Pierrakakis: Investments, exports, and tax cuts led to 2% growth

Kyriakos Pierrakakis identified three key catalysts for this transformation: strategic investments, outward-looking growth through exports, and the largest tax relief for families and the regions since the restoration of democracy. Particular emphasis was placed on the European Commission’s historic decision to remove Greece from the list of macroeconomic imbalances—a development that, as the minister and president of the Eurogroup explained, shiels the country’s international credibility and reduces borrowing costs. At the same time, he outlined the framework for managing private debt and curbing inflation, making it clear that the government’s top priority looking ahead to 2030 is the immediate trickle-down of positive macroeconomic indicators to the disposable income of every household.

Nikos Hatzinikolaou: Minister, welcome, and thank you for joining us at our conference. The European Commission recently removed Greece from the list of countries with macroeconomic imbalances. I would like to ask what this means in practical terms for the country. Is it a symbolic recognition, or does it change anything substantial for citizens and businesses?

Kyriakos Pierrakakis: Thank you, Mr. Hatzinikolaou, and thank you for the particularly honorable invitation, Mr. Chairman, Mr. Geroulanos. Let me say that there is certainly a strong element of symbolism, but at the end of the day, what counts are the tangible results. So, what does this decision mean? Less supervision, more trust. Less supervision because we have closed a 16-year cycle during which we went through a deep crisis: memoranda, enhanced surveillance, macroeconomic imbalances now… Greece, therefore, is closing a chapter, and this chapter is marked by greater confidence in the country and its economy. And this translates into lower borrowing costs compared to what we would have had, more investment, more exports… all of this ultimately benefits the people. And it is very important that we build upon the sum of our achievements. It is a very significant development leading up to the next one.

Nikos Hatzinikolaou: The European Commission has also decided on greater flexibility in public spending related to energy. I’d like to ask you what this energy escape clause means in practice? In other words, whether it could provide the opportunity, the possibility, for new support measures for households and businesses during periods of energy strain, such as the current one.

Kyriakos Pierrakakis: The escape clause that was decided upon follows the escape clause for defense. What did that entail? More investment in defense, initially. What exactly is an escape clause? Under the European Union’s new fiscal rules, which have been in effect for some time now, the European Union allows you to spend more money than you have. First point.

Second. What does this specific escape clause concern? It concerns investments in energy. Green investments. It does not, in other words, concern pure support measures that could be returned to the people, as we did, for example, a few weeks ago.

Third observation. Are these investments important? Absolutely. A recent study by the International Monetary Fund: the impact of the economic crisis in Europe and in our country is 12% less severe due to the investments made since 2022. Following Russia’s invasion of Ukraine.

So, being able to invest for the long term and ensuring that whatever you do in the short term aligns—in quotes—with your long-term goal also has a ripple effect on the world. So, let’s not underestimate the impact these investments can have on our economy and social cohesion in general. I would say it’s extremely important. So, we intend to make the most of the opportunities that will be presented to us. And of course, I should add here that the Commission’s response—as we’ve said from the start—depends on the severity of the problem, ever since the crisis in the Middle East began. If the problem deepens, so will the response. In other words, the response will be on a larger scale and have a greater scope. However, at this point in time, this is what we have at our disposal. Obviously, at the Eurogroup meeting we’ll have this week in Luxembourg, we’ll discuss the scope of this specific measure further.

Nikos Hatzinikolaou: The Greek economy recorded growth of approximately 2% in the first quarter of the year. The question is: what factors are driving this growth, and how resilient is it?

