Prime Minister Kyriakos Mitsotakis participated in a discussion in the context of the 33rd Greek Economic Summit, organized by the American-Hellenic Chamber of Commerce. The Prime Minister replied to the questions posed by the President of the American-Hellenic Chamber of Commerce Nikos Bakatselos, while Julie Linn Teigland, Area Managing Partner, EY Europe, Middle East, India, and Africa (EMEIA) also participated in the discussion.
The full discussion follows below¨
Nikos Bakatselos: Prime Minister, thank you very much for being with us tonight. I would like to start by asking you the following question. During your governance you have met with various prominent business people of global stature. What are your best arguments for convincing them to invest in our country and what were their main concerns?
Kyriakos Mitsotakis: First of all, thank you for inviting me. It’s a pleasure to be back. It’s great to have this meeting again without the pandemic constraints. However, as you pointed out, we are facing all sorts of different challenges that need to be addressed. So certainly never a dull moment in these three and a half years that we have been in power. I can tell you that the argument to attract foreign direct investment to Greece now is easier than it was three years ago.
When we first came into power, there was a lot of positive momentum. We came with a well-thought out and well-designed reform program. We were saying the right words to the international community, but we still had to prove that we could actually get things done and change the business climate, make sure that we put our public finances in order and ensure that what people saw as a country which could actually exceed expectations in terms of its performance could actually materialize.
Now, three years later, it’s easier to make that case because we can point to some hard facts. Growth that has been much higher than the Eurozone average growth. A country that has attracted record foreign direct investment. Companies, American companies that I don’t think would have ever considered investing in Greece, are actually investing a substantial amount of capital in the country.
And there is a pipeline of interest which makes us very optimistic that 2021 and 2022 are not going to be one-off years, but that this trend will actually continue. And we’ve also demonstrated that we have a long-term reform plan for the country, which we can implement in spite of all the crises that we had to deal with.
I would also argue that some of the crises that we had to deal with were also opportunities to strengthen Greece’s position, not just as a pillar of stability, but – I would say – as a center of innovation and innovative public policy in areas where we were always perceived as laggards, such as the digital transformation.
So when I speak to investors now, investors in the capital markets, or investors that actually want to really invest in the country through foreign direct investment, I can tell you that our case is easier. Of course, we do face significant headwinds, but I’m absolutely convinced that we will do much better in 2023 than Europe will do.
Our natural comparative advantages as an economy that is more focused on services and less focused on manufacturing – although we have a very decent manufacturing base- makes us more immune to some of the challenges that the more manufactured-dependent economies of Europe are currently facing.
And of course, the reforms don’t stop. We’re just getting started. And, hopefully, if the Greek people place their trust in us for a second term, we have a very clear plan of what we want to achieve post the summer of 2023 and a much better know-how now – being more experienced, having learned from our mistakes – on how we will get about doing that.
Nikos Bakatselos: Thank you, Mr. Prime Minister. The title of this year’s Greek Economic Forum was “Big Bets in Challenging Times”. I mentioned that during my intro. How do you expect the world to be shaped in ten years from now? And what should be the biggest bet of, let’s say, or perhaps renaming priorities of Greek governments.
Kyriakos Mitsatakis: In ten years from now, you’ll be celebrating your 100th anniversary since the creation of the American-Hellenic Chamber of Commerce. So my predictive abilities don’t extend that far. But what I can tell you is that the big bets that we are currently placing are essentially non-negotiable when it comes to the green transition, the digital transition, the skills transition, what does it mean to actually educate our labor force, our youngsters, but also the labor force that is currently in need of significant reskilling and upskilling. The bets that we place in terms of shielding and protecting our country, in terms of strengthening our defense posture in the Eastern Mediterranean.
All these are long-term bets, especially when it comes to energy. We want to be a global protagonist in the green transition and in the production of energy, in particular electricity from renewables. We are already one of the top ten countries. We know we need to move faster in that direction, and we know how we can actually get there. At the same time, we know that the hydrocarbons will play an important role in the interim periods until a time when they no longer will be necessary.
This is also a bet we are placing on Greece becoming a regional center for LNG at a time when Europe is desperately looking for alternative sources of gas to diversify away from its Russian dependence. The digital bet. We’ve been, I think, more successful than many people expected in terms of transforming the state and simplifying the relationship between citizens, businesses, and the Greek state. But we’re just at the beginning, understanding how this digital transformation, especially the use of big data, will change the way we as a state interact, is probably the next challenge.
And, of course, how do we position ourselves to leverage our human talent? This is also incredibly critical, from our universities opening up to the world to teaching English to four year-olds that have started at kindergarten.
