Prime Minister Kyriakos Mitsotakis participated in a conversation with Mariana Mazzucato, Professor in the Economics of Innovation and Public Value at University College London, in the context of the conference “Investing in Change: How Crete Is Transforming,” organized by The Economist in collaboration with powergame.gr, in Chania. The discussion was moderated by Alasdair Ross, Countries Editor for The Economist’s The World Ahead, and Joan Hoey, Greece analyst and Europe consultant for the Economist Intelligence Unit (EIU). The Prime Minister’s remarks follow:
In his opening remarks, referring to Greece’s economic transformation and the investments being made in Crete, the Prime Minister noted:
Well, first of all, it’s a real pleasure to be here with you. We’re very happy that we are organizing this conference in my home city, in this beautifully restored and very important historical building. And if I may jump directly into answering your question, yes, the previous years have been a lot about re-establishing the macroeconomic balance that was greatly disrupted during the years of the crisis. And a lot of the emphasis has been placed on restoring the health of our public finances, making sure we bring down our debt, making sure we borrow at reasonable interest rates, obtaining investment grade, and producing healthy primary surpluses because these are necessary not only to reduce our debt overhang but also to support public policies which are of great importance to us.
But a lot of the emphasis of our second term has also been placed not just on stabilizing the economy but making sure that we transform it. And in this vein, public investments— and I’m jumping into a topic I know that Mariana is very, very interested in— has played a very, very important role.
And we are in Crete, and this is an island which has benefited tremendously from significant public investment. And let me just highlight three projects of great importance. The first, which has already been completed, is the two electric interconnections between Crete and the mainland. These are important not only for reasons of energy security, but also because Crete used to burn diesel oil in order to produce electricity, and now it can benefit from an interconnected network and also leverage the significant renewable potential that the island has.
The second incredibly big public investment has been the new airport in Iraklion. When we’re looking at the potential of this island as the sort of the epicenter of the dynamic Greek tourism industry, we cannot envision an island growing to the 21st century with 20th century infrastructure. The old airport in Heraklion is struggling to meet the increased demands of people wanting to come to Crete. So building a brand new airport was a priority for us. It will be ready hopefully in 2028. 70% of the project has been completed.
And the third big infrastructure project was building a new highway that essentially runs across the northern part of the island. Again, a very significant public investment in infrastructure which is necessary to drive the island forward.
So for us, when we look at our agenda, public investments do play an important role alongside policies that foster entrepreneurship, bring in investment, and leverage the comparative advantages of our country. And of course, also all these projects, they’re being constructed by our big construction companies.
So this is essentially a public-private partnership, given that these are concession models, which in our mind work very, very well. So this is no longer just about stabilizing the country, improving its image abroad. I think this work to a great extent has been done. Of course, we always need to be very vigilant. This is about the new phase of growth in which public investment plays a very, very important role, especially here in Crete.
When asked about the most significant change that took place in the country during his first two terms in office, Kyriakos Mitsotakis replied:
Well, I think what you highlighted is quite important. Greece for a decade was struggling under a regime of intense supervision. And I think one of the problems, one of the reasons why we did not exit this crisis earlier had to do with the fact that there was no political consensus to implement reforms which we knew were necessary and we never dared to take full ownership.
So I think this has really changed. This government has a strong democratic legitimacy. We were elected twice, with a very, very clear agenda and a very clear platform. And when I look at the commitments that we made in 2023 and I compare them to the deliverables in 2026, we have met most of our commitments.
For example, we tried to make our second term about wage growth and support of disposable income. Look at the minimum wage. It was €650 when we came into power. It’s at €920 now. The median wage for full-time employment has exceeded €1,500, which was a target we had set in 2023.
Unemployment, probably our biggest success. We don’t talk enough about it. It was at 18% in 2019. It’s dipping under 8% now. We’re talking about 600,000 jobs that have been created. Greeks returning from abroad, you know, voting with their feet. These are the people who left during the crisis and now they’re returning because there are good jobs and they believe in the prospect of the country.