Kyriakos Pierrakakis: This growth is stronger in terms of its quality—for example, in terms of investment—than we had expected. In other words, if one looks at the factors driving this growth, we would say it is more investment and more exports relative to imports. Obviously, there is also an increase in consumption. The measures from the Thessaloniki International Fair have also played a positive role, as has the reduction in direct taxes—the largest tax cut since the restoration of democracy—with an emphasis on young people and families, and with the phased elimination of taxes, regarding the ENFIA property tax in the regions, as the President of the Republic also mentioned earlier regarding the spread of growth across the entire country. Let me remind you that 50% of the ENFIA tax in approximately 12,000 settlements is being waived, and the full amount will be waived over time. All of these factors, therefore, taken together, have a positive impact on the growth forecast. And, also, let me remind you here that if we compare with the European average—that is, if we look at where the growth forecast stands across Europe right now—we are growing at more than double the rate. Greece, in other words, has a growth rate more than double that of Europe. Given the data and the current situation. Because across Europe, we are seeing a revision of forecasts. Growth is being revised downward due to the crisis in the Middle East, and inflation is being revised upward. In this context, therefore, it is extremely important that Greece manages to achieve a growth rate more than double that of the rest of Europe. We are building on that.

Nikos Hatzinikolaou: I heard you say once again, essentially, that Greece is transitioning from a model based primarily on consumption to one that relies more on investment and exports. What is the next step the country needs to take by 2030? To live up to the title.

Kyriakos Pierrakakis: To live up to the title… but let me start by asking: what were we saying during the crisis years? That Greece must change its production model. We have achieved a great deal in the meantime. First, there is political stability in the country. That wasn’t a given in the past. Fiscal stability was built on top of political stability. In other words, the fact that Greece currently has twice the growth rate of the EU and, at the same time, high surpluses and—simultaneously—the fastest debt reduction in the world, not just in Europe… if you put all of this together, plus the fact that very soon we will reach a historic low in unemployment—over half a million jobs have been created since 2019… if you put all of this together, it is a very significant achievement. The country’s production model, however, is changing. It hasn’t changed completely yet. Because this is a journey. That is the truth. Let me mention two factors in this regard; you referred to them in your question.

Take investments. Where were we in 2019 in terms of investments? To mention two figures: 11% of GDP. The European average: 21%. Now we’re somewhere between 17% and 18%. So we’re making progress. What does that mean? It means we’re on the right track when it comes to investment. We want more foreign investment. We want more domestic investment. We want more mergers and acquisitions. We want more initiatives so that we can claim that yes, Greece’s production model has now completely changed.

And second, exports. I mentioned earlier that the growth rate compared to last year is higher due to exports. When we entered the crisis in 2009, exports accounted for 20% of GDP. Now they are over 40%. But the European average is 51%, Mr. Hatzinikolaou.

So, what else do we need to see happening? Completing this trajectory in terms of exports and investments, and at the same time, improvements in productivity. At the same time, we need growth in Greek businesses so that, overall, we can position our country to compete internationally where it can—and truly can.

Nikos Hatzinikolaou: I’d like to turn to private debt. You announced an increase in the exemption limit for bank accounts from 1,250 to 1,600 euros. You have taken a series of measures regarding private debt and the protection of primary residences. The question is whether these are sufficient and whether the size of private debt concerns you.

Kyriakos Pierrakakis: Let me say that the set of measures we have taken recently regarding private debt—I will list them—is, I would say, the most comprehensive and extensive package of measures since the crisis. Are we concerned about private debt as a systemic risk? No. As a social reality? Yes. Because behind every debt lies every family, every citizen, and every business that bears that debt. So, naturally and obviously, this concerns us—and it concerns me. Private debt as a percentage of GDP, of course, is lower than the European average.

The European average is 121.4%, and in Greece we are at 94.5%. Non-performing bank loans had reached around 46% of total loans in 2016, if I recall correctly. Now they stand at 3.3%, and last year we had 6.8 billion euros in debt restructuring.

So, what does all this show? It shows that things are moving forward. Have there been changes regarding the measures I mentioned? You referred to the measure I announced in Parliament last Friday, regarding the increase in the threshold for unseizable assets… that is certainly one of the measures, but it is not the only one: 72 installments, lowering the threshold for eligibility for the out-of-court mechanism from 10,000 to 5,000 euros, the transformation of the out-of-court mechanism into an effective and productive tool for protecting primary residences, and the government’s comprehensive policy for protecting primary residences through the agency, which will be activated in the fall and will protect the primary residence of every citizen who settles their debts.

