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CNBC Interview with Greece's Opposition Leader, Kyriakos Mitsotakis


Below are excerpts from a CNBC interview with the President of Greece's New Democracy Party, and the country's Leader of the Opposition Kyriakos Mitsotakis, and CNBC's Silvia Amaro.

Q1: If you look at the latest opinion polls it seems that you're well placed to become the next prime minister. If indeed that's the case, what are going to be your priorities?

A1: The next election is going to be about the economy, about jobs and about disposable income. So my number one priority is to restore the Greek economy to an aggressive growth path. If you look at what happened over the past 10 years Greek people have suffered a lot. They've suffered as a result of failed policies of the previous governments. They've also suffered as a result of the fact that the current government put us in an unnecessary position of requesting a third bailout programme back in August 2015 which has essentially prolonged the crisis for way too long. And I think it's about time to send a very clear signal to the Greek population and also to the international markets that we are committed to an aggressive reform programme that we want to unleash the forces of entrepreneurship in Greece, we want to support private investment while at the same time obtaining social cohesion. This is my number one priority and this is a platform that I will present to the Greek people in the upcoming election

Q2: I'll go back to some of the points you've just raised but if we look at what happened in 2015, what the current government would argue is that it wasn't really up to the current government to actually ask for a third bailout program. In the meantime, they have changed for instance, the finance minister…

A2: Look, we all know what happened during the first six months of 2015. It was very, very painful for the country. This Government brought down the previous government and they promised that it would tear up the programmes and would end austerity. The end result was an unnecessary confrontation with our creditors, a completely unnecessary referendum, a spectacular u-turn back in July 2015. And the third programme, which according to estimates by the European institutions cost us in excess of 100 billion euros. Greece should have exited the bailout programs in 2015. We're in 2019. We have technically exited the third bailout program but full market access has not been restored. So, we're still in a crisis and we are looking for the right government and the right policies to put an end to this ten year crisis.

Q3: What would you have done different in 2015 if you were in Tsipras' role?

A3: The first thing that any reasonable prime minister would have done, he would not have appointed Mr. Varoufakis as Minister of Finance. Certainly would not have over-promised that he would rip apart the memorandum and certainly would not have engaged in a populist bonanza which is exactly what Mr. Tsipras did back in 2014 where he essentially deceived the Greek people, and got elected by promising things he couldn't never deliver. Not only that, he did the exact opposite when he was forced by the circumstances to make a spectacular u-turn. If you look at the policies that were implemented over the past four years post 2015, these are not really growth oriented policies. You have a government that is systematically overtaxing the middle class only to create larger primary surpluses that aren't actually necessary, to return part of those primary surpluses in the form of handouts to specific electoral groups that Mr Tsipras is interested in. That is not a sustainable strategy to grow the economy. And I think Greece overall has paid the price. We are the only country that entered the bailout programme, that actually requested three bailout programmes, and that is still not able to borrow from the international capital markets at reasonable interest rates.

Q4: Let's go back to your programme for instance, if you become Prime Minister, what is the number one measure that you will seek to implement and how soon will you put it forward?

A4: An aggressive and comprehensive tax reform.

Q5: As soon as you enter government?

A5: This is something we can deliver within the first month. We will also be sending a very clear signal to the capital markets that we mean business. I have committed myself to be able to take Greece back to investment grade within 18 months. So, we will be very systematic and very focused in delivering the changes that the country actually needs. We need to start reducing marginal tax rates within the scope of the fiscal targets that have currently been addressed. I will return to this this question in a bit. But everybody recognizes that the real economy today is overtaxed. So, in a fiscally neutral way we need to start lowering tax rates but we also need to use our tax policy as an incentive to attract investment so we're looking at a more favorable treatment for capital investment in the country, we're looking at a more favorable treatment for R&D investment…we're looking to make Greece an attractive destination for people who want to invest in Greek real estate. I have big belief in the Greek real estate market. We live in a lovely country and we need to make investing in Greek real estate more attractive. So, number one priority would be a comprehensive tax reform which we could put in place very, very quickly. We've practically done all of the ground work and our number two priority would be a broad intervention in terms of improving the business climate and making, doing business in Greece overall easier and more attractive to foreign but also to domestic investors.

