Has the former pariah of the euro zone turned into a model student? Coming out of an economic crisis which almost excluded it from the European monetary circle in 2008, Greece is proudly raising its head. The rate of growth of its GDP is enough to make the great powers of the continent green with envy. While France should be satisfied with an increase of 1% in 2024, Athens is aiming for 2.3%. Support from Europe, austerity measures and profound reforms have enabled it to stimulate business activity, foreign investment and exports, while reducing public debt and unemployment. At the end of 2023, the Fitch and Standard & Poor’s agencies welcomed this progress by propelling the credit rating of Greek debt into the “Investment” category, the club of the safest borrowing countries. The guarantee of financing at more reasonable rates.
Reappointed following a large victory for his center-right party, New Democracy, during the legislative elections last June, Prime Minister Kyriakos Mitsotakis intends to continue on this path. For its Finance Minister, Kostis Hatzidakis, the key to success lies in the combination of budgetary seriousness and a pro-business policy. He explains it to L’Express.
L’Express: After dark years for the Greek economy, the current trajectory is very encouraging. The recovery even seems to have been faster than expected…
Kostis Hatzidakis: We have had a dramatic decade. Today, I think Greece is proving to be a good surprise for the Eurozone and the European Union. Our economy has recovered quickly over the past four years despite successive crises: pandemic, energy prices and war in Ukraine. We have achieved budgetary consolidation thanks to an unprecedented rate of decline in the debt-to-GDP ratio in the euro zone. We have restored our primary surplus [NDLR : hors paiement des intérêts de la dette] a year earlier than planned, from 2023.
Many European economies are in a slowdown or even recession phase. On the contrary, our trajectory is positive. Last year, we recorded a GDP growth rate three times higher than the European average. Foreign direct investment reached record levels in 2022, and major international companies are now investing in Greece, such as Microsoft, Google, Amazon, Pfizer, JP Morgan, Cisco, etc. The share of exports of goods and services has increased from 38% to 50% of GDP in four years.
At the same time, the unemployment rate fell significantly, from 17.5% to 9.2%. Most rating agencies have upgraded our country’s credit rating to the “Investment grade” category. Our banking system has been cleaned up. For example, the rate of non-performing loans fell sharply, from 49% in June 2017 to 8% in September 2023, and deposits increased from 150 to 200 billion between 2019 and 2023, an increase fueled mainly by households. We will continue to deploy this approach combining fiscal prudence and support for businesses, to promote growth.
What steps are you taking in this direction?
The corporate tax rate fell from 28% to 22%. The tax on dividends was also lowered, from 10% to 5%. We have also decided on tax deductions for “business angels” in order to stimulate innovation. We have reduced labor charges, introduced a special tax rate of 15% on stock options, with the aim of encouraging cooperation between employers and employees, and created a special regime intended to attract non-residents tax, with a 50% income tax exemption for seven years for those who create jobs in Greece. The objective is to convince our compatriots who left abroad several years ago – the brain drain generation – to return to the country. At the same time, we have carried out reforms to modernize the labor market.
What are the drivers of growth today?
The role of tourism is obviously important [NDLR : environ 20 % du PIB] and will remain so. The merchant navy also plays an essential role. But there are other good surprises, with exports relying more and more on the pharmaceutical industry and the agri-food sector. Innovation is also playing an increasing role.
At the beginning of February, Greece put Athens airport on the stock market. In what perspective?
This operation makes it possible to strengthen the Greek stock market with a large company but also to strengthen the airport itself, which needs investments to modernize. Investor interest was found to be 12 times greater than the amount expected to be covered [NDLR : 785 millions d’euros ont été levés]. In total, over the last seven months, asset sales, particularly in the banking sector, and concession agreements have brought in 6 billion euros to the State, which will help reduce Greek debt. It is also a signal to our foreign investors: our economic machine has finally started again.
Reducing tax evasion is one of your priorities. What progress are you making on this front?
They are significant. The so-called “VAT gap” [NDLR : la perte de recettes de TVA due à la fraude ou à l’évasion], calculated by the European Commission, reached 23% in 2018. In 2023, we estimate that it has fallen to 15%. This has an impact on our country’s public finances: reducing this gap brought us half a billion euros in additional revenue. Of course, we are continuing our efforts and for this we are relying heavily on the digitalization of transactions. In December, we adopted measures to combat tax evasion in eleven areas, including the self-employed and the oil sector. The profits we make from this arsenal will make it possible to finance expenses for schools and hospitals. If all citizens pay taxes according to their level of wealth, the system will be fairer. And in the long term, we hope to be able to reduce the tax rate for everyone.
Are these decisions well accepted?
According to polls, the majority of Greeks support the government’s initiatives. For years, self-employed workers paid, on average, less tax than other Greek workers, this was unacceptable. It is not only about modernization but also about social justice.
What are your objectives in terms of public debt?
We announced a debt reduction program. This year, it will go from 160% of GDP to 150%. We are aiming for 140% in 2027. We have other commitments to the European Commission and we will respect them. Of course, we would prefer a more flexible approach. But regardless of these commitments to Europe, we continue to pursue a prudent fiscal policy. For what ? Because the lessons of the past have been learned. We are aware that Greece was living beyond its means and that today, investors and markets closely follow what is decided in our Parliament.
Salaries are one of your priorities. What can be done to improve the purchasing power of Greeks?
We must find the right balance between wages sufficient to meet the needs of workers and their families, and the competitiveness of our businesses. The government has decided to increase the minimum wage – by 9.7% in 2022, then by 9.6% in 2023 – without compromising Greece’s competitiveness. An equivalent increase in the average salary took place between 2019 and 2023, higher than inflation, driven by businesses, without this affecting their competitiveness.
What are your prospects for unemployment, particularly among young people?
The problem concerns all of Europe, not just Greece. In the past, it has been much more acute with us. Things are better, but we still need to improve the match between the education system, the job market and continuing training. As such, we benefit from more than 1 billion euros in funds from Brussels to facilitate professional retraining and skills strengthening, with a focus on the qualifications necessary for the digital and ecological transition.
When will Greece return to its level of prosperity before the 2008 crisis?
We have experienced a violent drop in our GDP per capita. Until 2008, Greece was between 75% and 80% of the European average. This ratio has fallen below 60%. We went back to 68% last year. We must continue the reforms necessary to maintain, or even accelerate, our rate of growth. After restoring a climate of confidence in our economy, the government’s main objective is to regain real convergence with Europe.
This year France welcomes the Olympic Games. With twenty years of hindsight, what remains of the Athens Olympics?
I disagree that the 2004 Olympics were the cause of Greece’s budget crisis. The problem was much larger. We remember these Games, not only for the stadiums and buildings that remain, but also because the Greeks have a special attachment to this event. It is part of our heritage to the world. We are very happy that France is organizing the Games this year, in Paris. I am sure that many Greeks will follow them on TV, or by going there.
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