Having said that, there are still difficulties and in a time of general discontent with politics, we need to be aware of the fact that the increase in the level of prices, the cumulative inflation, has eroded a significant percentage of the wage increases, and there are many people who are struggling today. The affordability crisis is real. It’s not something certain parties have invented, and we need to acknowledge it and we need to focus on it, but the solution is not to offer promises which we cannot deliver on.
Whatever we do has to be within the confines of our fiscal space, and whatever we do needs to be laser-focused on growing the economy. We may discuss about this later, but the big problem of Europe has always been growth. We are growing at double the eurozone rate now. Am I happy with this growth rate? No, I would like to see it even higher.
And when we prepare our plan for hopefully a third term, at least what we will present to the Greek people, even higher growth rates are necessary to fund public investment, to support disposable income, to fund our social state, healthcare, education. So this is all about growth.
And of course, growth is not going to come without private investment. But also through a state that leverages its role in a smart way to bring about growth, not replacing the private sector, but playing its role whenever it can or whenever it should by creating the conditions for private investment to flourish and take responsibility for certain projects which I would consider public goods, for example, our digital state, which benefits all.
When asked about the model of state he is pursuing and the concept of the “smart state,” the Prime Minister stated:
I’d argue we need a competent state. And first of all, a state that can support itself at the end of the day. And that requires a rethinking in terms of the operating system of the state itself and the way it functions.
One of the first things that we did in 2019 was to completely rewrite the software of governance according to what we thought was appropriate, which means you need a strong center, you need strong coordination, you need accountability, you need to set targets. You need to ensure that departments work and cooperate in an efficient manner. All this is not rocket science, but it was not happening. And unfortunately, it’s also not happening in many other governments.
We have the privilege, the luxury of having one party in power. I can tell you one of the big problems in terms of delivering efficient government today in Europe is coalition governments that are constantly fighting amongst each other in order to preserve their own turf. That is not an efficient way of doing business.
And of course, also investing in forward-thinking know-how, and in our mind, the digital transformation has been truly groundbreaking. Of course, the next challenge is AI, and what does AI mean for a “smart state”? How do we retain the core competences rather than outsourcing all of them?
Again, I know you are very interested in this topic. Of course, all governments work with external support, with consultants, but at the end of the day, there is know-how that we need to keep in-house. For example, our gov.gr operating system was developed essentially in-house. We have support in-house. We had a big problem with agricultural subsidies in Greece, and one of the reasons was that we never took full ownership of the system that actually distributes the subsidies. So now we’re doing it in-house, and we want to make sure that this is our own system.
So in our case, it is about efficient delivery of public services and making sure that we set the playing field in such a way where we meet the dual targets of sustainability and growth.
And if I may just comment on what you just said, one of the most difficult reforms we’re currently implementing has to do with spatial planning in Greece, especially in our more sensitive ecosystems, and I’m particularly referring to our islands and in particular our small Cycladic islands where we know that we have to restrict the amount that people actually build. I’m saying this in a very, very simplified way.
And we have to look at water and possibly placing restrictions. You mentioned swimming pools, but at the end of the day swimming pools, when you do the math, are a very, very small percentage of the water we consume. It sounds like a nice catchy phrase. And of course, I would like, and we can do that, it would be smart regulation: if you’re close to the sea, you’re forced to use seawater for your swimming pools. It’s very simple. And we can do that, and we will do that. So that’s not rocket science.
But when we talk about water in Crete or water in Greece, we should be aware that 85% of the water is irrigation. It’s not tourism. It’s not the water that we spend to drink or to have showers.
So what is an appropriate model to invest in water? What does this mean for the regulatory environment? How can this bring in the private sector while respecting the fundamental principles of sustainability? These are important topics and important issues to discuss.
But I would argue right now that when it comes to areas such as energy, for example, which is absolutely critical, we need to balance from a regulatory point of view the green transition where Europe and Greece is a leader. We produce more than 50% of our electricity from renewables, so we’re a top 10 country both in solar and in wind in the world. But at the same time, we need to ensure that the green transition works for everyone and certainly works for our industry.
