Prime Minister Kyriakos Mitsotakis participated in a conversation with Ben Hall, Europe Editor of the Financial Times, at the “Energy Transition Summit: East Med & Southeast Europe”, organized by the Financial Times in collaboration with Kathimerini at the Four Seasons Astir Palace Hotel.
The whole conversation follows:
Ben Hall: Prime Minister, it’s an immense pleasure to have you back at this event.
Kyriakos Mitsotakis: Thank you, Ben.
Ben Hall: When you appeared last year, you surely could not have imagined that America would have started a war in the Middle East with huge implications for energy supplies, energy prices, and the economy, a war which they cannot get out of. Even in an age of disruption, this would have been hard to predict. Do you see any end in sight?
Kyriakos Mitsotakis: Well, first of all, thank you very much for inviting me to this extremely interesting conference. And indeed, we’re meeting at a time of great geopolitical and economic turmoil. I, unfortunately, do not have a crystal ball to be able to predict what will happen. As far as Greece and the European Union is concerned, we have always favoured a diplomatic solution to the current conflict. We’ve set out, I think, the basic guidelines that need to be part of any solution. Iran cannot have a nuclear weapon, and of course the freedom of navigation in the Strait of Hormuz needs to be fully restored.
And I would like to place particular emphasis on the second, because we risk setting an incredibly dangerous precedent if anything else were to happen. I think these parameters are, of course, the ones that will define the final possible agreement between Iran and the United States, but we’re not part of the negotiations, so unfortunately I cannot add any more insight into what will happen.
What I do know, and what I’ve mentioned also at the European Council, is that we need to be able to prepare for a possible negative scenario, which would mean a prolongation of the conflict, a significant spike in inflation, a reduction in growth rates, and a necessity for all governments to be able to support our citizens at a time of stress.
Greece is in the fortunate position to be able to have fiscal space because we are producing primary surpluses. We are one of the 5 European countries that have been able to do that. Interesting analogy, it’s the crisis countries that actually are doing fiscally much better these days, but still we understand that the fiscal space that we have at the national level is not unlimited.
So cushioning our economies and our citizens from a prolonged economic crisis, I believe, needs to be a responsibility and a topic that needs to be addressed now. We have the experience, unfortunately, of what happened in 2022 when gas prices spiked with dramatic consequences for energy markets.
And of course, my last introductory point is that what’s happening today in the Strait of Hormuz is just another indication that we need to take our energy security in Europe much more seriously. We have a climate change policy. I’m not sure we have an energy security policy, and these two, unfortunately, do not always go hand in hand.
Ben Hall: Before we get to the question of how the EU and national governments should respond, could you just sort of paint a picture of how bad do you think it could actually get?
Kyriakos Mitsotakis: Well, again, I always like to look at the glass, you know, half full. In this case, my glass is completely empty. I don’t want to be a Cassandra in terms of predicting negative scenarios. What I do know is that every week where the Strait of Hormuz remains closed, adds additional strain to the global supply chains. I think there’s a risk that we accept the status quo as something which is acceptable, and I don’t believe it is. We almost forget about it, because we don’t have intense military operations taking place. This would be a very, very dangerous scenario.
But I also understand, I’m sure that also the US President understands that this is causing a lot of domestic pain in terms of the price of gasoline. So I’m sure he also has an incentive to put this negotiation at the forefront, possibly even in his discussions with President Xi. China is also affected. I mean, the whole global economy is affected. We live in an interconnected world. We cannot believe that a significant disruption in the physical supply of oil and oil products is going to leave anyone unaffected.
Ben Hall: One of the biggest concerns, particularly in a country like Greece, given the size of its tourist sector, is jet fuel and whether there might be a shortage this summer of jet fuel. We’re already seeing a lowering of demand for flights from Northern Europe to Southern Europe. How concerned are you about that and what measures have you put in place?
Kyriakos Mitsotakis: First of all, let me mention that Greece is a country that is completely self-sufficient when it comes to fuel products, including jet fuel, and we’re big exporters of fuel products. We have two excellent refineries -I mean, two excellent- more than two refineries, actually, physical refineries. And this is also, I think, testimony to the fact that in Europe, we almost thought that fossil fuels were a relic of the past, that refineries were “dinosaurs” not worth investing in.
And I’m a big believer in the green transition, and eventually, once we get to climate neutrality, of course, we will also have made a significant step in terms of our energy security, but we’re clearly not there yet. So we may think that we’re done with fossil fuels in Europe, but fossil fuels are not done with Europe yet because we see the consequences now. So we have no issue in terms of supply and we are exporting products also to the rest of Europe.
