John Micklethwait: We have Kyriakos Mitsotakis, Prime Minister of Greece here with us. We jump straight in. A lot of movement on Ukraine this week. You’ve had Trump saying stuff about it. You’ve had various NATO allies getting cross about the fighter jets incurring into their territory and warning Russia about it.
You even had Germany coming forward and saying, “Let’s use the €140 billion frozen assets to help Ukraine”. Now, you have always been a champion of this idea of having a common European fund for defence, and you’ve always had pushback from the Germans on that. Do you think now it stands a chance of going through?
Kyriakos Mitsotakis: Well, thanks for having me, John. I’ve been advocating for quite some time about the need to create some joint European borrowing facility to cover what I consider the quintessential European public good, which is common European defence. I do sense that there is much more momentum now amongst my colleagues. Some of the countries that were inherently against the idea of additional further joint borrowing have changed their mind. I’m pretty sure that Germany will eventually also agree to this necessity.
We need to make sure that this facility finances projects of common interest. I would put missile defence, drone defence, right up there in terms of our collective European priorities. I would expect some movement soon. We have two European Councils, and hopefully we can make progress towards that direction.
John Micklethwait: Just looking at the economy at the moment, the Greek economy has been doing very well, there’s no doubt, you will tell me, but in 2024, you forecast a deficit, and then you ended up with a surplus. This year, you’re again forecasting a deficit. It’s quite close to the end of the year. I wondered if now you’re close enough to say this year you’ll end up with a surplus again for the government.
Kyriakos Mitsotakis: We’ve been producing significant primary surpluses, and I think it’s quite possible that we may have a real surplus again this year. This is a foundation of our economic policy. We’ve suffered a lot from not being fiscally disciplined. This is not going to happen again.
But I think the big success of our policy is to ensure that the economy is growing at the same time, to create jobs. We’ve created 500,000 jobs since I became Prime Minister. The real goal is to ensure that this collective wealth is spread equally.
My focus now is to use whatever fiscal space I can create through growth and tackling tax evasion to cut taxes for the middle class.
It’s important for me that this discussion is not just limited to the economists saying good things about the economy. I want the average Greek to really feel a tangible benefit from this growth story. Starting January first, when these tax cuts will kick in, they will see a real increase in their paychecks, and this is very, very important to me.
John Micklethwait: Let me just come back to the average Greek in a second. You just mentioned fiscal discipline. You look at the core of Europe -I sat down with Prime Minister Sánchez in Spain the other day as well-, something dramatic has changed. Greece, Spain, you’re the countries growing really fast. In the middle, you’ve got countries in much greater trouble. You look at France, you’re growing over 2%, they’re struggling to get to half a % of growth, their debt is ballooning. Are we now in a situation where you would worry about financial contagion from France?
Kyriakos Mitsotakis: This seemed inconceivable a few years ago. What I can tell you is that eventually no one can beat the markets. We know this very well. I do think that at some point, governments have to take difficult decisions to put their fiscal house in order.
We’ve done that. Once you do it, then you can enter into this virtuous cycle where you can actually grow the economy, you can cut taxes, you can support income through targeted measures. We are there, but we also went through very difficult periods and very painful reforms.
I do hope that the political situation in France somehow stabilises. It is important that the core of Europe, France, Germany, that these economies are doing well. We will receive 36 million tourists this year. Our tourism industry is booming. But if our core markets don’t do well, we will also, at some point, indirectly be affected.
John Micklethwait: You’re a famously polite man, and I know that ‘schadenfreude’ is not a Greek word, it’s a German one. But there must be some element in Greece of looking at these people who nearly pushed Greece out and thinking, “well, things have changed”.
Kyriakos Mitsotakis: Well, things have changed, but at the end of the day this is not about pointing fingers or about saying that “you were wrong and we were right”. It’s about ensuring that Europe collectively grows.
