GIG: On appointing your new cabinet, you gave a clear agenda and timeline for reforms. How confident are you these will be achieved? Are we on track? What measures are you focusing on to continue rebuilding confidence and credibility in the Greek economy and ultimately boost economic growth?
Mitsotakis:Our government came to office with a clear mandate for deep structural reforms and a cohesive plan that we put in action from day one. To this end, the very first week of the new administration all ministries set their policies and their targets on a six-month basis and an innovative information system has been put in place to facilitate the coordination and supervision of government actions. Clear objectives and timetables are essential conditions for an effective governance. And our strategy is working: in less than six months we have voted through 32 parliamentary bills and implemented numerous reforms. Reforms that range from cutting taxes to securing the viability of the PPC (Public Power Corporation), and from removing obstacles for investments through the omnibus growth and development law to completing the constitutional reform process.
So, yes, we are on track and will continue to do whatever it takes to restore credibility in the Greek economy. Recently, we legislated the so-called Hercules plan, an asset protection scheme – similar to Italy’s – that aims at almost halving the NPEs of the Greek banking sector. We are about to reform the capital markets’ institutional framework with the aim of making it more robust and transparent. We are also bringing a comprehensive pension reform bill containing significant reductions at the level of employer and employee contributions, and more freedom for the self-employed to select their own level of pension insurance.
Our plan is beginning to pay off: since elections came to the forefront, the country’s borrowing costs have fallen significantly and Greece’s 10-year bond yield dipped recently even below Italy’s for the first time since 2008. Rating agencies are upgrading Greece’ long-term sovereign credit rating, and economic sentiment continues to surge despite a global economic slowdown.
If you come to think of it, it makes sense. Greece is one of the few countries in Europe with a stable government focused on reforms, backed by an outright majority in the parliament and the support of the overwhelming majority of the Greek people.
GIG: Your government has announced a series of incentives and tax cuts to encourage investments. What are the government’s investment priorities and in which sectors do you consider that the most attractive investment opportunities reside? What is the one key message you would give to foreign and Greek investors considering investing in Greece?
Mitsotakis:Reducing the tax burden for businesses and people is at the epicentre of our policies as we are aiming at making Greece an attractive destination for investments. This is why we have already cut the corporate tax rate from 28% to 24%, and we will reduce it to 20% in the future. We have decreased the dividend tax rate from 10% to 5%. We are also reducing social security contributions by a total of 5 percentage points (pp) by 2023, of which 0.9pp [will happen] in 2020. We have cut the introductory marginal tax rate from 22% to 9% and the whole income tax curve by 1pp. We introduced a 15% tax rate for stock options and just 5% for newly established companies. We have cut the real estate ENFIA tax by 22% and, we will cut it another 8% in 2020. Also, we recently launched a non-domiciled programme aimed at attracting foreign wealthy citizens to Greece.
But our policies to encourage investment go beyond tax cuts. For example, the new growth and development law allows the certification of investments by private accounting firms. The law also makes business parks more tempting by not requiring separate licensing. We are digitising the government, while also upgrading our labour laws.
As regards the sectors that might attract the most attention from the business community, it is not for me or the government to pinpoint the opportunities but rather to create a business environment that is conducive to new investments. But allow me to give you a hint: there is of course huge potential in sectors that Greece has traditionally a comparative advantage, such as tourism. There are also enormous opportunities in energy as the country transitions from lignite, through natural gas, toward renewable energy sources.
But there are also many domains that have been overlooked and could generate significant growth for Greece and profits for those who grasp the opportunities. Don’t forget that Greece has a highly skilled workforce that can facilitate investments that are based on the knowledge economy. It is no wonder, for instance, that Pfizer chose to establish one of its six innovation centres across the globe in Thessaloniki.
To cut a long story short, my message to the investment community is clear: don’t miss the chance to be part of a successful growth story.
GIG: When do you realistically think Greece’s commitment to a 3.5% primary surplus can be eased and what level are you aiming for to allow you to meet your long-term growth targets?
Mitsotakis:My position on primary surplus targets is well-known. Debt sustainability has already been significantly improved: refinancing the Greek debt is cheaper than expected, and growth prospects have improved. But we have stated that we will first restore the credibility of the government, putting forward an aggressive reform agenda before renegotiating the primary surplus targets. This is already happening. In 2020 the target of 3.5% will be fully respected. From 2021 onward there needs to be a transition towards lower primary surpluses. As we do that, there will also be more fiscal space that will facilitate growth enhancing policies. We are a government dedicated to reform and as our initiatives unfold in 2020, we will discuss with our partners the extent to which we can smooth the 2021 and 2022 targets.