Q6: Looking at the opinion polls even though we are in a good place to become the next prime minister it seems that you might not get a parliamentary majority. Does that worry you and how can you overcome that?

A6: First of all I look at the opinion polls with interest, I do not consider any election to be a foregone conclusion. 2019 is going to be an electoral year we have national elections we have European elections we have regional elections we have municipal elections - a very important year for Greece and I think a year where we will have a big political change but we know we have to work very hard not only to convince people that Mr. Tsipras has done a poor job. People know that -- what we need to do is to convince more people that we are actually able to make their lives better. And I think we have the policy programme in place. We need to articulate it in an even more convincing manner. And I believe that we will create a broader momentum for a big electoral victory. What I have said is that even if I win with an absolute majority I will seek to build a broader political coalition, the day after. A simple reason being that we need to make important changes the day after. And the bigger the political coalition to support these changes the better it's going to be for us for the country. But I think there is a broader trend in Greek society that is supportive of our policy proposals but also of our ideas and of ideology. There's a broader trend in Greece away from this concept of a big state of a clientelistic state that will always be able to accommodate people by hiring them with the public administration. There's a greater belief in the value of entrepreneurship. There's a greater belief in the value of companies that behave responsibly towards their employees, towards the environment. All these are sort of core pillars of our of our political program. So, I think what we proposed to the Greek society is very much in line with what Greek society wants to hear. After 10 years of crisis what they certainly do not want to hear is another extravaganza of fake promises that we will not be able to deliver the day after. I made it very, very clear from the day I was elected leader that I have the idea that I want to break with a sort of a populist tradition of Greek politics. We are making commitments that we can actually deliver the day after. And I think that the Greek society is mature enough to appreciate that.

Q7: Let's talk about the budget primary surplus. Greece has actually overshot its targets from the budget surplus. Isn't this sending a positive message?

A7: Well I think it's sending the wrong message in the sense that we have gone overboard with austerity. The reason why we have overshot the targets was because the government over-taxed the middle class and the reason why the government wanted to create a bigger surplus than was actually requested was because we wanted to use this primary surplus to distribute it in the form of electoral handouts. This is the wrong policy. We should stick to our targets and if there is fiscal space we should reduce taxes. It's a simple, as simple as that. By the way, reducing taxes is also going to improve tax compliance in an economy that has sort of a tendency to move towards tax evasion. Now Mr Tsipras has agreed to primary surpluses of 3.5% until 2022. I think this is a very, very strict, very strict target. I've said from the beginning that I respect the agreements made by the current government but I've also told my European partners that should we be able to deliver real reforms, we should be rewarded with smaller primary surpluses. At least in 2021 and 2022. 2020, you know what the budget is too close to probably be able to make change for 2020. But what I ask is very specific -- give me 12 months to convince our creditors, the international capital markets that we actually mean business. That Greece can actually change and we take full ownership of the reform agenda that we don't just the reforms because they are in a programme and somebody is telling us to do them because we actually believe in the reforms that we have proposed. They will promote growth but they're also socially responsible. So, should this happen, let's have a discussion again 12 months later to renegotiate the primary surpluses.

Q8: After your first year in office, you will want to renegotiate the 3.5% target?

A8: I will in good faith. I will talk to my European creditors

Q9: How do you intend to approach those discussions?

A9: In good faith, and always in a very cooperative spirit. This is not about confrontation. And at the end of the day whether we have a primary surplus let's say in 2021 of 3 or 2.5%, it's not going to make a big difference in terms of our overall debt sustainability. But symbolically it would be a reward for a country that is actually engaging in meaningful reforms. Also, I have committed myself that whatever fiscal space I can negotiate, 80 percent of it is going to be redirected into tax cuts because the danger was always that if you give Greece fiscal space they will start doing the things that they did in the past. They will sort of engage into the traditional sort of patronage politics. I'm not that type of politician and I think I have enough credibility to convince both our creditors and the international capital markets that I mean business when I talk about reforms. However additional fiscal space that could be used for cutting taxes on corporations but also Social Security is going to fuel the growth and at the end of the day what Greece needs is not a growth of 2 percent. That's not going to make a difference. We need a growth of at least in the short-term of 4 percent that will be the target that we should really, really set and our creditors should be happy. The more the economy grows the greater the chances that Greece will fully repay its debts. So, this is at the end of day a question about growth. If the economy is trapped in a low growth environment than the constant question of whether we can repay our debts is going to systematically resurface. If Greece growth grows aggressively then our debt suddenly becomes much more sustainable.