All of this together constitutes a coherent policy. This policy works in society’s favor, and as we have demonstrated, we have both the reflexes and the willingness to continually take additional actions whenever we deem that they serve the broader economic and social reality.

Nikos Hatzinikolaou: I am certain that as long as thousands of our fellow citizens in Athens, Thessaloniki, and about 25 other cities where our program is currently being broadcast are listening to us on Real FM, they will be saying “What are you doing, Hatzinikolaou? You haven’t said a word about inflation, you haven’t said a word about rising prices.” So I’m coming to this issue that concerns Greek households more than anything else— which is the cost of living, and the question is: what will you do to curb inflation, and what is your response to all those who feel that prices continue to rise faster than their incomes?

Kyriakos Pierrakakis: I’ll start by saying that inflation is a very big problem; anyone who doesn’t recognize this is blind. Second, it’s a very big problem across all of Europe. This is what I discuss with all my colleagues every time we meet at various councils, and we share what each country and each of us is doing so that we can learn from one another. What can you do practically? Two things. One is to identify and implement measures that can keep prices in check. We have taken many such measures. From the 15% subsidy on fertilizers to the initiative to subsidize diesel, as well as all the measures concerning coastal shipping and agricultural diesel. These measures are based on this logic and this philosophy. And on the other hand, even more crucially, to boost citizens’ disposable income. In some cases, as you mentioned, you can’t keep up with it.

For specific segments of the population, depending on what they buy and what kind of expenses they have, you need to act in an even more targeted and even faster manner. And I know very well that constantly emphasizing statistics isn’t the answer. But, despite all that, how do statistics help you? They help you understand the scope and scale of the problem.

That is, the minimum wage has risen 46% since 2019, while the corresponding cumulative inflation is somewhere around 20–21% to date. It is a reality. Does this reality mean that all problems have been solved? Not at all. Not even close. But we know that the only way to solve them the only way to move forward and help all those who need the state, the state’s assistance, the state’s support—through measures such as the tax exemption I mentioned earlier at the Thessaloniki International Fair—is for the economy to be strong.

Well, what I can say is that the Prime Minister, the Cabinet, and I, as Minister of Finance, have one first, absolute, and decisive priority: to help those affected by rising costs by boosting their disposable income. With every euro that becomes available. What we will not do, however, is mislead or undermine the economy’s progress. Because in the end, this would be counterproductive precisely for those who need the state’s aid and support.

Nikos Hatzinikolaou: We are seeing positive indicators in the economy. You mentioned some of them in your previous answers. Many of our fellow citizens say they do not yet see these improvements in their daily lives. The question, therefore, remains: how will this growth translate into better wages, higher disposable income, and a better quality of life?

Kyriakos Pierrakakis: I would say that this is precisely what must be the goal of government policy and of our third four-year term. Exactly what you mentioned. The absolute foundation of the link between economic performance and social reality. This is already happening. Things have started to improve. To put it simply, we’ve created half a million new jobs. The impact these people feel in their lives comes from the jobs they’ve found.

That is one example. Similarly, the improvement in disposable income through measures such as those we implemented at the Thessaloniki International Fair (TIF) were measures aimed at private debt. All of these work together and cumulatively. Not all of these have yet achieved the set goal. That is, what we hear about Greece internationally—its achievements, how it is constantly improving its position—must truly reach and permeate every home and every family. But with every day that passes, every week that passes, every month that passes, I will tell you that we are making progress. And that things are improving. Our goal can be none other than what you describe in your question: to truly reach every home.

Nikos Hatzinikolaou: As the current President of the Eurogroup, you have a broader view of the European economy. So I’d like to ask: what do you consider to be the biggest challenge for Europe by 2030? Is it competitiveness vis-à-vis the United States and China, is it defense funding, or is it the demographic problem?