Because if we go too fast, the rest of the world is not following, we’re single-handedly obsessed with reducing CO2 emissions when nobody else places the same priority, we will end up in a completely de-industrialized environment in Europe and we will not have contributed significantly towards addressing global warming.
So some of these problems are Greek, some of these problems are European because of course the topic of how do we foster innovation, how do we smartly regulate at the European level is very relevant and there are some things to be said about Europe overregulating and making doing business in Europe a very, very complex issue.
Yesterday, I participated in this amazing gathering called “Panathēnea”, which is a big gathering of tech startups and people interested in the startup and technology ecosystem, were like 10,000 people and we’re working with a group of European entrepreneurs in setting up what we call the “28th regime”, this idea that you can set up and register a company, a startup in any European country and you’ll be able to do business. You still have to respect, for example, labor rules of the country in which you do business, but finding a simplified way to allow our startups to operate in the single market. This is smart regulation rather than regulation for the sake of regulation.
So I would advocate for the same mentality, not just as far as Greece is concerned, but as far as Europe is concerned, when we look at all the problems that we have and we realize that at the core of our deficiencies is the loss of competitiveness and a low growth rate vis-à-vis China and the US.
When asked about the Draghi and Letta reports regarding the growth and productivity deficit in Europe and how one can move from planning to implementation, the Prime Minister replied:
I would be very happy if we could adopt 100% of the Letta report and 100% of the Draghi report tomorrow, even if I don’t agree with everything. Why am I saying this? Because it’s very easy to cherry-pick. You read the Draghi report, you say, “okay, I like this, this, and this”, because I also wear sort of my national hat and I have to balance between my national and my European priorities. But the diagnosis is correct and the recipe is correct. Let me just give you two very specific examples.
The first is what we call Savings and Investments Union. When you look at where the European savings go, they go abroad. When you look at the liquidity of the US capital markets, there’s just no comparison. So we need at some point to pool resources and some of the countries need to agree that they have to do that and give away some of the regulatory authority that they have over their domestic capital markets.
I was speaking to a very successful startup yesterday. They are a European company. We just signed an MOU with them. I mean, for a successful company, is it conceivable today to list on a European stock market when the liquidity in the US is 10 times as much? They will say, as much as they feel European, “probably no”.
So this is a tangible goal. It needs to happen this year. We need to overcome resistance. The resistance usually comes from member states, so it’s a problem at the level of the Council, not at the level of the Commission or the level of the European Parliament.
The second topic is energy. We’re going nowhere with these prices of energy because we have a fragmented energy market that at the end of the day does not leverage the full scale of the European energy market. You probably need a European energy regulator. You need to invest more in grids. You need to ensure that if I have cheaper electricity, I can export it.
And by the way, Greece has become a significant net exporter of electricity because we produce a lot from renewables and because we’re cheaper than our neighbors. This is how the electricity market works.
So these are just two examples of tangible priorities set out in the reports that need to be implemented. Is there a sense of urgency? I think yes, certainly around the Council tables. Is it easy to foster this consensus and have the big countries sort of move in that direction? Not always the case.
Do we need funding, both private and public? Absolutely yes. Do we need to take a look at the European budgets and say, are there European common goods that could be funded and should be funded with European money? Because at the end of the day, that’s the whole logic of the European budget, we fund things that you cannot do at the national level. Definitely. Is defense one of those common goods? I think yes, absolutely.
So I’m not someone who is in great favor of borrowing significant amounts of money. My main goal is to leave a legacy where the Greek debt has become fully sustainable.
But at the European level, this is something which currently makes sense because otherwise you cannot fund these long-term investments otherwise. And there are investments that have to be funded where the market is not going to do its job. If we’re setting up a supercomputer for our AI ecosystem, which we’re doing, by the way, we’re using EU money, because you cannot make a return on this investment. So we’re giving computing capacity to the state and to startups.
