam. Our Minister of Labour was there a couple of days ago, part of our Brain Regain initiative. We had a thousand Greeks in the broader region of the Benelux coming. Greek companies there, recruiting. For Greek companies, this is a tremendous talent pool, convincing Greeks to come back.
Of course, lots of other priorities. Healthcare is probably, on the social side, my number one priority. I think we’re leaders now in looking at health not just through the perspective of treating sickness, but through prevention. Our prevention policies now in Greece, in terms of preliminary screening, are really cutting edge. Not many European countries do what we are doing on that front, and we’re very proud of that.
Asked whether there is a possibility of an extraordinary tax on the profits of Greek banks, the Prime Minister stressed:
The answer is we expect a lot of things from the banks, but an extraordinary tax is not in the cards.
On climate change, the green transition and the role of Greece, the Prime Minister said:
First of all, Greece is the European leader in reducing emissions. In 2005, we reduced our emissions by 45%. A big chunk of this is related to getting rid of coal in our electricity production. Of course, we produce more than 50% of our electricity from renewables, slightly higher if you also had our hydro capacity. There’s a lot of interest in further investing in renewables. We will continue to be leaders on that front.
But we need to be very careful in Europe how we manage the green transition. We cannot afford to be leaders in the green transition and destroy our industry in the meantime. So balancing the green transition with strengthening our competitiveness is going to be absolutely critical. If this means slightly reducing the glide slope towards reaching our ambition target, so be it.
Europe accounts for 6% of global emissions. We cannot believe that we will solve the problem on our own. We need to look at what industry is telling us and ensure that industry remains competitive, especially in those hard to abate sectors where it is difficult to imagine that there are magical solutions that will allow them to decarbonize very, very quickly.
This debate is taking place in Europe. It’s been also highlighted by the Draghi report. There are lots of things we can do in that direction. The first most important investment we need to make is in our grids. We don’t have a European energy market now. We think we have one, but we don’t. If you just look at the disparity of prices, the market is clearly not working for structural reasons, for reasons that are related to how the target model actually works.
I think the number one priority for the Commission is to look how it will bring down energy costs for business and for consumers. There are ways we can work towards that direction.
The other aspect of climate, of the green transition, which does not receive enough attention, is adaptation. We’ve placed all our eggs in mitigation, setting very ambitious targets. When we look at what’s currently happening in terms of the climate crisis, it is clear that we need to be more resilient and we need to be both proactive, but also make sure that we ensure that we can build back better in case of natural disasters. All countries have infrastructure that is not fit for purpose.
In Rhodes, yesterday, we got 80% of the rain that Valencia got. 80% of the rain that Valencia got. In Rhodes, no weather model predicted it. And zero casualties. Why? Because we have a very, I think, well-tested system of early warning and telling people what they should do in case of natural disasters.
So focusing more on smart adaptation, especially when it comes to issues such as water management, advanced weather forecasting models. This is an area where AI can really do miracles. I think we’re very close to having global weather forecasting models using AI that are probably much better than we ever, ever had. And this is absolutely critical in terms of at least protecting lives, because there’s only that much you can do.
If people believe that you can build the infrastructure to cope with this amount of water, I mean, sorry, but that’s not something you can do in a year or or two. We need to be better prepared and make sure that we focus on number one, priorities protecting human lives, and this, after the Valencia disaster became painfully clear.
On Greece’s position in the geopolitical field, Kyriakos Mitsotakis noted:
We have entered an era of great geopolitical uncertainty. We have a war in Ukraine that is clearly not going in the direction that we hope for. We have a crisis in the Middle East where three days ago we were more optimistic after the ceasefire, and now we have a new crisis in Syria, and we need to see how this will unfold. Because, of course, we’re always very concerned about not just the plight of the country, it’s horrible what has happened in Syria, but also about possible refugee flows.
Greece is a country that can act as a pillar of stability in a relatively turbulent part of the world. Of course, this gives us political and geopolitical leverage. We have a strong bilateral partnership with the US. I expect that not just to be maintained, but to be strengthened with the new Trump administration. I had a chance to speak to President Trump. I worked with him. We know his foreign policy team very well. I think there’s a recognition that we have a role to play in the region.
And of course, this is also opening up possibly new economic opportunities. Are we ambitious enough to look beyond the conflicts and prepare for that day? For example, do we aspire to play a role in the reconstruction of Ukraine? We should. As I told you before, we can already provide Ukraine with natural gas. When you look at the new trade flows, the connection to India, the IMEC corridor.
I do expect that at some point we can see a potential for a grand deal to resolve the Middle East crisis in spite of everything that has happened. I think the new US administration, if it plays its cards smartly, can move in that direction. That is going to be transformational.
The stability in the region, the connection to India, and Greece as the closest continental country to what I think is the country that offers the most potential in terms of connections to Greece, and that is India. This is not just about us acting as a trusted partner when it comes to geopolitics, because we talk to everyone and everyone respects us. It’s also about the potential opportunities that can emerge if we look beyond the current crisis. We need to prepare both for the worst, but also get ready for the possible opportunities that may emerge.
