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LSE: Public lectures and events
Greece’s economic and digital transformation: in conversation with Kyriakos Pierrakakis
01:05:05
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- [00:02]
A
Welcome to the LSE Events podcast by the London School of Economics and Political Science. Get ready to hear from some of the most influential international figures in the social sciences.
- [00:16]
B
Well, a warm welcome to everybody. Thank you for joining us in this LSE event organized by the Hellenico Survey, the Center for Research on Contemporary Greece in Cyprus, in collaboration with the Hellenic bank association in the uk to which we are very, very thankful for this opportunity to collaborate again. My name is Vasilis Monastigliotis. I'm the director of the Hellenic Observatory here at the London School of Economics. And it is an immense pleasure, I have to say, and an honor to be in a position to welcome the Finance Minister of Greece, Mr. Kyriakos Pirakakis. For this event, I'm quite sure Mr. Berakkakis doesn' need a lot of introduction. Everybody in Greece knows him, but I think internationally also he has quite a reputation and a following for the successes he has done in his tenure as Minister for Digital Governance, also in the Ministry of Education and the significant reforms that took place there. And now as Minister of Finance in Greece, he is known as Doer, a reformer, a person, a politician, a policymaker who creates change and makes things work to the best. So we're very, very proud and happy to have him here, to have a conversation with him about a number of issues, the achievements of Greece, what remains to be done and where Greece is placed in the European and international context. Amongst other things. I'm told I have to make a number of housekeeping announcements. So this is the boring part of the evening, but very, very important. I need to say that in case of an emergency, if you hear a fire alarm, you will be guided by the stewards to the fire assembly point which is in the lincolnshield field somewhere outside this building. Please, now is a good time to switch off your phones or put them into silent. There will be a Q and A that will follow the conversation with the Minister. You will have the chance to ask your questions. Not everybody, but we'll try to take as many as we can, both from the live audience here in person audience and the online audience, which is also live, who can use the facility, I'm told in the top left of the screens to ask the question. The event is being obviously live streamed, but also recorded. So your participation here is also your acceptance that you are happy to be in an event that is being recorded. If you're using Twitter or X, the hashtag for the event is lsevents. And I think this concludes my housekeeping announcements that's true. So I mentioned earlier that this event is organized in collaboration and with the support of the Hellenic Bankers Association. And we have with us the chairman ahead of the Executive Committee of the association, Mr. Xenofonso Jarudis, who I would like to invite on the floor for some welcome remarks.
- [03:48]
C
Your Excellency, Ambassador of the Hellenic Republic to the United Kingdom, Unsolicis. Your Excellency, High Commissioner of Cyprus, Kiriakos Kouros. Minister Pieracayas, Professor Monasteriotis. Good evening all. It's a pleasure to have you all here tonight. We are also very pleased to be collaborating once again with the LSE Hellenic Observatory Building on our long standing collaboration for what feels like a truly timely conversation. Greece's economic and digital transformation is not just a policy headline. It's a story about how and to what extent innovation, governance and institutional confidence can truly shape everyday life. We are deeply honored to be having with us tonight the Minister of Finance of Greece, Kyriakos Pirakatis, whose work and commitment has helped turn that story into reality. Now, without any further ado, please join me in a warm round of applause as I pass on the mic to Professor Monserriotis to set the stage for the discussion. Thank you.
- [05:09]
B
Minister. Mr. Belakakis, first of all, thanks for making the time. I know you're on a very, very busy schedule, not only today, but also in previous days. I have to start our conversation with what I think is the obvious question. The exceptional or very, very strong economic performance by Greece over a number of years now, the very successful handling of the COVID crisis, of which the handling you have a big part of, of course, in your capacity as Minister of Digital governance, but also the recognition that the country, you know, being titled as the country of the Year in 2023 by the Economist, the Financial Times, talking about the great turnaround, but also the numbers, of course, in place of growth rates, declining unemployment. I don't need to decide everything. So I would like to ask you, in your opinion, what do you think is that if you could single out one or maybe two things, what was the turning point? Of course there was a rebound from the crisis and so forth, but something must have gotten have gone very, very well in order for the economy to do so well and to draw the attention of German policymakers, French policymakers, asking how did the Greeks do it? So if you were to identify one or two key ingredients, what would that be?