I’m disappointed by the fact that when I look at the Draghi report, we have not made significant progress. I think it’s time that in Europe -we usually wear two hats at the Council. We wear our European hat and we wear our national hat. It seems to me that for some countries, the European hat seems to be shrinking-, we have to look at the big picture. Some of the decisions that we need to take require more funding. It’s pretty clear. We need to put our European interest not necessarily ahead of our national interest, but to realise that some difficult decisions need to be taken at the European level.
John Micklethwait: One of the areas where Europe has been pretty useless at doing these things is banking, the banking union and things like that. Italy’s UniCredit has built up a stake in Alpha Bank, which you were famously much more relaxed about than the Germans were when they built up one in Commerzbank. Would you be prepared if they were to take over Alpha Bank? Would you be relaxed about that?
Kyriakos Mitsotakis: If we really mean what we say about creating scale in banking union, we should be open to these types of transactions. I see value when an important foreign bank wants to acquire a stake in a Greek bank. It means they believe in the potential of the Greek economy, and it means that the bank could possibly do better.
I’m pushing my banks to extend more credit to mortgages, to small, medium-sized enterprises. The stronger their balance sheet is, the more likely it is that they will do.
So yes, in principle, we are in favour of these transactions, and I’m happy that UniCredit has decided to look at one of our Greek banks and take a significant stake.
John Micklethwait: Isn’t that as you said earlier, that’s the problem with Europe at the moment? Most people are taking these decisions on, I suppose, purely nationalist or that kind of level. You look around Europe at the moment, the ability to create common things like a banking union, that’s the real problem at the moment. Do you think that is something coming from Brussels or from the national capitals?
Kyriakos Mitsotakis: If you want to understand what’s happening in Brussels, look at the national capitals. I think the Council has become more complicated in terms of taking decisions. But on the other hand, in the past, we took a momentous decision when we had to address COVID. Is Ukraine a geopolitical COVID moment? I would argue to a certain extent, yes. I remember the COVID fund negotiations. There were a lot of countries, including Germany, that said no until they said yes.
When it comes to defence, which, as I said, is the ultimate European public good, I do expect that we will be able to take important decisions to target specific European projects, which would then again require European collaboration.
John Micklethwait: You talked a bit earlier about the average Greek. I was looking at the numbers. Greek GDP has come soaring back, but it’s still roughly the same level in nominal terms as it was before the crisis, a bit lower in real terms. Do you think Greece has now been through that phase? And it’s now the time to look forward to a different form of Greece?
Kyriakos Mitsotakis: We have clearly turned the page. But as I said, if we want to converge with Europe, we need to grow faster than Europe. We’ve been doing this, but this growth needs to be qualitatively different. It needs to focus on investment, on innovation, on exports, on creating really valuable jobs.
My main goal is to ensure that wages increase, that we have wage convergence with Europe, and that we support disposable income at a time when all European economies are faced with a cost of living crisis. The only way to address this is to ensure that we support disposable income, but we have to do it in a fiscally sustainable way.
That’s what we have done so far. We will continue doing it. I do expect that next year we will again perform very well. I tell my fellow Greek citizens that I think the best days are ahead of us and that this is a policy that will deliver long-term benefits to them.
John Micklethwait: You have elections coming up in 2027. The polls at the moment, so you might have to go into coalition with people. You’ve won two terms. I think you’d be the first person to get a third term if you did. Would you be prepared to go into coalition?
Kyriakos Mitsotakis: Look, elections are 18 months out. We are way ahead in the polls. Our goal is to win an absolute majority. We’ve done it twice. There were people doubting that we would succeed before the previous elections. I think that if we deliver on our commitments and if the economy continues growing, if we work hard to improve the National Health Service -these are the priorities I set out in 2023-, we have a reasonable chance to win an absolute majority. But if the Greek people decide otherwise, eventually we have to respect their decision.
John Micklethwait: We look forward to following you through that. Thank you very much for talking to Bloomberg.
Kyriakos Mitsotakis: Thank you, John, for having me.