Q10: So what's the biggest threat to economic recovery and economic growth in Greece?

A10: I think the opportunities are clearly there. This is a country that is in doubt with significant natural competitive advantages, beautiful country, safe and stable country in an important geopolitical neighborhood with a highly skilled and committed labour force with asset prices being very cheap after 10 years of crisis. This country can generate significant a significant investment boom in various sectors – tourism, renewable energy high quality agriculture services, logistics, you know shipping. Greece should really be a shipping hub for the world it really should be a shipping hub for the entire world not just for Europe. So, I think we can we can really describe a convincing growth story for the country. Of course, there are risks that always we've we cannot control but I would say that for us the biggest risk is an implementation risk. Assuming we receive a strong mandate we then have to deliver on a very bold and I think carefully planned reform programme on various fronts. We need to break the vicious cycle. We haven't broken it yet. You know some people can argue that yes, some progress might have been made over the past years but compare it to what base? Yes, if you compare it to the disaster of 2015 where we almost exited the eurozone of course we're in a better place. But are we in a good enough place to compare Greece to Portugal for example, your home country. Look at what happened in Portugal, look at how well Portugal has done under a socialist government, post-2015 and compare the Portuguese story or the Cyprus story to the Greek story. This is very, very disappointing what has happened in Greece and we don't deserve this we deserve much better.

Q11: We did see the first bond-sale post-bailout happening last month. The growth rate is picking up, unemployment is coming down. It might not be at the rate you want but these things are happening. So should the current government get some credit?

A11: Well first of all let's take the points you raise one at a time. Recent bond sale, yes, but look at the comparative cost to Portugal or Ireland or Cyrprus. Full market access has not been achieved and it's still way too expensive for market access has not been restored. And this is a problem for the country.

Q12: But the bond sales, we've seen interest from funds, rather than hedge funds.

A12: That's good. And we're interested in in making the case for long term investors. I would argue that as we get closer to an election the market is also going to begin to price in a likely political change. If the markets believe that there will be a political change, if the markets believe the story that we're telling them it is very, very likely that things between now and the elections could get better. And this is good for the country. I never was someone to undermine my country to gain political any sort of political advantage. I remember Mr. Tsipras back in 2014 discouraging investors from investing in Greece. I never told them that and I will always say you invest in Greece, invest in the country. If you want to do it now in anticipation of a political change, obviously you're welcome to do it. You may even be ahead of the curve. So, I would argue that if the markets react positively over the next months, that's good. It's a welcome development. It could also have something to do with the fact that people may anticipate a political change and we may find ourselves as Greece a rather favorable situation. Let me explain. At a time when we talk a lot about populists and the rest of Europe and the threats of political instability, you may find yourself in Greece with a centre-right moderate reform oriented government with a strong political mandate. That would mean that there is no political risk where at least the risk of political uncertainty is taken out of the equation. I think this is important for international investors as they scan the entire euro area. So, no I would not give the government much credit for what has happened. I would say way too little way too late.

Q13: One of your aims is to reform corporate tax, you mentioned that earlier. Could you give us some detail on your plan?