- [06:37]
D
First of all, I'm delighted to be here. I'm delighted to be at the LSC and To have the chance to discuss with all of you topics that touch upon both the turnaround of the Greek economy and certain aspects of reform that took place in the last years. Digital was mentioned amongst them. I wouldn't necessarily pick one. Overall, if you look at what's happening in Europe right now, take last year, out of the 27 countries in Europe overall, six had surpluses, headline surpluses. Four of them implemented bailout programs in the previous decade. So in a sense, getting our fiscal house in order is a function of accumulated experience. It's a function also of collective trauma, because that was the Greek crisis for us, we lost 25 points of GDP. It was the equivalent of the Great Depression. We required three bailout packages instead of one. I mean, we're in the uk, so I can think of Churchill saying that they did the right thing after having excluded all other possibilities, more or less. This was the Greek case and in my view, this duration, the fact that we needed a decade to get our house in order at the beginning and then start exiting the crisis was a very expensive lesson. To be frank, the first thing that comes to mind when I'm attempting to answer your question is a Marxist quote. You know, quantitative accumulation leading to quality change. In reality, this is what happened in the Greek case. We had a quantity of changes, a density of changes, many, many, many lessons, many experiences in a very dense period of time. And this led to a mentality shift in Greece overall. Because right now, if you see what's happening, I just came from the Echofin and the Eurogroup meetings in Brussels, and if you see at the contemporary debates between my colleagues at the Eurogroup and Ecofin, you know, one can observe that the world is upside down compared to what it was 10 years ago. Right. Greece is producing fiscal surpluses, it's having its debts de escalate in the quickest possible manner. Unemployment has reached. You didn't say it. I'm saying unemployment has reached the 2008 numbers. In reality, the lowest point. We can do even better. Of course, there are still challenges to be met and people that need to be supported and businesses that need to be supported, obviously, but still, right now in Europe, look at the debates happening at the center of Europe. Look at what reforms are needed in Europe. It's as if the world is upside down. So there is a lesson to be learned, I would say, from Greece through this, first of all. So when my European colleagues from France, Germany, et cetera, ask for advice from Greece, I always remember that the word hubris is Greek. So I'm quite careful about providing advice. But having said this, it shows something. It shows that effectively the accumulated experience of the Greek people and what they suffered in that decade metabolized into a policy lesson. And the policy lesson is that my generation in politics, I would say regardless of party, we're abroad, so I can be even more flexible on this. Regardless of party, we shouldn't repeat the core mistake of the previous generations. We shouldn't pass the bill to the next one. We should try to get our fiscal house in order as we did, keep it that way, and continue in a prudent path.
- [09:45]
B
I want to follow up on this because I also heard yesterday at the center for European Policy Studies in Brussels, and you seem to accept an optimism that the generation learned the lesson, as you were saying just now, And I want to ask exactly this thing is that also, does this also mean that a confidence that any or within reason, any kind of political change in Greece will not jeopardize the commitment, if you want, to this particular path, you very.
- [10:18]
D
Well know that politicians are terrible at making predictions. So I won't attempt to make a prediction. Galbraith used to say that an economist is a person that can tell you very prudently and very comprehensively what went wrong with his predictions. I think the same holds the same stance for politicians. But right now I think that being fiscally prudent is a regime in countries like Greece, in countries like Ireland, in countries like Portugal, because we experienced collective pain out of not doing it. And in this regard, I think that this will last. The question is, can you grow fast? I mean, the KPI for us and the KPI of the key performance indicator for every country is how quickly you can grow in order to support social strata that are having issues, that are having challenges, that are having difficulties. Growth should reach every household. And to a very significant extent, this is happening because the numbers showcase it. But there are still very significant challenges. We have a productivity challenge. We are converging in PPP terms with the EU average. When we assumed office, we were at 62% in terms of income of the average. Now we're at 70%, but we're at 70%. We need to grow faster. We need to achieve even better results. That should be the challenge moving ahead. So what I would say is that different political powers should provide different answers to the question. But fundamentally, in order to have social and political cohesion, we should agree on the fundamentals, that this is the KPI, that this is what we should all be striving to achieve. We can Have a different recipe, more or less, because certain things should be the same fiscally. You should have your house in order, you should be balanced. But on top of this, by definition, this is what democracy necessitates. We should offer alternatives and different recipes.
- [12:04]
B
It seems a bit like you anticipate all my questions, so this is definitely not rehearsed, I promise you to the audience. I want to pick up on this thing about productivity and the things that haven't been done. And you mentioned growth. Growth is important, of course. And yes, it is. In academic debates where I participate, there's this motto that says growth doesn't only have a rate, but also has a direction. So it is a lot about what governments essentially do to direct growth where we want it to be environmentally sustainable growth, socially sustainable and so forth. So there are issues to be addressed. You mentioned the productivity deficit, if you want, of Greece, but also a wider issue about the structure. We know there is a bit too much perhaps of a drug by tourism. It grows to fast. Too much. So justification is one goal. Financialization of real estate is the other. And I know the government is trying to deal with partly with that. There's also research conducted here at the Hellenic Observatory on the issue of how the advantages of this tourism, real estate actually are partly to blame for the promotional productivity and the carbon account deficit. Of course, tourism contributes directly for revenues, but on the other hand, it kind of skews the economy towards less productive local activities. That's a story from the LSE economists at least. So there is scope for some policy derivation beyond perhaps the horizontal policy intervention. So I know at the European level you're an advocate of European industrial policy, but is the scope and the plan for more interventionist domestic industrial policy?