One of the most sort of optimistic events I have attended over the past month was this visit of 30 American universities to Greece and the tremendous interest I saw in terms of forging educational partnerships between Greek public universities. And I’m not just talking about the public universities of Athens and Thessaloniki, but also our regional universities and leading American academic institutions. Incredible vibe, incredible sort of goodwill in terms of transforming Greece as a regional education center.
So I think that the bets that we place are well thought-out. They’re in line with sort of the megatrends that we need to think about when we try to envision the world in 2030 or the world in 2040. We have actually set up a foresight unit reporting to the office of the Prime Minister.
By foresight, we mean sort of a public policy unity that is exactly looking at these long-term trends – beyond what will happen this year or next year. And this is also in line with what the European Union is trying to do. So we are perfectly aware that we need to place some bets now, the benefits of which we will see beyond our terms. But that’s the way countries have to progress. If we were just looking at the short-term just of the next electoral cycle, I mean, these long-term investments would never take place.
Nikos Bakatselos: Sound like good bets to me. So allow me, Prime Minister, to turn to Miss Julie Linn Teigland, which I’d like to welcome to tonight’s Roundtable. Welcome. Very nice to see you. Thank you. Very short introduction. Born in the US, you live in Germany, and you are responsible for 115,000 people and companies that would generate turnover of $14.1 billion. So that’s quite a number. My first question to you is, what are your views about the current crisis and to what extent do you think it will continue to impact economies and businesses all over the world? We get the international perspective now.
Julie Linn Teigland: It’s such an honor to be with you. Thank you. I really believe that the recession that we’re facing right now will hopefully be a little bit like a paddle. It’s going to be slow and shallow and short but I know that the recovery will probably take a little longer than we expect for that paddle to dry up.
It’s going to equally be slow and gradual and frankly it’s going to be based on the level of consumer spending. I do expect a stronger economic recovery as we look towards the second half of 2023. I think it’s important that we mention that there are four real economic drivers with us.
Number one, we have to be honest with the central banks across the globe. Those rate hikes, they’re going to impact economic growth throughout the next year. Those rate hikes are slow and the monetary transmission takes a while.
Equally we are going to see developments in the energy market. It’s going to continue to weigh down on our economic outlook and in fact while we really well-managed at energy trends this winter – thanks to really large gas storage levels which are nearly 100% capacity – we know that as we look forward to next year with almost no Russian pipelines to Europe, replenishing that gas, this coming period, is going to be more difficult. We also expect that Asia is going to really take off and as a result there will be more pressure on gas prices.
I’d thirdly mention something that is not necessarily economic, but clearly geopolitical. Let’s be honest that geopolitics has an impact on our economic recovery. And in fact that war in Ukraine plays a large role in how the normalization of prices and energy and food commodities actually works out across the globe. If that war ends faster, we all expect that the rebound will come stronger and faster as well.
And last let’s not forget that economies are largely driven to some extent by consumer spending. As long as labor markets are resilient, we don’t see unemployment increasing substantially and that’s going to support some consumer spending that is going to allow us to grow modestly up until and into the second half of 2023.
So I conclude by saying a little bit of a paddle, it might feel like big splash, but we are hoping that the recovery will occur quickly – it might take a little longer and be a bit slower than we hoped, but it won’t be as bad as we feel when we get wet.
Nikos Bakatselos: Prime Minister, I am going to ask you to bring out the glass ball again and talk about the future. How different do you think our world will be in the future after the end of the war in Ukraine? What do you think will be the main characteristics that will be governing European policies and Europe’s relation to the USA, Russia and China? Is it more than ever possible that this crisis will contribute to a shift towards more introverted policies in the European states?
Kyriakos Mitsotakis: First of all, you need to be aware we’re dealing with a situation which was completely unthinkable a year or maybe 18 months ago. A war in the European heartland which has completely disrupted energy flows from Russia to Europe, has highlighted our excessive dependence on Russian gas but has still demonstrated that in the short-term we have proven to be rather resilient. Of course, the real question, as was pointed out in the previous intervention, is how are we going to fill our storage next year when we won’t have access to Russian gas? But still, this is a major disruption.
At the same time, you have the United States making a big bet on green technology, but doing it in a way that, from a European standpoint, is rather protectionist, which means that you give big incentives for companies that are actually producing in the US. And lots of subsidies for clean tech. Europe is squeezed, might be squeezed on two fronts. The first is the cost of energy. It is much cheaper to obtain energy, especially gas, in the US. And the second is that, frankly, it is very difficult to convince large European companies now to produce in Europe when they can produce much cheaper in the US.