A13: We want to take corporate taxation down from 28 percent where it is now. Tsipras promised to take it from 29 to 26 percent. He's taken it down to 28 percent. We want to take it down to 20 percent within two years. I think it's an important signal that we want to send to the business community. If you invest in Greece you will have a more favourable treatment. This is what is what is doable given our fiscal constraints and we also want to reduce taxes and dividends from 15 to 5 percent. Something which is very important also for small-medium businesses where the shareholders the owners managers are frequently rewarded through dividends. But it's not just about that as I told you we want a forward-looking tax policy that will encourage capital investment in Greece. We want more investment incentives for green investments in Greece. Want to give incentives to homeowners to retrofit their houses make them more environmentally, more energy efficient. A lot of this is already happening as more people rent their houses through sharing platforms. But we really need to turbocharge this effort. And of course, we need to be very diligent when it comes to compliance. One of the good things that has happened as a result of the reforms that were implemented over the past years was that finally we have an independent revenue agency which has sufficient data for the first time to really go after the serial tax evaders. And what we've said is very, very clear we're offering people in businesses a fair deal to lower your taxes but we're going to be ruthless in terms of punishing you if you don't pay the lower tax rates. And I think this is a reasonable proposal and every time in the past we lowered tax rates, we were pleasantly surprised by how tax compliance improved. We did it with VAT on food and beverage back in 2014 and we actually saw that there was a very small revenue shortfall as a reason to do it again now because if you go down to a Greek taverna it will be very difficult to convince a different owner to actually issue you a receipt and you may benefit as a customer but the state is losing.

Q14: The international community is very excited about some of your reforms but having spoken with some Greek citizens some have told me that they feel you come from a very privileged family and sometimes they also mention that you are a little bit distant from the reality. How are you going to convince those ordinary Greek citizens?

A14: I have the privilege of coming from a political family and one could argue that I do come from a privileged background. I mean this is who I am and I'm not going to change that. But I worked very hard to get to where I am. You know my studies my professional career but also my career in politics. I worked hard to get to where I am today. And I may come from a political family but I think a lot of people know me by my first name and recognize that I have, will judge me for who I am. I don't think in at a time when we talk a lot about you know elites versus the people it's very simple to say oh you know these elites don't understand what the real people are feeling. I really don't think that is the case. I think in the proposals that we've made, we really care about social cohesion. We really care about not just the owners of businesses but also business people but also the work of the employees of the businesses that's why I've encouraged people and I want to use more, more tax incentives especially for big corporates to provide better packages to their employees and I'd be very, very open to tax incentives for companies to actually handle shares to their employees. Because I do believe in this new form of sort of I would hesitate to call it collective ownership but the format that you see in a lot of startups where the employees are actually also owners of the businesses is a form that works actually quite well. And I'm here to make people's lives better and you need to start with those who are less privileged. I deeply care about that. At the end of the day I know there are always going to be people who may think that my privileged background is a barrier. You know I'll try to convince them I'll do my best and hopefully I'll convince them after the election should I win. I know there are people who are not going to vote for me in this election because they are still hesitant about my intentions about our party's intentions, our party has changed a lot over the past years. I hope I'll be able to convince them to vote for me in the election after the next election when I will actually have delivered I said. I said look there's a little cynicism in politics today everywhere. It's not just in Greece. The only thing I can do is to be myself and you know let people decide. That's the beauty of democracy. Not everyone is going to vote for you.

Q15: I have just one final question European elections. I was wondering if you are supporting the Spitzenkandidat process?

A15: I am. I am a vocal advocate who supporting the Spitzenkandidat process. It was put in place in 2014. There's every reason why we should stick to it. I think it is important for people to understand that if they vote for example for New Democrat they will be voting for the European People's Party and that should the European People's Party be the largest party in the European Parliament, as it will, Manfred Weber should be our next President of the Commission. So very, very clear that the Spitzenkandidat process adds a degree of accountability and somehow bridges the gap between you know the Brussels elites and the people of Europe. Going back would be would be significant backtracking. I mean this should not be just a question about you know back-door negotiations in the council. We tell people very clearly that for example if they vote for New Democracy in the elections they would also indirectly be voting for who the next president of the commission is. I feel very comfortable with our choice on Manfred Weber. He's a great guy, he is a good friend I think would be an excellent president of the of the commission and I fully support the Spritzenkandidat process.

Q16: What do you think if other European leaders, for instance French President Macron, block the process?

A16: It's the process for picking the next President of the commission is very clearly laid out. Division of labour within the council and the European Parliament. What I can tell you that I have supported the Spitzenkandidat process. And if I should I be elected prime minister and I have the privilege of participating in the Council I will support the Spitzenkandidat process.


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