GIG: What actions are you planning to take to stop and reverse the so-called brain drain and turn it into a brain gain? How will you encourage many of Greece’s most talented young professionals who have gone abroad during the crisis years seeking a better future to return?
Mitsotakis:Over the past decade, many young Greeks left the country, seeking a better future abroad. This is invaluable human capital. Ideally, we want to reverse the brain drain and convert it into a brain gain but until that happens, we want to make sure that these young Greeks can actively participate in the Greek public discourse. This is the reason we reached the necessary consensus with other political parties to change the legal framework that will allow them to vote from their countries of residence.
Besides that, our economic policy is focused on providing opportunities for Greece’s youth as well as convincing at least some of those who left abroad during the crisis to come back. It is by no means an easy task. What we seek to achieve is to reduce non-wage labour costs. This means lowering both taxes as well as social security contributions that create a wedge against labour.
Taxes have already been reduced and further cuts will be put in place in the forthcoming years, including an eventual abolition of the so-called ‘solidarity levy’ that burdens primarily the middle class in Greece. Social security contributions will also be reduced by 5 pp until 2023, and additional changes will also remove some of the obstacles that dissuade many young professionals from coming back.
But this is not just about taxes. The government is working on enhancing the connection between academia and industry, investing in science networks and technology parks. We remain focused on strengthening the start-up ecosystem of Greece through the development of incubators, accelerators, and venture funds. We believe that our commitment to the promotion of innovation and to the creation of an investment-friendly environment will contribute substantially to reversing the brain drain, if not converting it into a brain gain.
GIG: You have been very vocal about the need to address the implications of climate change, having expressed your commitment to implement the Paris Agreement and support the achievement of a climate-neutral European Union by 2050. Are you planning to undertake a formal risk assessment with regard to Greece’s exposure to climate change and plan specific mitigation strategies? What is your strategy in this respect?
Mitsotakis:Climate change and sustainable development is no longer an issue of minor importance for the Greek government. When I was invited to speak at the United Nations session on climate change, I made a very clear and ambitious commitment: Greece will quit using lignite for electricity production by 2028. Actually, most of the lignite units will be closed by 2023. Currently, half of Greece’s energy sources needs are from lignite. Thus, the lignite removal in less than a decade is a very ambitious commitment and one that leapfrogs the ambition of many other European countries.
Our intention is to be at the forefront of a green revolution. Renewable energy projects – wind, solar-thermal, biomass, small hydro, geothermal – will play a fundamental role in implementing this ambitious objective. We recently updated and presented our revised National Strategy on Energy and Climate Change. The penetration of renewable energy sources (RES) in electricity production stands today at 30%, and the revised national target for 2030 has been set to 50%, with new RES investments expected to amount to €3.5 billion in the next two years. The aim of decarbonisation of electricity generation will also be served by the promotion of R&D in electricity generation and storage, as well by investment in energy efficiency.
Protecting the environment also means protecting our cultural heritage. Let us not forget how many monuments are also threatened by climate change. This is a key priority for us.
We are willing to do more than our fair share in addressing this challenge. We also believe this is the world’s single most important issue. Let us all join forces, not only at a European but also on global level.
GIG: What, if achieved at the end of your term, would you consider for your government to be a success?
Mitsotakis:As you know, 2021 marks 200 years since the declaration of the Greek Revolution that led to the formation of modern Greece. This celebration provides an excellent opportunity for each citizen and the nation as a whole to reflect upon not just the achievements but also the missteps of the past and look into the future in light of the challenges posed by an ever-changing world.
By 2023, I want Greece to be a different country both compared to the one that faced a 10-year crisis but also compared to the version that led to the crisis: a country that stands strong and confident, at the core of the EU; a country in which its people thrive and take the lead on multiple fronts – in technology, business, and art.
And on a personal note, at the end of my term I wouldn’t want anybody to tell me that I deceived them – that I didn’t live up to promises like others before. That I will consider both a personal and a collective success of my administration.
I believe we have embarked on a sustained boom in Greece, one that is likely to surprise analysts with both its durability and its strength.
Τhe country has turned the page. The feeling that all of us, together, can build the Greece that we deserve. I look forward to witnessing this new Greece and charting this path together.