Prime Minister Kyriakos Mitsotakis had an interview with CNN and journalist Julia Chatterley. The full interview of the Prime Minister follows:
Julia Chatterley: Prime Minister, fantastic to have you with us. Well, I know you’re constantly busy. Let’s start by talking about the EU energy deal. I think the reaction in the gas price market said everything. There’s a credibility gap. There’s real fear of the power that Russia continues to wield. Something more surely needs to be done.
Kyriakos Mitsotakis: I think you’re right, Julia. We have agreed in principle to reduce our demand for gas by 15% and we’ve also agreed to a sort of mandatory framework to make sure that this does happen in case there is a real emergency. But obviously, we need to send a much clearer signal to the market that our approach is credible. And that is why I’ve sent a letter to Ursula von der Leyen, proposing what I consider to be a reasonable middle path between completely mandatory measures and voluntary measures.
Essentially, as you described it, it is a demand response mechanism for industry that will have a much longer duration than the usual demand response mechanism that we use when we want to take into account peak demand for electricity. Essentially, we will be paying industry not to produce and not to use gas in a much more organized manner with a much longer time horizon. We think this is a very good proposal. It has been relatively well received and I would hope that we can get some serious traction on these issues before September, because right now there is obviously significant uncertainty in the gas market. Gas prices have increased tenfold and this is something we all know is not sustainable.
Greece relies on gas for its electricity production. 70% of the gas that we import goes into electricity production. We are taking our own measures to reduce our dependence on gas. We’re forced to switch back to lignite for the next couple of years and we also use various other measures to make sure that we reduce our dependence on gas. But this needs to be done in a much more organized manner at the European level and also in a manner that is credible for the international gas markets.
Julia Chatterley: Yeah, it’s about changing the economics, incentivizing less use rather than potential punishment, and also mitigating the risk premium that’s in prices now that doesn’t tie to the supply and demand even as it stands today, because at some point prices get so high that industry can’t afford it anyway, and you’re exacerbating the potential for economic slowdown across nations too. So what’s the response, then? I know it’s, what, it’s been four days?
Kyriakos Mitsotakis: Probably too early to tell. As you know, Brussels is not at its most active during the heat of the summer. But I can tell you regarding prices is that we’ve been making the case that there’s something fundamentally wrong in the gas market since last February. When you look at the volatility of the TTF, there’s no reason why the prices should be so volatile. If you compare, for example, the TTF index to the oil market, you will notice significantly larger volatility. I think a lot of people are making a lot of money at the expense of European governments and at the end of the day, at the expense of European customers. This, in my mind, is an unacceptable sort of situation that needs to be addressed much more drastically. We need to reconsider the link between gas prices and electricity prices. When we put in place our marginal pricing mechanism for the European electricity market, it made a lot of sense. It was a time when renewables were still the most expensive form of electricity production.
But now, with gas shooting through the roof, this mechanism makes no sense whatsoever. So I would really hope that, as Europeans, we get our act together before winter comes and send a clear signal not just of solidarity, but also of effectiveness in addressing a problem that essentially is affecting all of us.
Julia Chatterley: Up to now, you spent a lot of money subsidizing, dramatically subsidizing for both small businesses, for consumers, the price increases that they’ve seen, and I’m sure for Greek people watching this, they want to know and understand for how long you can continue to do this, because there are political consequences too. We’ve seen political instability in Italy, the UK government. Yes, they have idiosyncratic reasons for instability, but even in the United States here, we see dramatic consequences for this government support too. Stability of governments at this moment in a cost of living crisis is vital, particularly given what we’ve been through over the last two years.
Kyriakos Mitsotakis: You’re right. Let me address your first question. We will continue to support Greek households and Greek businesses for as long as necessary. I mean, we are recycling, we are diverting windfall profits into a scheme that is subsidizing electricity bills. So we try to keep the increases reasonable. Just to give you an example, for households, we will be absorbing up to 90%, that is, 90% of the increase in the electricity prices, from the baseline price for electricity prices were, let’s say, two years ago. And of course, the public budget also has to contribute to this effort. And we’re able to do that because the Greek economy has been essentially overperforming. We’re doing much better than the eurozone average, and this is allowing us some fiscal space.
But as we discussed in the previous segment of your show, there’s only that much that public budgets can do, and that is why a European response is absolutely necessary. You’re right to point out that political stability is paramount these days. We have a very stable government in Greece, and I’ve committed, publicly committed, that the Greek government will see out this term and that we will have our elections in 2023 when our term comes to an end.
