Prime Minister Kyriakos Mitsotakis participated in a conversation with Daron Acemoglu, Professor of Economics at the Massachusetts Institute of Technology (MIT), as part of the 29th Annual Economist Roundtable with the Greek Government, which took place at the Grand Resort Lagonissi. The discussion was moderated by Daniel Franklin, Executive and Senior Editor of the Economist.
The Prime Minister’s remarks follow:
In his introductory remarks, referring to the situation of the Greek economy and international developments, the Prime Minister noted:
“Thank you for the invitation. As far as the state of Greece is concerned, I don’t want to talk too much because I’m sure we’ll be able to speak more about the performance of the Greek economy.
I would just ask you to remember where we were ten years ago to the day. This was the week before the fateful referendum called by the then SYRIZA-ANEL government, at a time when Greece was staring down the abyss with a real possibility of us exiting the Eurozone. The end result of this experiment with this type of aggressive diplomacy was the third programme. Unfortunately, Greece being a laggard in growth between 2015 and 2019, had us further diverging from Europe.
Six years later, our public finances are in order. Our borrowing cost is more or less on par with that of France. We’re borrowing cheaper than Italy, certainly the UK, certainly the United States, we’re producing primary surpluses. We’re able at the same time to drive a pro-growth policy that focuses a lot on investment, job creation, expanding labor market participation, while making sure that we also address the fundamental, long-term questions of how we have a competitive economy that can perform well in the long-term.
Of course, there are significant challenges ahead, important reforms that need to be completed and as a big fan of your work, professor, I was always struck by your book, “Why Nations Fail”, or why they succeed. And I am a big fan of the theory of inclusive growth, which means that at the end of the day, our purpose is to ensure that whatever growth we create, it needs to be equitably distributed.
That is why the focus of my government has been on making sure that nominal wages increase, taxes decrease, and that we really focus on the disposable income of the lower income, but also the middle class. This is I think, in the end, the one agenda on which we will be judged.
On the state of the world, very quickly, this is a different world from what we knew even some years ago. A lot of the fundamental parameters of a world order that was created essentially after World War II, or certainly after the fall of the Berlin Wall, no longer seem to hold true.
We are responsible, as European leaders, to ensure that our continent and our united Europe -which is a very big market, but unfortunately not able to fully leverage it , Enrico may have a few things to say about how the single market is functioning or is not functioning-, in a multipolar world where regional blocks are more and more important, I would say that our number one priority is to ensure that we drive those changes in Europe that will allow us to remain competitive and relevant at a time when the parameters of the world order have changed, not always in our favour.
I’ll stop here because you don’t want a long monologue on an open-ended topic, because if you give a politician a microphone with an open-ended question, they usually don’t stop”.
Asked how former German Chancellor Angela Merkel, who is in Athens, would comment on the current situation in Greece, Kyriakos Mitsotakis stated:
“I’m going to see her tomorrow. It’s interesting what she thinks in terms of the progress that was made. She was there during the very difficult, almost fateful negotiations. I think she contributed significantly to ensure that some of the more aggressive plans for a temporary exit of Greece from the Eurozone never materialised. And, of course, we were together at the European Council when some very important decisions were taken during the pandemic. She was also the one who finally agreed to the Recovery and Resilience Fund. I remember her saying “no, no, no” until she finally said “yes”. And thankfully so, because she understood that Europe needed to do something dramatic and very significant to address the post-Covid economic downturn. This was a decision which could also serve as a blueprint for what needs to be done in the future. So, I hope she recognises the progress that was made.
I may point out that on certain issues, on certain topics such as digitisation and the way we use technology -which is again a topic I care a lot about and you have written a lot about- I would dare say that Greece now is ahead of many European countries in terms of the digital state and how we break down bureaucratic silos, clientelistic mentalities.
At the end of the day, you need a well-functioning, impersonal public administration that doesn’t do favors and that doesn’t judge people depending on how they vote. Technology is, to a great extent, a solution to what was, and to a certain extent still is, a systemic problem when it comes to the public administration”.
Asked about today’s major challenges and how they can be addressed, the Prime Minister said:
“I agree with the professor’s premise that governing in a liberal democracy is becoming more and more challenging, for various reasons. Complex problems require complex solutions. Democracies, by nature, have checks and balances: courts, auditors, public procurement rules, institutions that sometimes delay the speed of actually implementing change.