Of course, there’s a concern in terms of how this will impact flights. For the moment, the tourist season has started very well. But of course, no one can make predictions.
I do believe that there are a lot of people who are reserving their bookings until the crisis is resolved. And again, I’m an optimist. I do hope that within the next weeks we will be able to resolve this crisis. And I expect, as is usually happening, a big surge of last moment bookings. So no concern in terms of the physical supply of jet fuel as far as Greece is concerned.
Ben Hall: Greece is spending big on mitigation measures. I think it’s the highest in the EU as a percentage of GDP according to the Bruegel ranking. It is targeted measures, which is a good thing and gets you the thumbs up from the IMF and others. You yourself said there were limits to how much you could go even with your newfound fiscal space, but were you implying that you want the EU to spend more on mitigation measures?
Kyriakos Mitsotakis: Well, first of all, I think this is a discussion that is starting at the level of the Ministers of Finance. We’re not there yet, but we need to be prepared for that eventuality. What Greece has done has been to implement targeted and temporary measures in terms of support for diesel, because diesel is quite important. Bringing down the price of diesel is important because it affects the whole supply chain and it feeds directly into inflation. But we’ve also supported pensioners, we’ve supported families with children.
So we fully understand that the number one problem that our governments in Europe, not just in Greece, are faced today is affordability. And we need to talk about this concern. You know, quite frequently in Europe, we talk a lot about competitiveness. And rightly so, but we need to explain that competitiveness is a precondition in order to also address the affordability crisis. We need higher wages, we need more productivity, we need more fiscal space. So if we fail to address the affordability concern of our citizens, all incumbents will have a problem, and that is why this topic is at the top of my agenda. But of course, I need to make sure that the measures that we implement don’t further feed into the problem, they don’t make inflation worse, and that they are targeted and temporary.
And this is what we have done. There’s probably possibly more in the pipeline. I hope we don’t have to use – we’ve kept some of our powder dry, of course, as we should be doing in these cases. But what we will do at the European level is also going to be important. And I’m not just talking about relaxation of state aid rules, but as a country which I think has been a paradigm of fiscal responsibility, I’m not going to be the first one to call for a European sort of relaxation of fiscal rules, but I do expect this discussion to gather momentum should the crisis continue.
Ben Hall: Are you talking about further EU-wide borrowing to try and sort of cushion the effect of the crisis?
Kyriakos Mitsotakis: That’s a completely different topic. I mean, there are ways we can… I mean, for example, you know, 3 years ago, I was the first to say exclude defence spending from our expenditure benchmark. At the time, people thought that this was naive, but Europe eventually allowed us to use some of our defence spending and not to count it towards our expenditure benchmark.
The big problem that we all have now is that we have very fixed rules. No matter how big my primary surplus is, I still have expenditure benchmark rules which I have to respect, and I will respect them because for me, preserving the fiscal stability is the biggest, I would say, political and economic legacy of this government.
I mean, we brought down our debt by more than 60 percentage points. This is the fastest reduction of public debt in the history of any OECD country. For the first time, Greece probably at the end of the year is not going to be the most indebted country in Europe. And this is a legacy policy for me and I think also an obligation towards the next generations. So we will not play with this. So whatever we do, it will have to be within European rules.
If we talk about fiscal borrowing, that’s a completely different story. If we talk about European borrowing, it again needs to be directed towards very specific European priorities, and I’ve been very clear that our European budget right now is not up to the European ambitions.
Of course, we need to mobilise private capital. That’s why the Savings and Investments Union is so important. Some countries have fiscal space, others don’t, but if we want to be, for example, very aggressive when it comes to defence, and for me defence is the quintessential European public good, we should also consider European borrowing for certain specific areas which are a priority for Europe.
I would not conceive of a blanket European borrowing to cushion for the economic crisis, but targeted European borrowing, yes, should be in the cards. We’re wrapping up the Recovery and Resilience Facility. I think once we do all the math and we present the impact it has had on the Greek economy, it was a great success. Even, for example, the topics we talk about – renewable energy, where Greece is a leader- it is connected to the RRF, not only because we funded renewable energy projects, but because the RRF also had reforms that went hand in hand with the grants, and many of the reforms that we had to implement had to do with simplifying investments in renewables.
So I’m a big believer that the RRF was a huge success, and whenever we will discuss any future new European borrowing facility, I think it should serve as a model.
Ben Hall: Before we leave the question of the Strait crisis, Hormuz Strait crisis, would Greece play a part in any freedom of navigation mission led by other Europeans, particularly the Brits and the French?
