Wednesday, August 04 2021
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The Economist’s 24th Roundtable with the Government of Greece

This year’s conference took place under the special conditions of covid-19, with strict limits on the numbers in the room and wearing of masks. Despite this, a top-class collection of speakers took part, maintaining the tradition of this high-profile annual event

 In a keynote interview the prime minister, Kyriakos Mitsotakis, reflected on a tumultuous 14 months in government, marked by a covid-induced recession, migration crises (most recently the fire at the Moria refugee camp) and heightened tensions with Turkey in the eastern Mediterranean, but also notable for a determined programme of economic reforms in Greece. Mr Mitsotakis expressed confidence on the key issues facing the country. Migration needed a European solution, he said, and the European Union had shown on the economic front—by coming up with the precedent-setting Next Generation EU recovery package—that it was capable of going beyond what once seemed possible. Funds available to Greece under the package mean the “investment gap” will no longer be such an issue and could help to accelerate Greece’s recovery. With Turkey, channels of communication between the governments are open but Mr Mitsotakis expressed concern about the extension of its energy-drill ship Yavuz off Cyprus“Turkey has a choice,” the prime minister said: “Engage with Greece and Europe in a constructive way or continue its unilateral actions and face consequences.” Looking ahead to 2021, Mr Mitsotakis said the bicentenary of independence offers a chance to “rebrand” Greece

• The main opposition leader, Alexis Tsipras, also talked about rebranding—in his case of his party rather than the country. The party has been renamed Syriza Progressive Alliance, and on the day Mr Tsipras spoke at the Roundtable some of its leadership posts were reshuffled and a new logo for the party was unveiledMr Tsipras stressed that the pandemic should encourage outside-the-box thinking

 The economic background is dire, with the worst recession in a century. According to The Economist Intelligence Unit’s forecast, presented by the Roundtable’s co-chair, Joan Hoeythe global economy will shrink by 5.2% this year. China will be one of the few economies to experience growth—albeit of only 1.7%, extremely modest by China’s standards. The euro zone’s economy will contract by 8.6% (the sharpest fall of any region), with Greece expected to experience a fall of 8.5% of GDP, wiping out all the gains since 2017. A sharp resurgence of the virus, political instability and geopolitical tensions could make the outlook even worse

 The Roundtable heard from a number of distinguished European leaders. Former French president François Hollande said that, after an initially disjointed response, Europe had mustered a spirit of solidarity with a major innovation of a joint fund: what seemed impossible yesterday became reality. Divisions remain profound on key issuesover transatlantic relations, migration, relations with Russia as well as with Turkey, and over matters of budgetary burden-sharing and fiscal harmonisation. A big question for the future is whether the EU27 proceeds together with a grand common vision, or whether (as Mr Hollande has envisaged) a core group goes ahead faster, without the constraints of 27-country consensus

 

 Germany’s former federal foreign ministerSigmar Gabriel, stressed the role of the pandemic as an accelerator of existing trends, including the shift from a Euro-Atlantic centre of gravity for the world’s value creation to an Indo-Pacific one. Whoever is the next US president will be more focused on the Pacific and less on Europe. This is uncomfortable for Europeans, who have (with the exception of France and the UK) largely been content to be the last geopolitical vegetarians in a world of carnivores (with Germany a vegan). Europe should not sit back while others develop World Order 3.0, Mr Gabriel said; it should, for example, work out how to balance China rather than attempt to hold it back. Despite the spread of a “my-nation-first virus”, as he put it, more co-operation is needed. With respect to Turkey, Mr Gabriel advocated “strategic patience”, not least because Turkey’s NATO membership stops it becoming a nuclear power

 

 Matteo Renzi, a former prime minister of Italy, said that in the face of divisions, the EU had “performed a miracle” by agreeing the recovery fund and “the three Ms” (Angela Merkel, Emmanuel Macron and Charles Michel) deserved all the credit. He worried however that a lack of vision and boldness by member states would result in missed opportunities, including in his own country, which is prone to political instability. He added that NATO also lacked vision and is “brain dead”, agreeing with Mr Macron’s characterisation of the Western military alliance in an Economist interview. On migration, Mr Renzi said that it was high time for the EU to dump the Dublin regulation on asylum seekers, which has left Greece and Italy to manage the migrant influx virtually alone, and for the bloc as a whole to share the responsibility

 

 Greece’s finance minister, Christos Staikouras, stressed the strength of the country’s cash reserves, which, at well above €30bn, are now much higher than at the start of the crisis, thanks to a series of international bond issues so far this year. Non-performing loans have come down from a peak of €106bn to €61bn. Mr Staikouras also emphasised the speeding up of reforms and the opportunity Greece has because of the €72bn of European funds that it will be able to draw on in 2021-27. This, he said, gives Greece the chance not just to recover but to achieve a strong and sustainable upward trajectory

 

• Several speakers were encouraged by the country’s strategic plans, in terms of the focus on removing barriers to long-term growth and investment. There are ambitious plans, for example, to streamline the justice system, bankruptcy laws and the business environment for foreign direct investment. Klaus Regling, managing director of the ESM, expected that there would be a continued waiver of deficit targets in 2021. He welcomed the growth strategy for Greece outlined in the Pissarides report and said the EU money being made available to Greece opens a unique opportunity. But he and other speakers from the European Commission and the European Central Bank highlighted the key challenge of the absorptive capacity of the Greek economy and the practical implementation of the reforms, to ensure that the available resources are used efficiently. In the past actual public-investment spending has often fallen short of grander public-investment plans

 

