To the shared experiences of Greece and Ireland from the economic crisis, to the need to accelerate European reforms, as well as to the challenges created by the energy crisis and the rapid development of Artificial Intelligence, referred the Minister of National Economy and Finance and president of the Eurogroup Kyriakos Pierrakakis.
The minister participated, together with the deputy prime minister (Tánaiste) of the Irish government and Minister for Finance Simon Harris, in the Conference on Small Businesses and Entrepreneurship, organized by the Fine Gael party in Dublin.
The main points of the minister’s remarks, as announced today, follow.
On the energy crisis and price pressures
“If we look at the overall picture, on the one hand we have increased energy prices. This is the dominant issue in Greece and throughout Europe. From what I understand, it is undoubtedly also a major source of concern in Ireland.
This is precisely the concern we also have about heating oil for households, prices at fuel stations, and all related issues.
On the other hand, we see that bond markets and their yields are showing increased volatility. And, needless to say, we both come from countries for which this had a very specific meaning in 2009 and 2010.
Therefore, fiscal and macroeconomic policy are called upon to serve parallel goals.
On the one hand, we must support businesses, families and citizens and, on the other hand, we must not destabilize the macroeconomy, because we learned the hard way what macroeconomic destabilization means.
And this is exactly what we are trying to manage, within the framework of our fiscal capabilities: to support those who are in the greatest need and to design measures that can support families.
We do this within the framework of our budgets. We are both trying to manage the situation by following specific European policies, which should be governed by one principle: that the measures be targeted, temporary and tailored.
No country in Europe fully applies this principle, because some of the measures we take are more horizontal in nature. However, we are trying to support citizens who are in need.
And I believe that it is proof of the successes of the Irish and Greek economies that we have the ability to support citizens.
There are currently other countries in Europe whose fiscal deficits are so high that they cannot offer the same support that you and I, as finance ministers, are planning and trying to direct in the most effective possible way to the citizens who need it, especially under these conditions.
I would like to conclude with a more general observation on energy. The decisions we make in the short term have long-term consequences. What were, for example, the consequences of the oil crisis of the 1970s?
France expanded its production capacity in the field of nuclear energy. Oil exploration in the North Sea was strengthened. The International Energy Agency (IEA) was founded. And at the same time, interest in Soviet energy resources increased.
Four consequences that proved to be long-lasting. They remained for a very long period of time. Therefore, what we do today will have consequences that will endure. And all of us are fully aware of this fact.
The International Monetary Fund (IMF) points out to us that, of course, we must support citizens in the short term. However, the investments we will make in the energy sector, which will sustainably reduce the cost of electricity and overall energy costs for households and businesses, are much more important, even if they need two, three or four years to bear fruit.
Provided, of course, that we are in a position to finance and implement them. This is our central goal. We must remain committed to it. And, at the same time, within the framework of our fiscal capabilities, do everything else as well. And I know that on this issue, our views fully coincide”.
On Greece’s upgrade by Moody’s and Scope Ratings
“Speaking about Greece, we lost 25 percentage points of our GDP during the crisis, which lasted ten years. And that was extremely significant.
Unemployment reached the highest level in our history. Growth collapsed. So, you can imagine the social and political consequences. And last night, amid today’s geopolitical circumstances, Greece’s creditworthiness was upgraded by Moody’s and Scope.
For those in the room who do not know our statistics, our public debt after the pandemic reached 208% of GDP.
Today, however, we are recording the fastest public debt de-escalation in the world. The forecast for this year is that debt will stand at 136.8% of GDP, from about 210% of GDP, while by the end of the decade it will have fallen below 120%.
And this is why we are being continuously upgraded. It is the result of the fiscal prudence we demonstrate.
In one phrase, what we say in Greece is that we are not going to pass the bill on to the next generation. Exactly as you also said, because that is what all previous generations did.
And this is a very strong political message to the markets.
You know, collective traumas create lessons for policymaking.
For Greece, this crisis was a collective trauma. The loss of 25 percentage points of GDP is comparable to that of the Great Depression in the US. The scale of the loss was exactly the same.
Of course, we experienced it under different social conditions. The structure of the Greek family played a different role in maintaining social cohesion, but the cost was enormous.
Therefore, we do not intend to repeat the mistakes of the past.
As the well-known saying goes: those who do not remember the past are condemned to relive it”.
On Ireland, shared experiences and European cooperation
“I believe there is also a strong symbolism here, because, as you mentioned, Ireland previously held the presidency of the Eurogroup through Paschal Donohoe. Now, Greece holds it through me.
This is proof of what our countries had to endure. We both experienced existential crises.
The criticism we receive in Europe is that things are moving forward, but not moving forward fast enough. I want to say this publicly: I want to acknowledge your leading contribution in ECOFIN.
I believe that what you are doing with the package of measures for market integration and supervision (Market Integration and Supervision Package - MISP), seeking its completion through the setting of a particularly demanding political deadline, is the right path.
I also believe that we should follow your example in the other fields of competence and the other items on the agenda, such as the Banking Union. And I consider that this is overall proof of the leading contribution of the Irish presidency of the European Union at this time.