Kyriakos Mitsotakis: Well, first of all, let me point out that Greece is already present in numerous missions abroad, one of them being Operation “ASPIDES”. Unfortunately, only two European countries, and now a third one, because France has added a ship to our resources, Greece and Italy have committed ships to protect the freedom of navigation in the Red Sea.
So if we really want in Europe to take our role in this part of the world seriously, we also need to ensure that we commit the necessary resources to do so. And of course, I don’t expect unanimity, but there’s a difference between two countries participating and 12 countries participating.
Greece has made it very clear that should we reach a peace agreement, and should we have some sort of UN resolution that requires a peacekeeping force in that part of the world, we would be ready to participate. We have an intrinsic interest in protecting the freedom of navigation. We are a medium-sized open economy. We’re a leading shipping nation. So for us, shipping is our lifeblood and a critical sector for the economy. And it’s a topic that we will constantly continue to raise and to encourage also, I will encourage my European colleagues that at some point we need to put our money where our mouth is and we need to be present, but only under the specific sort of preconditions which I just laid out.
Ben Hall: Greece is investing a lot in becoming a kind of entry point for US LNG, with the sort of vertical gas corridor supplying the rest of Southeastern Europe. Do you not worry about replacing one dependency with another dependency, dependency on American gas?
Kyriakos Mitsotakis: Well, first of all, I think we have a very clear and well-defined energy strategy. I should point out that Greece is the leader in terms of reducing our greenhouse gases in Europe, if you compare it to the benchmark of 2005. We’ve reduced our CO2 emissions by almost 50%. We’re leaders in renewables, one of the top 10 countries both in solar -in solar, we’re actually even higher- and in wind. We produce more than 50% of our electricity from renewables. This is important not only in terms of energy security, it’s important because it is bringing down the price of energy. In 2019, Greece had by far the highest wholesale price of energy electricity. Now we are below the EU average and we’re big exporters of electricity. We’re exporters because our energy is cheaper and because energy flows from the cheaper country to the more expensive country. So this has been a big success.
At the same time, we have completely practically eliminated coal from our mix, but we need baseload power, not just in the immediate future, but in the foreseeable future. And in our case, baseload power is natural gas. Where can we get natural gas? We’re no longer going to get it from Russia. We get some piped gas from Azerbaijan. And of course, the rest of the gas is going to be LNG, which we can source from various providers.
But we’re quite eager to explore sourcing LNG from the US, which, by the way, is also a European priority. It’s not just a Greek priority. And of course, we don’t just do it for our own needs, but we use our geographic position and our important infrastructure -pipelines, two big regasification plants- to also be an energy provider and an energy security provider for the Balkans, but also for countries such as Hungary or Ukraine.
So, in 2019, 7 BCM came into Greece, all was consumed by the Greek market. Now, we’re up to 18 BCM that pass through Greece. 7, again, is what we need in Greece, and the remaining 11 billion cubic metres transit through Greece towards the north. So, this is giving us significant geopolitical leverage.
And of course, we do believe that American LNG is going to be important. Yes, we consider the Americans to be a reliable provider of LNG, but at the end of the day, these are market transactions. There’s private companies involved, and we’re also looking for the best possible price.
Kyriakos Mitsotakis: I do expect that there will be an ample supply of LNG over the next two, three years. There’s a lot of LNG capacity coming on the market. I think this is good for countries, but good for Europe, because we should not forget that Europe paid last year, I think around $100 billion for natural gas.
And it’s interesting if you go to Europe and have a hydrogen project, everyone’s going to applaud and say, “Wow, you’re a climate champion.” If you go to Europe and say, “Look, I’m interested in natural gas because, by the way, we spend $100 billion,” and it would be good if we could bring down that bill, maybe do some exploration as we’re doing. It’s better to have our own gas than to import it, given that we’ll have it for at least 30 years. You’re almost viewed as a climate hater.
So I would urge us to be very pragmatic in terms of balancing our decarbonization strategy with our energy security strategy and acknowledge that in the short to medium-term, for the next decades, natural gas is going to be important. It’s the fuel that sets the price for electricity.
So it’s not just a question of supply, it’s a question of the price of electricity. And if in Greece we can find our own natural gas, so much the better. And we are starting our explorations for the first time. We’ll have active drilling in the Ionian Sea the first three months of 2027. We have Chevron, present south of Greece. And this is good for Greece and it’s good for Europe. Obviously, we would be better off if we had, as Europeans, our own natural gas than being forced to import it.
Ben Hall: But I mean, Greece, like other European nations, can’t lock in gas as a baseload power for the next 30 years, because you won’t meet your climate targets. So you have to wean yourself off natural gas. If you’re drilling new wells, you are going to be locked into gas for longer than you should be?