For me, this absolutely highlights the need for a targeted European response to the IRA, the Inflation Reduction Act, of a similar magnitude. This is something we’re beginning to discuss. It needs to happen quickly. We need to send a signal to European companies that they can actually stay and that they should stay and keep producing in Europe. Otherwise, we’ll be facing major challenges.
At the same time, it’s important for the US to understand that what it does vis-a-vis China should not affect its transatlantic partner because we are partners and we will continue to be partners. And I think this is something that was also communicated by President Macron to President Biden. And I think in that respect this is a view of, I think, all European countries.
And that’s why I wouldn’t be surprised if there are some exceptions to the IRA that will also include Europe in the category of those countries that could be exempt for some of the restrictions of the IRA, in the same way that Canada and Mexico, which are already part of NAFTA currently are.
So I think we are moving towards a world where the globalization as we knew it in terms of simply looking for the cheapest source of production, it’s still going to be there, but it’s going to be much weaker, where geopolitics are going to play a bigger role and where strategic autonomy is going to become more important.
And this is relevant on numerous fronts. This could actually present countries such as Greece with significant opportunities. When we’re talking about reshoring and bringing back production to Europe. This is an opportunity for a country which has a manufacturing base, has access to good logistics, and is part of the European Community in terms of being a stable country in our part of the world. Let me just give you one example: pharmaceuticals. We’re talking a lot during the pandemic and we suddenly realize our dependence on China, not just for masks, but also for drugs or for the raw materials of drugs.
Let me just give you one example: pharmaceuticals. We’re talking a lot during the pandemic and we suddenly realize our dependence on China, not just for masks, but also for drugs or for the raw materials of drugs.
Well, I can tell you some Greek companies and some foreign companies have realized that this is an opportunity. And ten days ago I was in Tripoli. And in Tripoli we have two big investments taking place in the production of drugs, but also raw materials that can cover not just Greek but European needs. And it happened because we gave smart incentives to pharmaceutical companies to use the clawback as an investment tool to encourage them to invest in Greece. So you can actually see that this reshoring and greater control of supply chains may create some challenges.
We may not actually be looking for the cheapest source of production, no matter where it is, but it also creates opportunities for European countries such as Greece to move into areas of investment, which we didn’t consider to be priorities a few years ago.
Nikos Bakatselos: Excellent. And bearing in mind my background, when I hear you talk about production, I get very excited. But unfortunately, time is of the essence. So I will move forward with one more question which is related το the US. We have so many questions here I would love to ask you*
Our ties with the US are stronger than ever. And perhaps now that the image and narrative about Greece, as you pointed out earlier, has changed radically, it is an excellent opportunity to change the model of our leadership with expatriates by going beyond the logic of remembering them whenever we need them, but including them as a structural pillar of our development model. How can we achieve it?
Kyriakos Mitsotakis: First of all, let me agree with what you pointed out, that the relationship between Greece and the US is at an all time high, not just geopolitically, but also economically, culturally. And of course, the bridge, the natural bridge in that relationship is our Greek diaspora in the US. And I’m happy because there’s much more interest by the diaspora, not just in investing in Greece, but in general, in supporting Greek affairs. And I think this is also a testimony to the fact that we’re able to deliver on our commitments.
Unfortunately, we’ve also given the, you know, the possibility for Greeks who live abroad, to vote where they actually live, but because of constitutional constraints, we could not get to the 200 votes otherwise. We place so many constraints on their sort of ability to vote where they live that the number of people who have actually signed up is very, very small.
Maybe in our next term this is something that we can actually solve. But if you just look at how many Greeks or Greek Americans are active or in senior positions in the US, in fields such as, for example, pharmaceuticals, or technology, in general, venture capital, or, for example, the film industry, you understand why it is not a difficult pitch.
When we talk to the Greek American community and tell them that Greece has actually changed, take a look at Greece and this time you won’t be disappointed because we always have to manage expectations. And I know how appealing this first trip to Greece was in the past. You have a lovely sort of dinner with a view of the Acropolis. You think this is a fantastic country, and then you start dealing with the bureaucracy and things usually fall apart. I think we’ve been able to break that trend and deliver. And of course, diasporas are very, very important elements in this globalized world, and they’re also sources of talent.
We talk a lot about the ability to support our growth. When we look at our demographics, for example, they’re not good. Not just Greece’s demographics, but the Western world in general. So how are we going to drive growth and productivity with poor demographics? Well, one source of potential demographics is the brain drain generation that is already beginning to return to Greece. And there are a lot of young, talented, very well trained Greeks who would be interested, theoretically, to return to Greece, provided there are good jobs and believe in the future of the country.
