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CNBC Transcript: President of Greece’s New Democracy Party Kyriakos Mitsotakis

The following are excerpts from an interview with CNBC reporter Julia Chatterley and the leader of Greece's New Democracy Party, Kyriakos Mitsotakis in Athens.


JC: Thank you so much for speaking to us today. The government believes we are on the path of a pickup in growth and that 2017 is going to be quite spectacular by eurozone standards. How likely is that in your view?


KM: I don't have much doubt about the ability of the economy to recover. If you take into consideration the policies of this government is implementing. First of all we need to point out that Greece in 2014 was actually in the process of coming out of a very deep recession, As a result of the policies of the current government would be the last two years we've had a recession in 2015. A recession in 2016 and we hope that we will have a mild recovery in 2017. Problem is that this government is implementing the wrong policies as it is implementing the wrong fiscal mix. It is overtaxing the productive economy and it does not engage in meaningful structural reforms that will attract foreign investment so as much as I would like to believe the economy is going to recover. I have serious doubts that it will happen with these types of policies.


JC: I mean I can list a number of the tax hikes that we're seeing corporation tax has gone higher. There's taxes on those taxes VAT heating on the islands have been quite heavily penalized. What would you be doing then would you be reversing those at all?


KM: What we've said from the very beginning is that there is room for a different type of fiscal policy while maintaining you're seeing more short term fiscal targets. We have proposed very specific tax cuts, taxing corporate taxation from 29 to 20 percent and 30 percent cut in property tax. These approximately would cost between 1.3 in 1.4 billion euros. And we have identified spending cuts that are of equivalent size. So what we basically say is that there is room for further spending cuts in Greece.


JC: Where would you be cutting spending?


KM: There is still discretionary spending on public administration side that can be contained. And of course if you look at the periphery of the Greek city, the state controlled enterprises there is a constant overshoot in spending which is tolerated by the current government and I'll tell you why it's tolerated because this this government is still behaving in the all clientelistic manner of the of the many previous governments did…


JC: Your party included because I guess that was the criticism…


KM: Yes that is true to an extent. But I have decided from the moment I was elected that I want to take a very clean break with the past and I was also minister of administrative reform and I implemented a very specific policy when it when it came to making the public administration more efficient. So personally no one can accuse me of engaging in clientelistic tactics, which is exactly what this government is doing.


JC: So basically they're doing the opposite of what they promised to do when they came into power?


KM: You know I think what they're doing is pretending to implement real reforms. There is great dissent within this government even if you look at privatisations: decisions which may be taken at the level of the prime minister are frequently overturned by ministers. We should not forget that this is a government which at heart is a radical leftist group of people. And I don't think that they have fundamentally changed their ideologies. They were forced to sign a third bailout program which back in 2013 was completely unnecessary. They're trying to implement it but they don't believe in these types of reforms. And if you want to send a real signal to the international investment community to the national capital markets that Greece really is changing we need the government that is fully fully committed to these types of reforms. That is the main reason why we're actually asking for an early election. I believe we have the full capacity to win this election. That's at least four of polls indicate. And should this happen Greece will have a competent pro reform government. And I think that this government will be in a position to attract foreign investment and will be in a position to implement policies that could deliver the true growth potential of the economy.


JC: Do you think this bailout allows enough scope for Growth policy in Greece.


KM: Look technically the bailout runs until 2018. And. A key the problem is if this government has committed to maintaining primary surpluses of three and a half percent practically for the next decade. Now I have my serious doubts whether this is actually doable. And I've been making the case that post 2018 we need to reconsider the level of primary surpluses and probably bring them down to 2 percent. 2% is still a very tight fiscal policy but we need a little bit of fiscal space to manoeuvre to further cut taxes not increase spending but to further that taxes and to use these tax cuts to fuel the recovery. A lot of economists agree with this approach so does the governor of the Bank of Greece which the problem is there's this government have the ability to deliver the necessary structural reforms and to keep our side of the bargain because we need to be consistent with the framework of the agreement. And though the bulk of the agreement contains structural reforms we as New Democracy as the main centre right party are fully committed to actually implement these structural reforms. But I think that post 2018 our European creditors need to reconsider the threshold for the primary surplus.


JC: So it's obviously time that is going to be the debt talks as well I mean at present Prime Minister Tsipras is suggesting that he can get further details on these debt talks by the end of the year. From what you're hearing. From my sense I'm not sure that the Germans in particular are going to be willing to deal with this without significantly more progress from the Greek government..


KM: First of all I need to point out that the first review was supposed to be completed back in November 2015, we're now September of 2016. And technically it is not complete. Now that gives you an indication of the pace of performance under this government. Obviously if you want to rebuild the credibility of the country that's probably not a very good idea to move at this at this pace. Now we were all hoping that some good news on their on the debt front will emerge relatively soon. I cannot predict what will happen. Obviously it is in the national interest of the country to obtain some sort of debt relief…


JC: But you can't rely on it…


KM: I very much stress the importance that we need to be fully accountable for our own actions. And there's a huge difference between a party that fundamentally believes in reforms that is pro business by nature, that believes in entrepreneurship and that is friendly to private investment and a government which pretends to reform while, at heart, maintaining its hard core practically neo-Marxist ideology.