Kyriakos Mitsotakis: Not necessarily, because I think if you look at the mix, Greece would be 80% renewables, but the 20% will have to be something else. And again, we are not compromising our green transition strategy. We’re rapidly expanding storage. Storage is critical for Greece.
I mean, we’ll have negative prices during the midday, but come 8 or 9 in the evening when the sun sets and when still there’s a lot of demand for electricity. If storage can sort of add two to three hours of cheap electricity during that time, this is very, very important to us.
But we’re not being naïve. Natural gas is going to be with us for the foreseeable future and we’re not compromising our renewable strategy, but I prefer to produce, if I can find it, I prefer to produce my own natural gas than pay to import it. It’s going to make a huge difference in our public finances, and it’s certainly going to make a big difference in terms of our energy security. Now, would we want to lock in long-term contracts? That, again, is a commercial decision. Depends on the price, depends on your view on the market.
Right now, we’re more dependent on spot purchases of LNG and gas, but this could change in the future depending on market conditions.
Ben Hall: I mean, Spain is another country blessed with ample sunshine and wind. They have much cheaper electricity prices than Greece, very abundant electric -cheap electricity, and they are doing more, have done more to decouple from the gas price. The gas price is very expensive. Shouldn’t you be going down the Spanish route?
Kyriakos Mitsotakis: Well, the Spanish route is quite particular because they managed to get a derogation because of their specific interconnection issues that they have. They’re essentially an energy island. We’re not in that category, but we’re at par with Spain in terms of our energy penetration, and Spain uses quite…
Ben Hall: But not in terms of energy prices.
Kyriakos Mitsotakis: Yes, because the Iberian Peninsula is a very strange sort of, I would say, exception to the energy market. What I can say is that we don’t have an energy market in Europe as a whole. We have a fragmented energy market. We don’t have proper interconnections. We don’t look at energy as -and electricity, in particular- as a European resource. I’ve been a big proponent of investing in grids and in interconnection infrastructure, and we need to look at issues with the current flow of electricity.
It’s a very technical issue. It took me a long time to understand exactly what’s going on. But at some point, we found ourselves in Southeastern Europe to be much more expensive than the rest of Europe, and there are reasons why this happened, and we’re beginning to address them. You know, again, we started as a country which was the most expensive in terms of wholesale prices, so we’ve made significant progress, and I would expect prices to continue to decline as we add more renewables to the mix and as gas becomes hopefully cheaper.
Ben Hall: Why do you think the EU is making such slow progress on the question of grid interconnections? Is it money? Is it national sensitivities about the EU having more oversight over grids? Is it governments trying to protect their own markets?
Kyriakos Mitsotakis: It’s probably all of the above. But, you know, maybe if you have cheap energy, Why would you feel like sharing with someone else if this would increase, albeit slightly, the price that your citizens pay?
But we need to be lucid about the fact that we don’t have a European energy market. We don’t have an electricity market.
Some of the variations are just completely – they’re not inexplicable because the reasons for these variations are exactly what you just mentioned. But if I go back to the Draghi report and the fundamental problems with our competitiveness, the cost of energy is right there. And we know we’re moving towards electrification. It’s a fact. So we know we will need more electricity. So the price of electricity as a cost component for everything we do is going to become critical. We can replace boilers with heat pumps, but that would make us more dependent on the price of electricity, much more environmentally friendly, but will require more electricity. So one thing we know for sure is that we will need more electricity, and we want to play also more than just a local role, we want to play a regional role.
I mean, the Public Power Corporation, which is, you know, 34% owned by the Greek state, back in 2019, it was borderline bankrupt. Now it’s a big regional player expanding beyond Greece. And I think this is really an indication that the country now has turned its page and is becoming a regional player and not just a country that is concerned with addressing its own shortcomings.
Ben Hall: Last year at this conference you made news by talking about how Greece had ambitions to get into nuclear power with small modular reactors. What’s happened in the 12 months since?
Kyriakos Mitsotakis: Well, certainly it was the first time I mentioned this topic and since then I’m happy that the public debate around this issue has first of all gained steam. We’ve made it very clear – I attended a conference organised by President Macron in Paris. It is my belief, if I wear my European hat, that nuclear is the only sort of long-term option and alternative to gas in terms of baseload power.
We set up a working group to look at the future of civilian nuclear in Greece. This is a 10-year project. This is not something which is new. No decisions have been made. But for a country that was almost in a state of panic every time it heard the word “nuclear”, to be able to even have this debate with the pros and cons, because there are pros and cons, I think is a big progress. So we’ve done well since we first touched upon this topic. But again, for us, if it ever were to happen, it’s a long-term project.