The way we respond to Artificial Intelligence and the challenges it creates is something Europe must address. On all fronts we have made progress, but with delay. At this moment, however, a change in momentum is being observed.
I believe that this change in momentum is due to the change in the conditions Europe is facing. The era of geopolitical innocence is over.
At the same time, I believe that the technological acceleration we are experiencing, especially in the field of Artificial Intelligence, affects us all. I believe that all of us sitting at the same table understand this reality.
I would say that I discern a similarity, at least with Greece, in the following sense:
After we came out of the crisis and had to start growing again, reducing unemployment and creating surpluses instead of deficits, we had to proceed with a series of reforms.
And through these reforms we gained what I would describe as the dividend of the obvious.
It is the other side of the same coin. When you implement something self-evident, which you have not done for a very long time, an obvious development dividend arises, provided you have the political will to carry it out.
So, I believe there is an analogy here with Europe. Whether we are talking about the Capital Markets Union, or banks, or our technological leadership or our technological strategy, or the Energy Union and all these fields, we know what we need to do.
Diagnosis is no longer the problem. What we need is implementation.
What you did with the MISP package is an example of leadership that places emphasis on implementation. All of us must do the same in every individual priority of this reform agenda.
Today’s generation of policymakers must not give priority to one of the five or one of the six reforms.
We must try to advance all six simultaneously, in order to unlock Europe’s full potential.
And, incidentally, this will benefit Ireland, it will benefit Greece, it will benefit all member states. You have demonstrated strength and leadership ability through outward-looking engagement. I believe that this is a lesson from Ireland for Europe as a whole.
We must begin to think in terms of the outward orientation of our economies, in terms of dynamism, without fearing what is coming, but by harnessing the wave of change. And we have every capability to achieve it”.
On Artificial Intelligence and productivity
“Before we talk about Artificial Intelligence, we must look at the overall picture.
Technological innovation has existed since the invention of the wheel and the discovery of fire. In economics, this process was described by Schumpeter with the theory of creative destruction (Schumpeterian creative destruction).
It is a process of exponential evolution that transforms our economies. Something replaces something else. The car replaces horses. Netflix replaces Blockbuster.
In our generation, previous technological innovations needed 10 or 15 years to be implemented and bring about a full transformation in various business sectors.
The problem today, or rather the challenge, is that the innovation taking place through Artificial Intelligence is now evolving within weeks. Therefore, we do not have enough time to absorb it.
We tend to think linearly, while, more generally, in institutional frameworks of fragmented political decision-making, such as that of Europe, decisions are made at a slower pace. So, this is a challenge we have before us.
The benefits we can reap from Artificial Intelligence at the productivity level are enormous. The European Central Bank (ECB) has carried out a series of calculations, as has the IMF.
The ECB estimates that we can achieve additional productivity growth of 0.3% to 0.4% thanks to Artificial Intelligence alone. The IMF predicts that this increase may be even greater at the global level, while the ECB’s calculations concern Europe.
What we must all think about is how we can integrate smart applications of Artificial Intelligence into decision-making processes.
This concerns both businesses and the institutions that formulate policy.
Overall, this discussion cannot be disconnected from technology and digital policy, because at the same time we must digitize the economies of our countries. We have not done so to the extent we should have.
Incidentally, neither have the US done so to the extent they should have.
If you compare Washington with Silicon Valley, these are two different worlds. The innovations being developed on the West Coast have not yet been integrated into the policymaking of the East Coast.
And when we discuss Artificial Intelligence, citizens think about their daily lives and the way they interact with the state.
How do you renew your driver’s license? How do you enroll your child in kindergarten? How do you pay your taxes? These kinds of processes, in many areas of Europe and the world, have still not been fully digitized.
Ireland is an exception. And we also tried to be an exception in this field over the last seven years. We have advanced to a very great extent in our digitization.
However, we must do both.
And if we manage to advance simultaneously in digitization and in the use of Artificial Intelligence, we can unlock enormous possibilities.
I will give you an example from Greece.
Artificial Intelligence can prove extremely useful in combating tax evasion. We can analyze taxpayers’ data and identify deviations from expected tax behavior.
We have already managed to do this to a very great extent by using digital means. Revenue losses from VAT in Greece stood at 30%. Today they are below 9%. But we can do more. We can always improve the way we monitor and record our expenditures.
Artificial Intelligence can also have extremely important applications in the education system, offering personalized education for every child. It can contribute significantly to this. Therefore, we must move forward on both fronts.
To summarize, in my view, we must fully harness the positive possibilities offered by Artificial Intelligence. So, we need an action plan. And this plan must concern every ministry, every organization and every business.
At the same time, it must also include the management of potential risks. Because, in reality, this technology also creates significant challenges.
Let us consider Anthropic’s Mythos. If we have a technology that can essentially breach any system, then a very major challenge arises as to how we can effectively protect ourselves from it.
And beyond strengthening the capabilities of our states in the field of cybersecurity, something we are all trying to do, without entering here into a public discussion about the relevant legal framework, a degree of institutional coordination at the global level is also required. It is necessary for you and me to speak with our colleagues from all over the world, in order to coordinate solutions at the governance level.
And we are called upon to do this at a time when multilateral cooperation is at a low level. Therefore, the challenge is particularly significant”.