We, in Greece, have the benefit of having a single-party majority, which I think is a great luxury these days in Europe. At least we don’t have to think through coalition arrangements and bargaining with possible coalition partners. But of course, we’re judged on our results. At the same time, there is a competition from other models of governance which at the end of the day, portray themselves as being more efficient, being able to deliver public goods at a faster pace.
I was thinking, as the Professor was speaking, of an interesting comparison which I read between China and the United States. California is one of the wealthiest states in the world, the fifth largest economy. For 30 years, they cannot build a high-speed rail connection between Los Angeles and San Francisco. At the same time, China has built 25,000 kilometres of high-speed rail. Just to put things into context regarding how difficult some of these decisions, these projects are.
At the same time, if you add into the mix extreme polarisation, fake news, and the rise of Αrtificial Ιntelligence in the world of politics, I can tell you, come the next electoral cycle you will struggle to distinguish what is real, what isn’t, what is fake, what is generated by AI. We’re already seeing the emergence of these trends.
All these are difficult challenges, although at the end of the day we can only be judged in terms of the ability to deliver results, the consistency between what we tell people when we get elected and what we end up delivering, and I think the honesty with which we interact with people, which I do think requires a new, I’d say maybe more unscripted style of politics compared to what we saw in the past.
So, as far as governing, these are challenging times. At the same time, the revolution of AI, I think, can be used in order to also make sure that the government is more efficient. Again, AI as a sophisticated tool for automation can help our civil servants become more productive. And we set up an AI unit within the Office of the Prime Minister to look at these types of projects. Of course, we have a Ministry of Digital Transformation, which we are now renaming to the Ministry of Artificial Intelligence and Digital Transformation, to indicate the importance we assign to this emerging technology.
But just to react to what you said, I’m not going to comment on all the challenges, but I do want to comment about the one which I consider to be the most pressing and possibly the most dangerous, and that is the great displacement of white-collar jobs by Artificial Intelligence in the effort of companies to increase productivity and, of course, returns on capital.
Again, I don’t think we’ve thought this through to the extent that we should, nor are we aware of the speed with which some of these jobs will be displaced, the implications it will have for the job market. What does it mean, for example, to retrain. A call centre, a decently paying job, could disappear within three years because simply the job can be done certainly cheaper by an AI chatbot. I’m just giving you one example.
This double combination of AI and robotics, which you already see in China, has the possibility for a massive displacement also of manufacturing jobs. For the first time, I think in the history of technological revolutions, we may be faced with a technology which will not create more jobs than it destroys. This is something which could happen.
I know there was skepticism in the past with any technological revolution. When the car emerged, people were concerned about their carts and their horses. But I have a strong belief that this time it could be different, and at least we need to prepare for this eventuality, which will also have dramatic implications for what it means to work, for how long we work, what it means for our social security systems, what it means for our health care systems; and how expensive they become, and who’s going to pay for those.
For example, I asked the recent European Council a rhetorical question, but we would be forced to provide these answers: are robots going to pay social security contributions and taxes? Because at the end of the day, if a job is destroyed by a technological replacement for a human, these contributions are going to miss, especially in our case, where we have redistributive systems, where today’s pensions are paid by today’s contributions.
I’m just giving you some extreme examples to highlight how difficult these problems are and how we need to prepare our labour market, our educational system, for what is going to be a massive change”.
On how Greece and Europe can prepare to face these challenges, Kyriakos Mitsotakis replied:
“First of all, I know that there’s a lot of skepticism, especially across the Atlantic, about regulating this technology. I do feel that probably this skepticism is, for a certain extent, not justified. We have a blueprint for ensuring that these technologies are applied in a way that they respect the social values of Europe. I think we can certainly break down some bureaucratic barriers, to be more entrepreneurial and to allow for these companies to grow in Europe without being sold to the big American tech giants.
But there’s a real risk that all the power is going to be concentrated in the hands of five, ten big companies that are going to create incredible value for the shareholders which operate globally, which have massive power, greater than that of governments, and which will react to any sort of regulation, even in areas which, in my mind, are incredibly sensitive.
I speak a lot about the mental health of children and teenagers and their exposure to social media and technologies. It’s very frustrating to see that these companies still insist on making money from our kids. Τhey clearly impact their mental health in a way that doesn’t show any respect for what childhood has and how we, in our societies, protect our children.