And I think, in this way, we’re resisting the temptations of calling an early election, although we are way ahead in the polls. But it is important, Julia, in these times to send a signal of political stability and of political predictability. And I do hope that when our term is up, we will again convince the Greek people that we deserve a second term. But this will happen only at the end of our term, in 2023.
Julia Chatterley: Yeah. I mean, as you know, I’ve spent many months in Greece over the past few years reporting on elections. And to your point, I do think it’s important that you can be strategic about the timing of calling an election when you are ahead in the polls. But the loss of time in leadership terms and in government decisions would be tragic. So your point that you make there is well heard. Let’s talk about some of the good news as well. Tourism, please.
Kyriakos Mitsotakis: Sorry, just one point on the question of political stability. Italy is plunged into a political crisis. Greece is a stable government. Right now, Greek government bonds are trading at a 30 basis point discount. I repeat that discount to the Italian bonds. Although we have a higher debt, it has very peculiar characteristics. One of the reasons why this is happening is because Greece is politically stable and Italy currently is politically unstable. So there is no way, Julia, I would ever compromise political stability to achieve a short term political gain. That is not the proper way of running a country. And I think that one of the reasons why the markets are also rewarding Greece is because we are institutionally responsible.
Julia Chatterley: And your FDI flows. The foreign direct investment flows, I think, argue that too. Prime Minister, let’s talk about tourism. I keep getting photos from people that are spending time in Greek islands, particularly ones that come from America, because obviously the strength of the dollar versus the euro is helping them too. And you’ve had a few high profile visitors. Τalk to us about one of the most important contributors to your economy and the recovery that we’re seeing. More than recovery, in fact.
Kyriakos Mitsotakis: I think the recovery has been very very impressive. Greece is doing particularly well this summer. I think once we do the math at the end of the season, I do hope we will be pleasantly surprised. We have lots of people coming to Greece, but the most important thing for me, Julia, is that people are happy and they are having a fantastic time in Greece. So whether they visit the islands or whether they visit the mainland, we put a lot of effort in upgrading our tourism product, in making sure that all new investments in tourism are sustainable and people can come to Greece and have an exceptional experience.
And the good thing is that they no longer just come during the summer. We saw this year the tourism season start very early, and I do expect it to end very late. We have nine or ten, I think, non stop flights from the US on a daily basis. We expect, just to give you an indication, a million visitors the first week to arrive in Athens, the first week of August. So we’re particularly happy about this influx of tourists, but also about the fact that people who come to Greece seem to spend more than in the past.
But again, our focus is on making sure that we manage our destinations properly, that people have a great time, that they share their experiences on social media, that they can convince people like you to come and visit us and that they can come back next year and bring even more friends to Greece.
Julia Chatterley: Noted. You also have to say, offered to provide a warm retreat for Germans potentially this winter if they wanted to come too. I noticed that in the past couple of months. Any takers on that? It’s a sort of circle back to our energy conversation now.
Kyriakos Mitsotakis: Greece is not just about tourism. Greece is a great place to spend all year. Greece became a great destination during Covid to work from. So we want to turn Greece into a destination that people can visit for holidays, a place where they can work from. We have thousands, I’d say tens of thousands of digital nomads who work out of Greece. We have retirees who choose to spend other gloomy sort of north European winters in Greece, which is great for us, because it helps us spread our season. So this is not just about people appreciating the beauty of our beaches in the summer. It’s about much more than that.
Julia Chatterley: I want to ask you, finally, about Turkey and the current state of escalated tensions. I think there are a lot of people that are watching this situation and are very worried. Not just for the region. But given the backdrop of what else is happening in Europe at this moment. What can you say about that to perhaps alleviate some of the serious concerns.
Kyriakos Mitsotakis: What I would say, Julia, is we’re facing a sort of once in a generation geopolitical crisis after the invasion of Russia into Ukraine. The last thing that NATO, the last thing that Europe needs is another source of instability in southeastern Europe. And we have an obligation to sort out our differences with Turkey. And there is only one playbook which we can use, and that is the playbook of International Law. Greece has always behaved very very responsibly towards Turkey. We’re destined by geography to live together. Yes, we’ve seen a series of provocations by Turkey over the past months, but I really believe that President Erdoğan would serve his people much better if he focused on reviving the ailing Turkish economy rather than reviving sort of neo Ottoman revisionist fantasies. So we need to sit down, we need to talk as responsible adults. We should not use foreign policy to fuel sort of national sentiments. That is an irresponsible approach. Greece will always behave responsibly, but it will always do whatever it can, whatever it has to do, to defend its sovereignty and its sovereign rights. That is simply non negotiable for us.