So this is, in a sense, it’s a public good. So it needs public money. And then we need to figure out what’s the split between domestic money and European money. But right now, many European countries are struggling with their public finances. So the only solution would be to add to the European budget and make the sorts of investments that the US made many decades ago using public money that eventually had a tremendous spillover effect across the whole economy.
It’s not too late. There are battles which have been lost in my mind because the US and China are way ahead of us, but there are other battles that we can still and we should fight as Europeans. And this would require a significant amount of capital, both private but also public, that needs to be deployed.
When asked whether the current situation in Europe can be compared to the sense of urgency that prevailed in Greece in the past as a result of the crisis, Kyriakos Mitsotakis noted:
No, because European countries, thank God, I mean, they don’t have capital controls, they didn’t suffer a 25% collapse in their GDP. The problem is the gradual erosion. If you have a sudden shock, you’re forced to reckon and address your shortcomings, which is what we did, and great credit to the Greek people because they’ve persevered. Not many people thought that this was actually possible. The problem in Europe is that things are not as serious, unfortunately, but it’s this gradual erosion that was highlighted in the Letta report that is extremely worrying.
And of course, on the political side, mainstream parties are struggling, affordability and inflation is a big problem, and you have easy solutions offered by populists both from the right and from the left. And in that sense, Greece has an advantage because we’ve already experimented with populists and it didn’t go very well. So when the populists reemerge now with a nice new sort of rebranding sort of strategy and they say the same things, people say, “Okay, but last time we tried this, we almost went bankrupt.” So Greece has these two advantages vis-à-vis other European countries.
Regarding how the rise of artificial intelligence is affecting and will affect public policy, the Prime Minister stated:
This is probably the most complicated question that you could ask, and we would need a whole day to analyze all the implications of this incredible technological revolution. And all states are struggling. No one, I think, has a clear mind because the technology is changing so fast and because essentially we have created supranational actors, the big tech companies, that have so much power that they’re able to also shape the public discourse in their direction.
Of course, when it comes to the state, there are huge opportunities for efficiencies when it comes to using AI. This, of course, requires identifying how AI can actually improve the delivery of public services or the processes of government itself, training your employees and your civil servants in looking at AI as a true tool, and making sure that we address the fears within the public service that AI could actually replace their jobs, which in the case of the public sector is not so much of an imminent risk.
Then, of course, the second obligation is to look at the certain clear sectors or those areas of policy where AI can deliver profound improvement, such as healthcare, where the balance overall is going to be positive. In our case, building a new defense ecosystem is a big priority and moving away from the old legacy systems of our Department of Defense. And this is generating a lot of interest because it’s also driving growth and innovation. And a lot of the defense tech eventually spills over into the real economy.
But of course, we also need to be very aware of the fact that there are regulatory battles that have to be fought when it comes to technology. And I have been at the forefront of protecting our kids and our teenagers from social media. We are legislating in that direction. But this is only the first battle that we will fight because we’re scratching the surface in terms of the way our kids and our teenagers interact with technology. I was speaking about this yesterday. How do we feel about having AI companions chatting to our kids and our teenagers, and having our kids creating these types of virtual relationships with AI agents? I have a hunch this is not going to be very good for their mental health.
So what does this mean in terms of also interacting with the big tech companies and setting clear boundaries in terms of ‘this is what you can, this is what you cannot do’, and Europe has been relatively protective of its digital market, and I don’t think that we need to be overly regulative in our approach, but if there are certain issues we care about, we need to make that also very, very clear.
And of course, the biggest challenge of all is the big job displacement. There, I’m afraid no country is prepared because we simply don’t know exactly what will happen to the job market. But when I look at, for example, the companies developing – and we’re talking to them, we even signed an agreement with them yesterday – very sophisticated AI speech agents, what is going to happen to the people who work in call centers? Because I can guarantee you, in 3 to 5 years, these jobs may no longer exist.
So we need to think proactively about the jobs that will definitely be threatened at the beginning. We need to think about the jobs of the future. You mentioned nurses. Nurses are going to be around in the age of AI, but we have a shortage of nurses now in Europe.