So, I would say in terms of preparing, first of all, look at those technologies where AI can really be a game changer: health care, civil protection, for example. We have wildfires, we already use AI tools, as we speak, to predict what the wildfire is going to do in the field. I’m not a luddite, I’m not someone who is inherently scared of technology.
In health care, AI can be transformative, not just in drug delivery, but also in service, in improving the experience within a hospital. Ιn education, tailor-made education through sophisticated tutors is going to become a reality. You can actually make sure that you offer kids, especially in isolated places in Greece, that don’t have access to the traditional form of tutoring, this type of service.
Let’s identify those areas where AI is clearly beneficial and make sure we double down on those. Let’s pick our regulatory battles wisely; Which are the areas we clearly need to regulate? In my mind I have two priorities. The first is the mental health of children and teenagers. The second is the way AI is going to impact our democratic debate and what it means for the quality of our democracy and possibly how we can use AI for public consultations, for making sure that the voice of the citizens are heard.
Because let’s be clear and honest, there is a gap of trust between citizens in all Western democracies and elites. Let’s ensure that the distribution of wealth that is created does not end up benefiting very few, because that’s what seems to be happening right now”.
Asked about the negotiations between the EU and the US on tariff policy and Greece’s position, the Prime Minister noted:
“We are a medium-sized country with an open economy. We are a global leader in shipping, which, of course, benefits tremendously from trade. So, we have every reason to be in favour of a rules-based international system that encourages free trade and that ensures that these free trade agreements are completed in a reciprocal and just manner, which was not always the case in the past, especially when you think about the way that China entered the World Trade Organisation system at the beginning of the 21st century.
So just to be specific, I do hope that the contours of an agreement between Europe and the US will be completed by the set deadline of July 9th. It would be, I guess, the basic premises of what would eventually be a more detailed agreement. It would be too optimistic to hope for more zero for zero tariff sort of arrangements, at least in certain critical sectors. But what I’m certain of is that a full-blown trade war would be clearly bad, both for the US and for Europe.
At the same time, Europe is a very big market. Also, in terms of perceptions, we need to also ensure that we get a good deal. We cannot afford to give the impression that this is a capitulation to the United States, nor I think there is a desire from the European Commission, which has the exclusive responsibility to negotiate on our behalf.
But, speaking of tariffs, I want to get back to what I previously alluded to. We speak a lot about the single market, but if you look at the barriers to the single market within Europe, they essentially are the equivalent of a significant internal tariff in terms of how we do business. We have a tremendous opportunity to look at the Letta report and the recommendations in terms of how the internal market is going to work.
Certainly for a country which is primarily dependent on exports to Europe, such as Greece, this would be tremendously beneficial. At the same time, I think this is a great opportunity for Europe, regardless of what happens with the US, to negotiate new free trade agreements with other countries or other regions, which are going to be critically important in the new global economic order, India being the most important one. I think we should really try to focus on this agreement. Having said that, the agreement with Mercosur has been in the process of being finalised for many years.
Asked whether the pressure exerted by the US acts as a driving force for Europe, the Prime Minister said:
“First of all, the fact that the US cannot longer be considered a totally reliable partner for Europe has clearly resulted in us taking more ownership over our own European affairs. Of course, I think this should have happened even before President Trump came into power. The issues that are raised in the Draghi report regarding the erosion of European competitiveness go back many years.
I think this is an opportunity to take more European ownership over our own affairs when it comes to competitiveness, when it comes to defence. There’s no doubt we will spend more on defence in Europe. We are aware of the fact that we have to do so not only to ensure that NATO continues to work within the confines of a transatlantic alliance, but because we also understand that keeping our people safe is, at the end of the day, our number one responsibility.
But this also entails difficult trade-offs. Greece is in a good position because our public finances allow us to spend around 3% while not cutting other spending. But I’m not sure that all countries are in that position”.
On the competitiveness issues facing the EU and the measures taken by the European Union, the Prime Minister stated:
“Of course, the issues of competitiveness are absolutely critical. I speak a lot about energy. We cannot be competitive in Europe with the price of energy that we have. Of course, there are also tremendous disparities in the prices of energy within Europe. Again, an example of a single market which exists only in theory, but not in practice.