Kyriakos Pierrakakis: Everything you mentioned is fundamental for Europe to truly reach its full potential. To overcome the challenges and seize the opportunities. But if I had to choose one, I would choose the word competitiveness. That is what the Draghi Report and the Letta Report describe. And it is also the obvious one, you know. That is, you can sense this at European summits—that there is a dividend of the obvious. All those things you haven’t done for years—we in Greece had that too. We felt it very distinctly. Kyriakos Mitsotakis and his government, after 2019. All the things you haven’t done for decades give you a dividend of growth, if you do them. Because governments don’t just have to do that. They also have to figure out how to respond to the unpredictable. To the spectrum of the unpredictable.

Europe faces a similar issue. We have 27 largely fragmented markets. For example, even today, across the 27 capital markets. Regarding the Banking Union, the President of the Republic spoke very eloquently earlier about the European challenge. The European challenge regarding capital markets, banks, and innovation is too great for us to ignore. And I believe that the greatest challenge for a generation of politicians in Europe— regardless of political affiliation, is to be able to act together so that we can overcome these obstacles and unleash this potential. It will truly benefit every European society, certainly including the Greek one.

Nikos Hatzinikolaou: I often hear you say that the major challenge for the Greek economy is to increase productivity. If you had to choose one—just one—reform that could substantially change the country’s productivity over the next five years, what would it be and why?

Kyriakos Pierrakakis: My answer won’t surprise you. The completion of digitization using artificial intelligence. And let me explain why. We have seen very clearly what digitization can achieve, whether we’re talking about combating tax evasion and improving surpluses, along with the independence of the AADE, or gov.gr, which has now been in operation for six years and offers over 2,200 reasons not to leave your home or workplace to get things done. This journey is not yet complete. It is an ongoing process. Completing this journey with the use of artificial intelligence leads to something very simple, in my opinion: no time wasted. Don’t go searching for lost time “à la Proust.”

You should always be able to do your work quickly and systematically. Whether this concerns business licensing or the administration of justice. And generally speaking, I would say that if you can’t measure it, you can’t reform it; you can’t even monitor it. So, right now, by leveraging the resources of the Recovery Fund, we are implementing a series of digitization projects across the public sector, whether in the justice sector or the health sector. So, I’m thinking about what we’ll actually be able to do once we have a comprehensive overview of the state’s data. And in terms of service delivery, because that’s right around the corner.

We’re not far from that. Just a few years away from the completion of these projects. So, whether it’s about simplification, or about service delivery, or about being able to make smart and sound decisions, this will make a huge difference, Mr. Hatzinikolaou, and it will do so—even though it sounds technical—in a very simple and everyday way for everyone listening to us.

Nikos Hatzinikolaou: Mr. Minister, Mr. Pierrakakis, I would now ask you to mentally transport yourselves to 2030. To take a journey into the future. So, if we were in 2030 and taking stock of the entire period leading up to that point, what would be the one economic or social outcome that would make you say, with pride, that Greece has truly achieved its goal?

Kyriakos Pierrakakis: I’d cite a qualitative factor rather than an isolated quantitative one: a shift in mindset. This shift in mindset, which I believe is taking place, involves striving not to divide up an ever-shrinking pie of growth, but to continuously produce an ever-larger one. Above all, to have the conviction as a country—you as a country and its people—that you live in a country undergoing reform, with the deep belief that this country can constantly change.

Greece has begun to achieve this. And I believe that if we continue on this path, with even greater speed and with even greater conviction that Greece can do it, we will see results that few of us could have expected earlier. The economic model must have completely changed by 2030.

By 2027, not 2030, Greece will no longer be the most indebted country in Europe. All of this is important. The major qualitative change is Greece as an outward-looking country that produces and opens itself up to the world. And I believe we are on the verge of it.

Nikos Hatzinikolaou: I would like to warmly thank the Minister of National Economy and Finance and President of the Eurogroup.

Kyriakos Pierrakakis: And I thank you as well.