So what can we do more to encourage our kids to consider these careers, which we know are going to be around even in the age of AI, taking over many jobs. I think this is a debate that is still in its infancy, but I’m afraid that the speed of the change is so quick that governments will always be rushing to catch up, and this is not just a Greek problem. I think it’s a global problem.
When asked what he would consider a success for Greece in 2030, as well as what key lessons Europe can learn from Greece and our country’s achievements over the past seven years, Kyriakos Mitsotakis stressed:
Well, the main goal has to be faster convergence with Europe. This is what people will feel. If you look at the amount of money people spend as a percentage of the European average, which is, I think, a much better indicator rather than GDP-per-capita, because GDP-per-capita doesn’t account for tax evasion, we’re probably around 80% of the EU average. So, if we want to converge with Europe, we need to grow much faster than Europe and we’re not going to grow without investment. So, I would say, almost an obsessive focus on ensuring that we create the best possible investment environment and that we use the power of the state to attract the sort of investment that we want, because this is not investment at all costs. It is the investment that we like.
For example, we’ve had this big debate and I recognize this is not going to be popular here in Greece, in Crete, what I’m going to say. If I’m going to use state subsidies to support investments, I took a conscious decision to do less in tourism and more in manufacturing because these are the types of jobs that we feel we need and because I think that tourism is doing well enough that it does not need the amount of incentives that it got in the past.
So these are the sort of regulatory decisions that you have to take, and then develop certain areas of excellence where we can actually leapfrog some of our European colleagues.
And the digital state is probably the best example. If you look at healthcare, we’ve made huge improvements in healthcare over the past four years. You can book a doctor now from your MyHealth app anywhere in Greece, and you’re probably going to have an appointment in a week’s time. I’m not sure this is possible in the NHS. So this is a very good example of how you can use technology to empower people, to drive efficiency, to bring down costs, and to make the whole system more transparent. So these are some of the areas I would clearly focus on.
And of course, make sure in our public demeanor to be humble and to continue to listen to people and their true concerns. It’s very easy if you’re getting into your 8th year, especially if polls indicate that you’re going to win the next elections… This is the biggest danger. So we have an election to fight. We know we’ve moved the country in the right direction, but we know there’s a lot of work still to be done, and we need to acknowledge that many of the grievances that feed the populist parties in Europe are real grievances.
If people care about their disposable income, they care because we have seen a rapid increase of prices across the board over the past four years, which is only made worse as a result of the war. So choices need to be made. And when we think about the state, you think about, okay, there’s public, you know, there’s state bureaucracy, but the state is people at the end of the day. It’s politicians making decisions and making trade-offs.
If I have a fiscal surplus to spend, I took the conscious decision to support families with children. I could have done something else. I could have cut VAT, for example. So these are the sort of difficult decisions that you make that at the end of the day you can only be judged by whether these decisions are successful.
So I think reestablishing a minimum trust in the political institutions, which at the end of the day comes down to accountability. I’m a big believer in accountability. I would really love the people to look at what we told them in 2023, literally go through our manifesto and tick the boxes. And I think if they’re going to do that, they will see that we’ve actually delivered on most of our commitments.
People never vote for you for what you’ve done. Maybe a building can get named from you because of your work, but you’re not going to win an election based on your record. But if your record has been a record of consistency, then people are probably going to place more trust in you, if you tell them that you’re going to do more things in the next four years.
So as we’re gearing up – and let me conclude with this – towards what is essentially going to be our last year in power, we should never forget that, at the end of the day, politics is basically about policy. It’s about choices. It’s about addressing real problems. It’s about improving public transport, which is a public good. I mean, if you’ve added more than 1,000 new buses in Athens, this is a good public investment, because public transport is an important public service.
So, all these nice sort of ideological debates are good and interesting, but at the end of the day, people have problems, they expect solutions, and people are, at the end of the day, I believe, rational. They sit down with their families, they will discuss, “okay, we’ve offered stability and predictability, this is important”.
We have a plan for how to move the country towards 2030. I think we’re the only party now that is talking about the 2030 agenda, and I’m confident that we have a good chance that they will place their trust again in us.