Focusing on cheaper energy, be it investments in grids, more investments in renewable, investments in new technologies such as small nuclear reactors, all these, I think, are critical for Europe to retain or to build its strategic autonomy, but also to become a leader in certain, at least, technological sectors where it can still play an important role.
I think, on the one hand, there is a much greater awareness that we need to move faster. I have a lot of confidence in the new German government. I think they made a very good start. The decision to also spend more domestically is important for Europe because the German economy is very important for Europe. The Franco-German alliance is still very important.
But of course, one needs to be aware, coming back to a previous discussion, that as politics become more and more complex in our Western democratic societies, it’s quite likely that leaders will bring their own domestic problems to Brussels and to the table of the European Council. That makes things more complex.
On the one hand, there is a greater sense of urgency. We need to do more, pushing the Commission to implement a lot of the recommendations in the Draghi report. But on the other hand, when governments are under pressure, they may look at their domestic constituency and not think in terms of what is really good for all of us.
If we have to make hard decisions, which hat do we wear? Do we wear our national hat? Do we wear a European hat? Do we try to wear both? For example, we need more scale in European companies, which means we need to reform our competition rules. I’m pretty clear about that. This will create winners and losers. Some companies may get bigger, some companies may end up not doing as well. If you have a national champion, for example, that doesn’t make it in the new landscape, are you ready to accept that this is good for Europe but not good for your own country? These are difficult and hard choices.
But coming back to the decisions that we took five years ago, the RRF was a big decision, €750 billion, joint European debt. We have to make it a success. I think we are very successful in Greece in terms of using these funds for tech projects, for healthcare projects, for infrastructure projects.
We will probably, if we want to be ambitious, need more financial tools. The current budget is not fit for purpose. We will have a very difficult negotiation regarding the next budget, for 2028. Greece may have a very important role to play, because we will have the presidency of the Council in the second half of 2027. This is going to be a very big challenge for the government that emerges after the next election. Hopefully it’s going to be us, but no one can predict the outcome of an election.
So these are difficult questions, especially when it comes to how we are going to find the money to do everything we want to do. Private capital, important. We need capital markets that are well-functioning at the European level. We need maybe more consolidation in financial services. But again, if Bank X wants to buy Bank Y in one country, how would we react if that is going to be the case?
Sometimes when we wear a European hat, we say, we want all these good things to happen. But then, when decisions affect us nationally, we say, “maybe we want to put the brakes”. This has always been the story of Europe. But yes, exactly, what I do want to point out is that it’s so much more urgent now”.
Asked about the priorities he has set for the second half of his term, the Prime Minister said:
“In a very uncertain and unpredictable geopolitical environment, I’d argue that the first priority of any government is to keep the country and its citizens safe. Then, of course, halfway through our second term, my priority is to ensure that I honour the trust that people placed in us in a double election in 2023.
The question I asked myself, but I also asked my team, is the following: if in 2027, we would have delivered on our programme and we will have more or less done what we committed to do, while acknowledging that governing is difficult, that, of course, there will be setbacks and mistakes, will we have been a successful government? In terms of at least making sure that we didn’t tell people one thing and we did the exact opposite?
Because the real problem today, and we’ve not spoken a lot about this, in democracies is this notion of trust. Trust is being eroded across the board, it’s eroded across generations. The younger people feel -and rightly so, when they listen to the professor laying out all these threats and these problems-, there’s a reason why one should feel not particularly optimistic. So it’s again building these relationships of trust.
At the end of the day, it may sound mundane, but I have a long list of things which I want to get done, and I want to do as many of those because that’s what I told people, in 2023, I would do. At the end of the day, that is the notion of accountability. What does accountability mean? It means whether you are consistent and whether you can actually deliver on what you said you would do.
But to finish, to conclude from where we started, it will be about the economy, it will be about real convergence, it will be about wages and disposable income, it will be about offering people “ammunition” to fight this increased level of prices, which was a result of the pandemic, which is a problem everywhere, but also in Greece.
At the end of the day, are people going to feel that they’re better off after four years? And will you be able to offer them a clear path about the future? Because no one is going to vote for you because of what you did. But they will vote for you if they believe that you can do more things. And the past is important only to the extent that it serves as an indication of your intentions and your capabilities”.
