Greece’s Mitsotakis Points to Reforms in Bid for Fiscal Leeway
Greece’s new prime minister is pledging to further improve the investment climate in his country as he attempts to turn the page on the crisis era and gain some breathing space on fiscal targets.
Kyriakos Mitsotakis, who took over as premier in early July, is trying to reshape investor sentiment on the Greek economy and convince creditors he can push ahead with reforms and privatization while seeking some leeway on previously agreed fiscal goals.
In an interview with Bloomberg Television in New York, the prime minister said he’s confident the country will meet its budget targets for next year and called for a loosening of Europe’s “very tight” fiscal rules.
“These primary surpluses are a relic of the past, they were put in place when there was no trust in Greece,” the premier said. “We need to rethink what they mean for Greece.”
Convincing European institutions to soften Greece’s target of a primary surplus of 3.5% of gross domestic product from 2021 won’t be easy. The Greek government will first have to show representatives of the country’s creditors, who ended their mission to Athens on Wednesday, that targets can be met in a credible way, particularly following recent government measures including tax breaks.
Mitsotakis is convinced the proof is there. “Something is really changing in Greece,” he said. “We’ve made a good start, my government has a strong mandate and investor sentiment is moving in the right direction.”
Some of the initial signs are indeed promising. Mitsotakis’s administration has moved forward with the long-stalled Hellinikon project, which envisages transforming a disused airport site more than twice the size of New York’s Central Park into a massive complex including luxury hotels, casinos, marinas and apartments.
To kick-start an economy that has lost some 25% of its output over the last decade, though, businesses and households will need better access to credit. The finance ministry is currently waiting for European Commission approval of a plan to help lenders reduce bad loans by as much as 30 billion euros ($33 billion dollars) in a bid to help boost lending.
The new government has “an asset protection scheme in place that will improve balance sheets and allow banks to extend credit,” Mitsotakis said.
The administration also wants to revamp state-owned Public Power Corporation, which is facing huge losses and liquidity issues, partly by pushing the company more definitively into the renewable energy sector.
The attention to clean generation comes as part of a new national strategy for energy and climate change. Under the plan, Greece will look to phase out lignite power plants by 2028 and ban single-usage plastics by the end of 2021.
Arrivals to the country’s western Aegean islands have more than doubled compared to last year, as Turkish President Recep Tayyip Erdogan has threatened to “open the door” to Europe for the millions of refugees in his country unless he gets more help from the European Union.
While Greece wants to make “an honest restart and improve” the state of relations with its neighbor, Ankara “can do more to implement the EU- Turkey agreement -- I think it’s a win-win, provided it’s implemented by both sides,” Mitsotakis said.
©2019 Bloomberg L.P.