Referring to the need to strengthen European competitiveness, the Prime Minister stated:
Implement the Draghi report. For those of you who have not read it, it’s a great reading, and it highlights both the problems that we face, but also the opportunities that we need to address. The problem in Europe is twofold. On the one hand, it is a problem of excessive regulation. I think this is something which is recognised, not making it easy for companies to operate in Europe. You are a tech startup, for example, and do you really have access to a single market? No, because you have 27 different regimes. So this idea of this 28th European regime for startups is, I think, extremely interesting. Complicated to implement, but very interesting. No surprise, they moved to the US.
Capital Markets Union. Does anyone really want to list if you’re a booming startup? I mean, right now, you’re either going to move to the US or get venture capital from the US, which is primarily European taxpayers sending their money to the US to reinvest that in Europe. So the Capital Markets Union, for me, is absolutely critical. We’ve been talking about it for 10 years. Now is the chance to actually make it happen. This means overcoming objections by certain specific member states.
I spoke about energy and the financing of European public goods. And of course, defence is a big topic, and Greece is doing its fair share. We spend more than 3% on defence. But are we going to be able to mobilise European funds for defence? Interestingly enough, I saw this morning that the Prime Minister of Denmark, Denmark is a traditionally frugal country, so they’ve been traditionally rather opposed to common debt, said “yes” to European common borrowing for defence purposes.
Right now, if we were serious, we would say, “Okay, we did 750 billion for the COVID recovery, why can’t we do 100 billion for a dedicated defence fund that will also focus on developing European technology”? We have technology in Europe. We end up buying systems from abroad. It’s inconceivable to me that we cannot develop the European technology for missile defence, which has proven to be absolutely critical. It will strengthen NATO, but we need to make sure that such an investment also has more European content. These are some of the bold decisions that we need to take.
Two observations. The Commission is on board and the mood in the Council is changing. On the other hand, the headwinds are significant, but the threat of gradually gliding towards geopolitical irrelevance is real. I think it’s at least been accepted by my colleagues at the European Council.
On the migration issue, the Prime Minister said:
Our biggest success has been to move the European Union towards opposition on immigration. Because, you’re right, in 2020, we were faced with the first instance of weaponization of mass migratory flows, we were very tough and we did the right thing. Poland is faced with a very similar situation now, on its border with Belarus, and the same may be happening in Finland or in the Baltic countries. Protecting your border and making sure that you decide who comes into the country, not the smugglers, is critical. If you have a sea border, it’s more difficult. You always need to be very careful, and we’ve saved thousands of people.
But this does not mean we make it easy for boats to get into our territorial waters. We will make it difficult for the smugglers, and that’s the only way to break the model. If someone pays in advance and cannot get through, then they’ll have difficulties recruiting new clients.
But this is only part of the story. We need returns. Returns have not happened yet. For those whose asylum applications are declined, they end up in one way or another staying in Europe, and this is a big problem.
This should be a European project. We need to use European leverage. We cannot have, for example, preferential arrangements with countries and not use the leverage that we have in order to tell them that they need to accept returns.
And of course, we also need a proper and more, I think, ambitious agenda when it comes to legal migration. We’re doing that with countries such as Egypt, for construction workers or agricultural workers, with India, the Philippines. There are already shortages of labour, and we need to be more open in terms of offering people the opportunity to work in Greece, but on our own terms, and make sure that they travel legally and safely.
On Greece’s actions in the field of artificial intelligence, Kyriakos Mitsotakis noted:
We have just published our AI strategy. For those interested, it’s a document worth reading because it has been put together by an excellent team of Greek AI experts from abroad, and it’s really very thoughtful and very realistic in terms of what we do? What can Greece offer?
First of all, what are the advantages that we have when it comes to AI? We have a large number of AI scientists abroad who do cutting-edge work when it comes to AI, who would like in some way, shape, or form, to get involved with what’s happening in Greece. We have a booming ecosystem of startups in Greece focused on AI. We have a government that understands that putting in place a proper and attractive regulatory framework within the AI Act could be a comparative advantage. We have centrally managed data because we have a Ministry of Digital Transformation which oversees our data policy, and data is critical when it comes to AI. So healthcare data or climate data, these are data sets which, if properly curated, can actually be of great use.
We are bidding to be one of the seven AI factories. The tenders have been put in place, which will give us access to significant European funding when it comes to AI. We’re building our first Greek supercomputer, and we’re an attractive destination for data centres. Many of them are already in the process of being built. And of course, we’ll also need the renewable energy in order to supply them.
I think on the softer side, but still very, very important, given our heritage, we should be leaders in the space which bridges ethics and AI. We have that additional advantage that we can be the central focal point for these discussions which are incredibly interesting, not just thought-provoking intellectually, but at some point would also lead to regulation in terms of protecting us from the negative aspects of AI. I think this is a pretty good set of pieces that constitute a country that has thought about this and can possibly punch above its weight when it comes to AI.
Of course, we have many companies, I need to point that out, large companies, who we would like to help also by accessing European funding that can play a critical role in terms of using AI to improve their processes, and a government that is ready to do that. For example, we already use AI to scan legal contracts. It’s incredible how much time you can actually save.
So think of AI as who’s developing the technology. Difficult to imagine that anyone will compete with the American hyperscalers. But how we apply AI is critical. How to use AI to improve productivity is something which should be of concern, certainly to the companies that are present here.