Nikos Bakatselos: Thank you, Mr. Prime Minister. I think the words reliability and trust are certainly very important in this struggle to convince people that Greece has turned the page. And I think your government has been very successful in that.
Based on the global experience and the megatrends currently impacting the future of future economies. Which sectors do you believe Greece should develop more and invest in going forward?
Julie Linn Teigland: That’s a great question. And when I look globally and specifically across Europe, as I looked at our own ΕΥ Europe attractiveness survey, we see that there are three sectors that are poised for growth: The digital economy. 45% of our surveys said they are in the lead. Clean tech with renewables 35% and health sciences and wellness. These are the three that are really going to drive growth all across Europe. And frankly, this is very much in line with our megatrends around decarbonization, the changing phase of technology powered by 5G, quantum computing, edge computing and, of course, the potential to transform the way we treat illness, make things and feed ourselves.
When I look at Greece for our EY attractiveness survey, we’ve seen a real shift towards investments with high-added value and where you have an emphasis on a true competitive advantage. This would include agri-food, transport and logistics and software and IT. These are all very important sectors as we tackle food security, as we see shifts in globalization to nearshoring, and as companies seek to build more resilient supply chains and digitalization accelerates. These were the three. If I was going to place a bet, that’s where I would go.
Nikos Bakatselos: Mr Prime Minister. Given that there are promising sectors in Greece, what policies are being put in place to increase their competitiveness in the global market?
Kyriakos Mitsotakis: Well, we have obviously horizontal policies when it comes to promoting Greece as a business destination. And we’re always very happy when we see Greece really moving up the rankings in terms of the improvement we’ve made in the business environment. These surveys are important because a lot of investors look at them. So when you talk about a stable tax regime, labor reform, on top of that political stability, as a country where things happen in a predictable manner.
But then, of course, you come to sort of more vertical policies when it comes to specific sectors, some of which you have highlighted. And then, of course, we have all sorts of policies that target areas where we feel we have natural competitive advantages. Let me just highlight two. Τhey’re, in a sense, interconnected.
You mentioned agrifood; tremendous opportunities in Greece as a producer of quality agrifood products and tremendous opportunities for productivity gains also using technology. It’s beginning to happen, but we can move so much faster in that direction, which means that we move away from the model of the individual farmer into sort of collective organizations that are run as proper businesses.
But what we can produce is remarkable in terms of quality. And there will be a market, of course not just in Greece, but a market primarily outside Greece. And that’s why our exports have been booming.
I need to point out that Greek exports of goods and services have surpassed 40% of our GDP. Ten years ago, we were at 20%. It’s a huge leap. It’s an indication that the economy is really becoming much more extrovert and we can still capture many markets with high quality products. Look at our olive oil. Ten years ago there was very little branding. Look now at all the initiatives. Smaller producers really branding their olive oil, making sure they take care of their product and exporting it at very high premiums.
Of course, the second sector is tourism. I would say tourism and wellness. You mentioned wellness. Wellness is a broad term but I think one of the megatrends, which has to do with the way people spend their money, works in our favor. Because I think at the end of the day, given the choice between spending on a good or on an experience, people will increasingly choose the second. Between your new phone and your holiday, people will pick a holiday.
I have a very clear vision. I want to make Greece the top destination, the top tourist destination in the world, full stop. I mean, I will not settle for anything less in terms of the experience, the service, catering, of course, to people who can spend more. And that means no compromises when it comes to sustainability, when it comes to locally sourced products, when it comes to the connection to our cultural heritage.
Of course, wellness also means that people actually can not just come and spend their holidays here; they can work from Greece, they can retire in Greece, they can study in Greece. So, the destination and what we say quality of life, work – life balance, what it means to spend time in a beautiful place -not just to go to the beach in the summer- that will become very important.
I think Greece is uniquely positioned to take advantage of this sort of total experience. Sometimes we think of wellness just in terms of a spa or something. It’s something much, much bigger than that. And it has to do with the weather, the food, the social networks, the ability to get really, still incredibly original experiences in Greece. That’s what people are craving and I think we’re extremely well positioned.
We’ll need to make some tough choices also. Make sure that we protect our destinations, because some of them are already reaching breaking point in terms of their impact on infrastructure. So, a model that will place high-end sustainability at the very core of how we view the experience of someone visiting Greece, I think it’s still offering us lots of opportunities.
