NEW YORK – Greek Prime Minister Kyriakos Mistotakis on the sidelines of the Bloomberg Global Business Forum 2019 in New York spoke with journalist Erik Schatzker in a live Bloomberg TV interview on September 25. The full transcript of the interview follows:
Erik Schatzker: Your election has restored optimism and brought confidence to Greece in a way it hasn’t seen in many years. Now of course as the Prime Minister you have to deliver on your promises, your promises of growth, your promises of jobs, your promises of foreign investment. You’ve been meeting with world leaders here in New York City you’ve been meeting with CEOs of companies, you’ve been meeting with bankers. Anything to report?
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Posted by Kyriakos Mitsotakis on Wednesday, September 25, 2019
PM Kyriakos Mitsotakis: Well, first of all I’d like to point out that as you mentioned something has really changed in Greece since the elections. I think we made a good start. My government has a very strong mandate to deliver growth which is the real outstanding issue that we are facing in Greece after 10 years of crisis. Investor sentiment is clearly moving in the right direction. Our yields are going down which is a very positive development. And overall I think there is a sense of optimism around Greece which allows us to push forward with our agenda in a much more aggressive manner. We have a very clear plan. We want to reduce taxes. We want to make it easier for businesses to invest. Greek businesses but also foreign businesses, we want to take care of our banking problem. And my goal is very simple. I want to make Greece the success story of the eurozone for the next three to four years.
ES: Debt has been a problem for Greece in many respects. Is there any way for you to take advantage of those low yields you described?
KM: Well first of all technically we have a high debt to GDP ratio. But if you look at gross financing needs over the next decade, they are relatively low. Greece is returning to the markets and borrowing again at interest rates that are much more reasonable. We intend to repay our IMF loans back as soon as possible. And we have already filed the necessary documentation. These are very expensive loans. So our debt is going to look much more reasonable taking advantage of the lower interest rates but also our debt is going to be much more sustainable if we manage to restore high growth rates.
ES: No question. I know Mr. Prime Minister you feel straight jacketed by that three and a half percent (3,5%) primary surplus the previous got previous government agreed through 2022. Have you talked to your creditors about bringing that down to a more realistic level in the near term?
KM: Of course we have. And I’ve made the case from the very beginning that these primary surpluses are essentially a relic of the past. They were put in place at a time when there was little trust in Greece. Now I think we are moving very quickly to restore trust not just in the economy but also in the government and again as I told you before, in a low interest environment we need to rethink those high primary surpluses and what they mean for our debt sustainability. But I’ve also said that I first want to restore the credibility of the government first pushed through with an aggressive reform agenda and discuss reducing the primary surpluses for 2021, not necessarily for next year. We feel confident that we can meet our obligations for 2020. We will be submitting our budget within the next couple of weeks, we are in discussions with the institutions as we speak but we feel very comfortable that we can find a compromise that will not endanger our fiscal sustainability, allow us to push forward with our tax reduction agenda and certainly keep alive the discussion regarding the reduction of the primary surplus, as I sense there is more momentum supporting our arguments.
ES: You mentioned the important role that banks play in the Greek economy. You’re already helping the banking system with state guarantees for some of their bad loans, but they remain crippled by their balance sheets remain somewhat crippled by the amount of bad debt that they have. Is there anything else that your government can do such that Greek banks will start to pump more credit upon the economy?
KM: First of all. You’re right to point out that we have very quickly moved towards putting in place an asset protection scheme that will allow the banks to offload a large number of NPL and NPE and that will of course improve their balance sheets and allow them to expand credit and provide funds to the real economy. But as the business climate improves, as asset prices improve that will also help the balance sheets of the bank. So, I consider this intervention to be important. We will legislate along those lines and make sure that we tie up all the loose ends within the next couple of months. And the instrument is gonna be in place very very quickly. So we’ve moved very aggressively in addressing this issue, because we recognize from the beginning that we need the three pillar strategy to restore growth. We need a different fiscal policy, lower taxes, a little bit of fiscal space as we’ve discussed. We need structural reforms that will make Greece much more attractive for foreign capital, but also for domestic capital to invest. And we need to address the banking problem. If we address all these three issues simultaneously as my government intends to do, I see no reason whatsoever why we cannot restore healthy growth in Greece and send a clear signal, not just to the international capital, but to the Greek society that we let the crisis behind us.
ES: On the subject of fiscal space did the pleas from Italy and now the challenges that Germany is beginning to confront add momentum to what you’re trying to achieve?
KM: I think so. Obviously it’s not up to me to sort of recommend what Germany’s fiscal policy should look like, but it is from one perspective interesting that Greece is currently a country where economic sentiment is moving upwards whereas Germany is having other types of issues. And I certainly believe that in these times of negative interest rates when monetary policy seems to have reached its limits, that we need to rethink some of the very tight fiscal rules that have been put in place for eurozone countries. Obviously we are at a different level of tightness and that is why I make the case that reducing the primary surpluses from 3,5% to 2,5% or even 2% is certainly not endangering our fiscal discipline. If anything it will allow us to repay our debt back without being constrained by a low growth environment.
ES: Do you think a 2% primary surplus is a reasonable target for 2021?
KM: I’m not going to make any estimates as to how quickly we will reduce the primary surpluses, but what I will say is that the fundamental logic of what we are proposing a domestically owned reform agenda that is going to make the Greek economy more competitive, more extroverted, more innovative was always what we were striving to achieve. I want to make this a domestic agenda. I want to have the full ownership of this reform agenda. And yes, I think that once we demonstrate that we’re committed in delivering real reforms it is only reasonable to ask for more fiscal space, but we are a new government with a strong mandate. We defeated the populists from the left in the ballot box. We did it by putting forward moderate proposals. We intend to govern from the center. We want to own the centrist agenda. And I think we’re sort of ushering in a new era for the country vis a vis the politics, but also the economy.
ES: One sure way to attract foreign capital is through privatizations. How long until you do something with Hellenic petroleum?
KM: Well, we started with the Athens airport. The process has already started. We’re selling 30% of the Athens airport. We’re looking into Hellenic petroleum and we’re contemplating all our options. It’s a question of price. We want to make sure that if we do sell we sell at a good price. But there is a very aggressive asset disposal scheme put forward by our privatization agency that includes the highways, ports… There will be privatization assets related to the energy sector which will be offered to investors very soon.
ES: Are you speaking of the power networks or specifically of the public power corporation?
KM: I’m speaking of splitting, carving out the networks from the Public Power Corporation which needs capital to invest in renewables. I’ve made a very clear commitment that I want to decarbonize by 2028 and shut down all our lignite plants by then. And the public corporation needs to move into renewables.
ES: One quick question I have to ask you before we finish. You’ve met with President Erdogan of Turkey here in New York. Have you reached any agreement with him on what’s going to happen to the migrants, refugees that he is threatening to release effectively into Europe. Many of those will surely cross the Aegean into Greece.
KM: I had a good meeting with President Erdogan as my first meeting in my new capacity as prime minister. We want to make up an honest restart and improve the state of Greek-Turkish relations. Of course I raised the issue of migrants coming across the Aegean. We’ve seen increased numbers of migrants and I’m sure that Turkey can do more in implementing the EU -Turkey agreement, so that we are not faced with a situation that we currently have to address on our islands. So I surely raised the question, I think the EU-Turkey agreement is a win -win agreement provided it’s implemented on all sides. And of course that it is sensible, as it was sensible, to make sure that the EU supports Turkey with funds, as Turkey is managing the complicated situation on its own territory.