 A session on Greece and the financial markets addressed the risks of a sovereign-debt crisis in southern Europe as a result of the inevitable huge increase in public debt levels in countries such as Greece and Italy in 2020. George Chouliarakis, who played a key role as alternate finance minister during the 2015 battle over the future of Greece's bail-out programme, said that the markets are relaxed because of the unprecedented injection of liquidity by the ECB and the availability of large sums under the EU recovery fund. Greece also has two unique assets that mitigate any short-term financing risk: its debt/GDP ratio is very high but its financing needs are very low because of generous debt-relief measures, including extremely long maturities agreed with the EU institutions. However, other speakers emphasised the importance of maintaining positive sentiment in face of difficulties ahead by keeping on the reform track, improving institutional capacityboosting the country's growth potential and fixing problems in the banking sector

 

• According to the Roundtable’s session on health, led by minister of health Vassilis KikiliasGreece responded with impressive speed to covid-19, but the pandemic has highlighted challenges for the health system and the pharmaceutical industry. Greece’s consumption of generic medicines, for example, is the lowest in Europe, raising the cost for patients. There is an opportunity for Greece to benefit from a Europe-wide push to manufacture more of the medicines consumed closer to home: currently 62% of the active substances used in medicines in Europe are made in China and India. The minister of digital governance, Kyriakos Pierrakakisalso noted that the pandemic had been a catalyst for changing the relationship between the state administration and Greek citizens, bringing the two closer through digitalisation, which was another success story for Greece in 2020

 

 A session on young entrepreneurs heard from two award-winning students, in a powerful reminder of the talent Greece can draw on to tackle tomorrow’s problems. And a session on female entrepreneurship discussed the challenges facing Greek and Cypriot women as well as compelling evidence from survey data internationally that female managers consistently out-perform their male peers in many sectors. Despite women having achieved formal equality in law decades ago, cultural and social barriers to women entrepreneurs remain formidable in Cyprus and Greece and women are under-represented as managers in most enterprises

 

 There was optimism on the Western Balkans, in a panel involving two prime ministers, Edi Rama of Albania and Zoran Zaev of North Macedonia, as well as two former foreign ministers of Greece, Dora Bakoyannis and George Katrougkalos. Despite a period in which the EU, suffering from enlargement fatigue, seemed to forget about the Western Balkans, the region is on a positive track towards EU membership and integration. North Macedonia, now NATO’s 30th member, is using what Mr Zaev called the “honeymoon period” following the Prespes agreement to expand trade and attract investment, and is now jointly with Greece addressing issues of history books, double taxation and the use of brand names in products. Greek leadership in supporting a region of 30m people has been crucial. Sticky points remain, of course—not least in the failure to conclude a maritime-borders agreement between Albania and Greece: Mr Rama rejected the suggestion that Turkey had played a role in obstructing this

 

• Amid the heightened tensions over the eastern Mediterranean, Greece’s foreign minister, Nikos Dendiassaid that there had in recent days been a positive sign from Turkey in the return of the Oruc Reis survey vessel to Antalya. He hoped that Turkey would see that resuming its “gunboat diplomacy” would not be to its benefit. Given the recent signing of a maritime-borders accord between Greece and Egypt, the presence on the panel of Egypt’s foreign minister, Sameh Shoukry, reflected the growing web of agreements emerging between countries in the region, also involving Cyprus, Jordan, Israel, the UAE, France and Italy (but with the notable absence, for now, of Turkey)

 

• The American ambassador to Greece, Geoffrey Pyatt, highlighted a long list of deepening defence projects between the United States and Greece in the 14 months since the previous Roundtable, to emphasise how engaged the US remains in the region. That is partly because of the region’s perceived importance for great-power competition, both with Russia (through its palpable military presence) and with China (which has significant investments), and the way to counter concerns about their influence is to deepen American involvement in the region

 

 This theme was echoed by former US assistant secretary of state for European and Eurasian affairs, Wess Mitchellwho said that the US was no longer the uncontested hegemon in the region. Commenting on recent tensions in the eastern Mediterranean, he said that the difference between Turkey and its adversaries was the former’s willingness to take risks as it seeks to extend its influence in the region. However, the US is committed to the region and has been working hard, if not always visibly, to assert itself, defend its allies and counter the threat from insurgent powers

 

• Greece’s energy minister, Kostis Hatzidakis, outlined policies in three key areas: deregulation of the energy market, to reduce the high prices Greece pays for its energy (the highest wholesale prices in Europe), including a raft of imminent privatisations; promotion of green energy, a priority for Greece as well as for Europe more broadly (and explored in detail in a separate panel devoted to the topic); and international energy co-operation, to improve Greece’s geopolitical position by diversifying its energy sources

 

• Development minister Adonis Georgiades claimed progress towards the aim of making Greece Europe’s most business-friendly country and the most business-friendly Greece of all time. Greece is moving up global rankings of competitiveness; the handling of the covid-19 crisis has enhanced the country’s credibility; and the long-delayed €8bn Hellinikon project, emblematic of Greek failure to get serious about privatisation, is finally under way. “We will amaze you,” predicted Mr Georgiades. A similar confidence pervaded a panel on inward direct investment. FDI into Greece has risen, along with signs of renewed interest among potential foreign investors, but it remains very low by European standards. Kostas Karamanlis, minister of infrastructure and transport, said that infrastructure development was one of the three main pillars for boosting GDP and outlined ambitious plans and projects for Greece's ports, roads and railways and for the country's inter-connections with the western Balkans. The large funds available from the EU in coming years would be a game-changer

 

 Daniel Franklin of The Economist, the Roundtable’s co-chair, concluded that, despite a generally upbeat assessment of Greece’s prospects, a lot of work lies ahead for the country to make the most of the opportunities and to fulfil its potential. The landmark 25th annual Roundtable in 2021 will be an occasion to check up on that progress