JC: Wolfgang Schauble said this week that he believes that the IMF should and will be part of the solution here in Greece going forward. How do you feel now because the last time we spoke he was saying actually you want this to be a European thing and you'd like the IMF separated.


KM: Again I cannot predict what will happen on. On that front. It's probably too early to tell. I mean again I very much insist on us keeping our own commitments. The IMF. Has a. Valid point in making the case for lower primary surpluses. At the same time I fundamentally believe that we have a much greater capacity as a country to reform than the IMF gives us credit. At the end of the day Greece's problem is profoundly political. We need the political leadership and a competent government that believes in these types of reforms. If you look at other bailout countries it is sort of sad that you know after six years Greece is the only country that is still a part of a bailout program. The reason being that back in 2015 we paid the price of populism. We elected a populist government that promised to tear up the memorandum and at some point collided with reality. And unfortunately for for the of the country Reality won. So what we need is in a sense to determine a new narrative. I call that the politics of post populism. I think this is also a relevant discussion for Europe in a way which is also facing populist threats from right and left. And make the case for competent citizens-centred policies. Greece having gone through the experience of populism has understood that populist governments don't normally go anywhere. They may be good at getting elected but they're terrible once in power. So that's why I think the pendulum is swinging back and we said I think it's swinging back in our direction. We already have a very clear lead in that in all polls and this is happening just a year after the election and I think we're putting forward a very pragmatic realistic reform program we're not over promising. We're telling Greeks that this is not going to be an easy path but at least what we're offering them some hope. I hope which is based on the truth rather than on lies


JC: The government's hoping that access to the QE program will unlock key investment in Greece. Do you believe that?


KM: Access to QE is obviously is going to be a positive development but by itself it's not enough. Mr. Tsipras seems to have this theory of the compressed coil, that something miraculously is going to bring back growth. Well it doesn't work that way. You need very specific policies. You need a competent government, you need lower taxes, you need less regulation. You need reforms on all fronts and you need to make a plausible case for why Greece is an attractive investment destination, which by the way I think it is. So that's why I think that with a different government we can really achieve a sustainable growth that will far exceed the growth that we currently see in the Eurozone. But my fundamental belief is that it's not going to happen with this government. Hence we are calling for an election.


JC: There are those that say actually that your party is not ready for an election, that you've got internal divides, that even though you're 5-10 points, depending on which poll you look at, ahead of Syriza at this point, it's still not enough to form a majority government.


KM: Well I don't know if it's enough for a majority government, only time will tell. What I do know is that this party lost a national election by seven percentage points a year ago, elected a new leader last January and now we're ahead between eight and 10 percentage points in the polls. So this is still a pretty big swing and we're building up on this momentum. I think we presented a very credible economic plan A week ago. I think it was well received. We're constantly fine tuning our policy proposals and we're ready, we're ready to both win an election and we are ready to govern.


JC: Do you still feel as though your in a process of rebranding the party, as you said you want to break with the past. I noticed your offices are very different to those that I have been to in the past.


KM: Well. It is always a challenge to take a traditional Party that has played a significant role in modern Greek history and change it towards the better but that was a mandate I received when I was elected the leader of New Democracy. This is what I'm doing. We're bringing in new people, bringing in new ideas and we want to make politics attractive again for young people who unfortunately have turned their back to politics and public service. It's not an easy task. It's a challenge everywhere in Europe, there's a lot of mistrust with politicians everywhere. That's why I fundamentally believe that we need to be brutally honest even if sometimes what we say takes people by surprise. And it does take them by surprise because they are used, especially in Greece, to always listen to politicians over promise and think in terms of you know handing out benefits to people. That's why when I propose specific tax cuts I was also bold enough to identify specific settlement cuts. No politician has ever done that in Greece, they would only tell people the good things but never tell them the hard measures that we need to implement. But I fundamentally believe that we have paid a very heavy price for populism in Greece and we need to leave this this era behind and I think that Mr. Tsiprisa's government is in a sense the last chapter in A book of a post-Junta populism in Greece. We want to be the first chapter of a new book and I think that's exactly what we will do.


JC: Greece has also paid a heavy price over the years for corruption and for vested interest. How do you break that.


KM: By making it clear to everyone that we need to stick to the rule of the law. That may sound simple. And obvious, but it was never the case. Look what's happening now with the government, a government which came into power by making the case that it wants to tackle vested interests and tackle the old oligarchic establishment. It is doing exactly, I wouldn't say the same, even worse things then the previous governments did in a sense in trying to build a new oligarchy, trying to control media, put in people who are friendly to the government, control the number of TV channels in Greece- this is unthinkable. I mean in an era of digital communication here comes the government and says I will only grant out four TV licenses thus creating a technical sort of oligopoly in order to control who gets those media licenses.


