Mitsotakis vows Greece will not bow to EU conditions on Covid aid

Greece’s prime minister has said he will not accept strict EU conditions on the use of coronavirus emergency aid, in a sign of the difficult negotiations ahead for the bloc’s leaders on its proposed €750bn recovery fund.

Kyriakos Mitsotakis told the Financial Times in an interview that he would not countenance a return of the strict and unpopular oversight imposed on his country by the “troika” of EU, European Central Bank and IMF officials during the debt crisis “forcing us to do reforms” even though “there was never really any domestic buy-in”.

“Greeks have matured a lot,” he said. “And we want to do our own reforms.”

Sweden, Finland, Denmark and the Netherlands are opposed to the European Commission’s plans for the recovery fund and are pushing for so-called “conditionality” to be applied to EU money to ensure it is spent to improve competitiveness. German chancellor Angela Merkel who supports the recovery fund has said the money must be used to “future proof” each economy.

© Alexander Beltes/EPA-EFE/Shutterstock

Mr Mitsotakis said a six-monthly review of economic performance carried out by the European Commission was sufficient. “I don’t think any additional strict conditionality is necessary,” he said adding that every southern EU member state regarded it as “politically unacceptable”.

Given its near-economic collapse five years ago and deep cuts to public services under successive austerity programmes, Greece surprised many with its effective handling of coronavirus. As of the beginning of July it had recorded 192 deaths from Covid-19 and 3,432 confirmed cases.

“It was very obvious to me that at some point we needed to go into full lockdown mode. And my political decision was to do it sooner rather than later.”

After a decade of austerity, he could not allow a debilitated health system to be overrun, he said, but was “pleasantly surprised” by a service his centre-right New Democracy party had long wanted to restructure.

It is approaching a year since Mr Mitsotakis won power from the far-left, promising a return to business-friendly reforms to entrench Greece’s recovery from the debt crisis.

Since then, the pandemic has hammered its economy and sharply increased its mountainous debt burden. At the same time he has had to contend with the “aggressive behaviour” of Turkey, which enraged Athens with its assertion of sovereignty over swaths of the eastern Mediterranean and by unleashing another migrant wave into Greece earlier this year.

Mr Mitsotakis conceded it was fortunate the virus erupted during the winter when Greece receives few international visitors, but said he would have put his country into the same lockdown had the pandemic hit at the height of the summer season.

Despite its luck, Greece’s economy could shrink by 10 per cent this year, the biggest contraction anywhere in the EU, according to the European Commission, because of its dependence on tourism.

Greece would only see a “fraction” of the 33m visitors it received last year, Mr Mitsotakis said. But people would make Greece their “top choice” once they understood the preparations they government had made, he said, including randomised testing, diagnostic capacity on even the smaller islands and a doubling of intensive care beds.

Corfu welcomed its first tourists at the end of June © Angelos Tzortzinis/AFP/Getty

Greece’s recovery from the debt crisis was propelled by a surge in tourist numbers and investment in high-end hotels and resorts. A once-booming sector, which accounts for some 20 per cent of GDP, now looks like a liability. Did he have a plan to diversify the economy?

“We have a very, very aggressive reform agenda,” Mr Mitsotakis said. It would focus on “the green transition, on the digital transition” and encouraging investment partly through a privatisation programme.

The economy’s revival will also depend on improving the business climate, cutting bureaucracy, strengthening the rule of law and challenging the rent-seeking behaviour of Greece’s business oligarchs, say analysts.

Mr Mitsotakis, a Harvard-educated former McKinsey consultant, is happy to describe himself as a pro-business “technocrat” in contrast with his firebrand anti-capitalist predecessor Alexis Tsipras, who took Greece to the brink of euro exit in 2016.

But despite the modernising pitch, Mr Mitsotakis’s opponents detect signs of the Greek right’s traditional cosiness with big business interests which tarnished its image for decades. Recent changes to the criminal code set tight time limits for prosecutors probing financial crimes committed during the debt crisis or freezing the assets of suspects.

Mr Mitsotakis dismissed the criticism, saying there was ample time to investigate crimes. “We have been the champions of making sure the rule of law is upheld in Greece,” he said, blaming Mr Tsipras’ administration for interfering in the judicial system.

The coronavirus crisis may have set back Mr Mitsotakis’s ambitions to revive Greece’s economy, but it has helped him turn the page on populism, of which his country was the first victim with Mr Tspiras’s rise to power in 2015, he said.

Out of the crisis has emerged a “renewed sense of trust in politics and institutions and technocrats” that would give his government the legitimacy to pursue its reform agenda.

“Covid did a lot to discredit those who believe that there are easy and simplified solutions to complicated problems, and those who always want to hold somebody else accountable for their own shortcomings,” he said. “This doesn’t work when you have to save lives on a daily basis and I think people realise that, not just in Greece but also at the global level.”