Ben Hall: Wouldn’t it be better to put your efforts into boosting battery storage? I mean, that could also be a baseload power for Greece.
Kyriakos Mitsotakis: We are doing that. But let’s have no doubt that no storage – I mean, there is no technology in storage that can – there is no grid right now where you can envision that only functions with renewable storage. It’s just not possible. I mean, storage is part of the solution. It cannot be the whole solution.
Ben Hall: You wrote a piece in the FT last October with 5 lessons for Europe for its energy transition, which was a bit of a sort of shot across the bows, I think, is how a lot of people saw it, and maybe it’s in tune with the growing scepticism that the EU has the balance right. Has the EU got its approach to decarbonization wrong?
Kyriakos Mitsotakis: If we only look at decarbonization without taking into consideration our competitiveness, our industrial base, and the well-being of our citizens, the answer is yes. Do we need – should we set ambitious targets? Absolutely. Should we prioritise in terms of the climate transition and really go full steam ahead with those technologies that are proven while keeping in place enough incentives to invest in longer-term technologies? Absolutely, yes.
Should we kill our industry to decarbonize? No. Is this a possibility? It could be. Should we be lucid about countries that undercut our industrial base by – I wouldn’t use the word dumping, but by importing into Europe products which may be great for our consumers because they’re very cheap, but problematic for our industry? We need to look at this problem. Should we be protectionist across the board? No. Should we give our car industry some time to adjust? Probably yes.
So these are the sort of balances and trade-offs that are actually being discussed at the European Council. What I can tell you is that the consensus at the European Council is that we need to look at our climate strategy in sync with our energy security strategy and with our competitiveness strategy, and that the three go hand in hand.
And I think in that sense, and that we also need to be non-ideological. I mean, you’ve been reporting on this for many years. I mean, how many years has it taken us in Europe to accept the concept of technological neutrality? Because some of us simply, in principle, for example, consider nuclear bad, unethical, dangerous. Well, we got there, but it took us a long time.
So I do believe that the position of the Council, at least, has shifted to a more pragmatic approach. ETS2, it’s been pushed back by a year, and I think rightly so, because with the prices of fuel high and the price of ETS high at the same time, if you go now to a poor Greek and tell them, “Look, I’m going to increase your price on fuel, but you can’t even afford an electric car.” We’re penalising those we shouldn’t be penalising.
On the other hand, if you look at where we can make the most progress in terms of reducing our CO2 emissions, let’s focus on those areas. The biggest progress that we have made was getting rid of coal. Yet there are countries that got rid of nuclear and restarted their coal factories. Does this make sense from a climate point of view? I’m not talking about the energy security point of view. I mean, it doesn’t make any sense.
So let’s go full steam ahead with those proven technologies where we can really achieve fast progress. Let’s focus on those clean tech sectors where we can still retain a competitive advantage and support them, if be even through protective measures. And let’s be a little bit more sceptical about setting very, very ambitious long-term goals with the technologies are clearly not there yet.
Ben Hall: Last question, because we’re almost out of time. Given the spike in energy prices, or the sharp rise in energy prices, is this the moment to proceed with the complete ban on Russian oil and gas imports?
Kyriakos Mitsotakis: This is a geopolitical decision, and I believe that there is no appetite in Europe to recreate new dependencies and new long-term energy relationships with countries that have proven profoundly unreliable.
Ben Hall: And on the question of sanctions and the next sanctions package where Greece is possibly going to be one of those countries that is resisting particularly the ban on maritime services?
Kyriakos Mitsotakis: We supported all sanctions packages. You know, we’ve asked for us to be pragmatic and not to punish European, not just Greek shipping, and we will continue down that approach.
And speaking of shipping, shipping, for example, is a sector where there is no obvious decarbonization solution right now. So just imposing a tax on shipping and sending the money somewhere where we don’t even know how we’re going to benefit from it does not seem to me to be the smartest bet.
90% of global trade is shipping, and shipping accounts for less than 3% of global emissions. Should this really be our priority? My answer is no, frankly. I want to be very, very blunt.
We are working on decarbonizing shipping. But if someone can tell me how we can do it, and where I’m going to find all the nice sustainable fuels in 10,000 ports or wherever the ships are calling, I’ll be ready to listen to them. But I don’t see the solution there.
Ben Hall: Kyriakos Mitsotakis, thank you very much for your time and for joining us again.
Kyriakos Mitsotakis: Thank you.