JC: So replacing one oligopoly with another…


KM: So that's not the way to go. I mean we're in favor of pluralism, of free competition and at the end of the day it's the market that will decide how many TV channels can survive in Greece and not the government or you know the minister who in charge of this process who happens to be Mr.Tsipras's best friend. No, it doesn't work like that.


JC: This also ties to what we're seeing or what we're hearing about the banking sector too because the central bank has expressed some concerns particularly with regards the Exec committee at Attica Bank I believe I believe. We've subsequently seen a raid on the offices of the wife of the central bank governor. She said that was politically motivated. What do you make of what's going on?


KM: I will not comment publicly on any Judicial investigation, what I will say however is that I have full trust in the governor of the Central Bank of Greece And I think he has done a good job supervising banks. And I think that Attica Bank is a very problematic case that needs to be investigated further and it is no coincidence that one of the people bidding for a TV channel, a person rather friendly to Syriza, happens to be owning a construction company which obtains contracts from the government while at the same time he's also a preferential client of Attica Bank which granted him significant and very very substantial loans in 2015, violating every proper sort of banking procedure. So there's a little interesting triangle there which just unravelled as these things have become public but which has cast A big sort of shade on what's happening on this front.


JC: Are you concerned that the government is pressuring the central bank governor?


KM: We have seen comments by, unofficial and also some official comments, by government officials which in my mind constitute a clear intervention that violates the independence of the central bank of Greece.


JC: So when you hear that the economy minister says they have an excellent relationship and they're working very well together…


KM: Well we've seen other comments which sort of don't necessarily agree with this approach, it is important for the central, for the governor of the Bank of Greece to do his job and to be fully independent and I'm sure that's what he will continue doing.


JC: I want to ask you about the pension system because for me this is also a critical element in the longer term growth of the country and something that the creditors are saying needs to be tackled. What's your plan B for the pension system?


KM: We've had, we've implemented, we've already implemented significant pension reform. Over the past five years and a lot of pensions have actually been reduced and pensioners have paid the price. The fundamental problem of the pension system has to do with the nature of the demographics. With an economy that has an unemployment of 25 percent we don't have enough people that contribute to the pension system so we need to outgrow the problem. And again the only way to actually outgrow the problem is by attracting foreign and domestic investment and creating more jobs, that's why all our emphasis in our programs is placed on job creation. It is quite possible that, you know, in the medium term we will need another Pension Reform, that we need to encourage more private savings, more private investments into private pension plans. All this is still not happening in Greece but the fundamental problem of the system right now is that we don't have enough people who contribute into the system


JC: So more needs to be done to tackle growth as much as anything else?.


KM: I mean we all talk about growth, everyone likes growth but the real question is how do your bring about growth and Greece, What I want to stress, is a country with a significant natural comparative advantage, be it tourism, renewable energy, the agricultural secotr, services ,Education, health even high tech and a highly skilled labor force that is relatively cheap by European standards. Asset prices have gone down significantly as a result of the crises. There is room for further infrastructure investment in Greece, significant room for private public partnerships in areas ranging from desalination to waste management. There's a lot of opportunity here. But the country's held back. By its politics and I happen to believe that it's held back by this, by this specific government which almost pushed the country to the brink of the abyss back in July 2015 and has frankly been unable to regain credibility ever since.



KC: So you're painting a picture here of a country that offers great opportunity potentially to investors out there. But at the same time you're warning of an incompetent government that's potentially corrupt and suspect on a number of different levels. So what is the message to investors here?


KM: The Message to investors is that no matter how you look at it, Greece in the medium or long term is an excellent investment opportunity. We will sort of the politics sooner rather than later. There will be an election. We cannot force an early election. But I am fundamentally optimistic about the medium to long term prospect of this country. We have again, I want to stress, we have very, very talented people and lots of natural competitive advantage- just look at our tourism sector. There's so much investment that the sector requires in terms of upgrading our hotels, building new hotels building second homes, doing it in the right way, in a sustainable way, not over building this beautiful landscape. But we still have not used our cultural heritage to the extent that we can in terms of making Greece a unique destination. Athens is a fantastic city for city breaks, year long and everyone who comes here has a, has a great time. There's so much investment this country can attract, so in the medium to long term I remain very very optimistic about the prospects of the country. And I also have a lot of trust in, in Greek people. We will sort out the domestic politics one way or another.


JC: When do you get your election then?


KM: That I don't know. And I don't have a crystal ball. We're pushing for an election sooner rather than later. And I want to also send a very clear signal that the international investor community should not be afraid of an early election in Greece, every time we hear about an election in Greece we are worried that we'll plunge again into an era of uncertainty. It's not going to happen. I'm very confident that we will win the next elections and I'm confident that Greece will finally get the government it deserves.