This means that valuations will also increase. There’s more money to be made out of tourism. People will get better wages as they become more skilled, as they offer new services. Who would have thought, ten years ago becoming an executive chef was not a very promising career path. Why don’t you ask people in tourism how much they pay now for an executive chef and what a fantastic job this is that actually you’re making good money.
Nikos Bakatselos: I think that we all share an understanding when your team says that the best salesman of Greece is the Prime Minister.
Kyriakos Mitsotakis: I can only sell a good product.
Nikos Bakatselos: Absolutely. Which you also helped form. And I think we all thank you for that. I think within the time limits that we have, we have promised Ms. Teigland that she could ask you a question. So if that’s okay by you.
Kyriakos Mitsotakis: With great pleasure.
Julie Linn Teigland: Thank you so much. I’ve been so impressed by Greece’s performance, not just in terms of attracting additional foreign investment, not just in the transformation that they’ve been undergoing. But when I look at our EY’s Renewable Energy Country Attractiveness Index, given your economy size, Greece is punching way above its weight. They ranked number 16th in the ranking, but already number two in the adjusted index. That’s huge and a major accomplishment.
But with the spike in energy prices and the impact and focus on renewable and sustainable energy sources, can I ask you, how do you think we could sustain the focus on the green transition with all of the short term pressures on energy supply? And I know that this is a big focus of your policy and what you are looking at in Greece. What advice would you give the rest of us and what are you planning to do in Greece?
Kyriakos Mitsotakis: We’ve placed a big bet on renewable energy for good reason. We have ample supply of wind and ample, you know, access to sun. And Greece, as you pointed out, is already a protagonist in terms of renewable energy. We have more than 10 gigawatts of installed wind and solar power, and close to another 2.5 gigawatts of hydro. And of course, we’re looking to get to 25 gigawatts by 2030.
We want to be a net exporter of energy, and we can do that provided we all also invest in our grids because we still have deficiencies, both within Greece -there are investments that simply cannot go forward because we don’t have the necessary grid infrastructure- but also in terms of connecting the north of Europe with the south of Europe.
It’s very interesting, I was talking to my energy expert, if you look at the patterns of wind and solar they’re incredibly complementary. The truth is you have more wind in northern Europe in the winter and you have more sun in southern Europe in the summer. So if you had truly interconnected grids and you could move energy from the north to the south and vice versa, this electricity market would function much better than it currently does.
So we know what are the barriers we need to overcome. We will have a European regulation on permitting, which I think is very important, which will give us also more firepower to accelerate permitting. But I would argue that in Greece the real big bottleneck is the grid. We will use additional resources from the REPowerEU facility to invest in our grids. We need to move faster in that direction.
But, of course, we also need to be at the forefront of the new technologies, the new clean-tech technologies; be it storage, pump storage or battery storage, it’s going to become more and more important. And projects that include a storage component need to be prioritized. Carbon capture and storage is going to become important because we’re not going to be able to get rid of fossil fuels in the foreseeable future.
And of course we need to balance that out with short-term support for households and businesses, because there’s real pain now and we’ve been able to do that. We’ve captured excess profits from energy producers. We’re the first to do it in Europe. We implemented an almost sort of neocommunist 90% tax on the super profits. But we use this money to actually support businesses and households. There is a European regulation that will need to be implemented in Greece as well, regarding super profits of refineries, which will give us more fiscal space in 2023.
So, in the short term, we need to make sure we have security supply and reasonable prices. That’s why it’s so important to finally get an agreement -hopefully we’ll have it tomorrow- on what we call the price cap on imported gas into the European Union, but at the same time make the case to accelerate the green transition, not just for economic reasons but also for geopolitical reasons. Because clean energy is not just good for the environment. It’s cheap and no one can take it away from you. You can’t be blackmailed when it comes to your access to wind and sun.
Finally, we also have a role to play as a conduit of possibly even cheaper energy from Africa into Europe, Northern Africa. If you look at Egypt, 5% of Egypt is currently occupied, the remaining 95% is desert. So it’s not very difficult to find space in Egypt to place especially new photovoltaic installations. And that’s why we’re also talking about a big cable that will connect Egypt to Greece and to the European grid, of course, with the adjacent production capacity to produce the electricity that can then be exported.
Nikos Bakatselos: Thank you, Mr. Prime Minister, I think the message was heard loud and clear, particularly by the president and CEO of the electricity distribution network who are sitting over there.
Kyriakos Mitsotakis: I noticed he’s your main sponsor.
Nikos Bakatselos: Well, Prime Minister, I promised you that we will be on time. I think I’ve kept my word.
Kyriakos Mitsotakis: Thank you very much for offering me the opportunity to participate in this discussion.