- [13:53]
D
First of all, I did read the paper and I found it extremely interesting because you always need to challenge the way you think. There are parts of the paper I agree with and parts of the paper I would deviate from. What do I agree with? I do. I mentioned productivity myself. I do agree that we have a productivity challenge. I mean, if we look at Greece from a helicopter perspective, we have solved for the primary budget surplus, debt, de escalation, unemployment, limiting unemployment. So many of the things which were the challenges of the previous decade. The headline stories. I was in Bloomberg this morning. The headline story of Bloomberg 10 years ago was tax evasion. Have we managed to capture a big part of tax evasion in the last years in Greece? I think this is objective. Yes, we have. And we have done this by the integration of digital technologies in the system. So part of it is solved for part of it. We're in the process of solving. Investment to GDP. It was 11% when we assumed office. Now it will be 17.7 in the 2026 budget. Exports to GDP. The model that failed, it was 20% in 2008. Now it's 42% EU average, sits at 51. Productivity needs to increase at a much higher pace. So on that I agree with the paper, what I also I would say agree with is vis a vis the integration of the two Nobel laureates of this year, the young Howard models, and the idea of where you sit vis a vis the technological frontier. How close are you to the technological frontier and technological innovation? And this should be driving industrial policy decisions. And I had an article in the Economist recently which touched upon this case. Let me tell you where I deviate. I deviate on a couple of things. The first one is that tourism, in my view in the difficult years was a lifeline. It was not a problem. And if you see how the tourism industry and even the restaurant industry, the cafe industry, all this industry, the way it has innovated, it has innovated in the last years, the way it has become more sophisticated, I think it's self evident to every visitor of Athens. So I wouldn't necessarily underline it as a problem. That would be my first observation. The second one is that I wouldn't directly go and say that the problem of Greece was that the memoranda were ill designed. Did they have problems within their design? Yes, they did. They had a one size fits all approach. The classical Washington consensus, let's say, analysis on certain things. But the labor market reforms and the product market reforms that were there were necessary for us to be able to do the rebound. What was the primary problem in my view of the memoranda was what I said before. The length the political economy, integration of the memoranda in the Greek state, the fact that while other places needed one, we needed three because we had antagonistic politics and populist politics offering alternatives that never really existed on the ground. And finally, I wouldn't necessarily pick 2008 as a benchmark year, 2008, even though I did that one minute ago myself on exports. But I wouldn't necessarily do that because it was an inflated year. We didn't have real, I would say, growth parameters which were not inflated by consumption and by effectively the model that itself failed. So all of those things taken together remind me of a concept. When I was reading the paper, I thought a lot about this concept developed by Costa Dinos Tsukalas Polisthenia meaning multitude of strengths. Greece managed to withstand this crisis exactly because it had a series of hidden strengths in the families, in the businesses, throughout the economy, not necessarily depicted by a mathematical model per se, or even a mathematical model of the image when implementing the memoranda. But this is what led us to withstand. Now I've said all of those things. Do I agree on what we need to do moving forward? Yes, I do. Because right now we have an achievement, which is the fiscal achievement, we have a digital achievement. And what we need to do is that we need to build on top of this. At the end of the day, politics. Politics is like two games. But the one I have in mind right now is Jenga. If you remove the wrong brick, the edifice collapses. What you need to do is to build on top of the edifice. So we have achievements. Let's agree upon them and start building on productivity, cross border M and A and industrial policy, which needs to be deployed primarily at the European level. Because in my view we do not need 27 efficient markets, we need 1, 1 single efficient market in Europe, specifically in the banking union, in the savings and investment, UN Union Telecom is an area that I have written on vis a vis what we could do collectively. But to a certain extent we shouldn't be afraid to say. There are certain sectors in Greece where there are self evident policy choices that we can make, which can unlock growth, which can unleash growth. And those areas can be many, like the silver economy, for instance, to give you one. Or other areas like education, which is an area where chronically Greek students are all over. I used to be a student in American university for four years, two American universities. Actually. The ratio of Greeks studying abroad is extremely high compared to the ratio of foreign students studying in Greece. But if you change this and if you reverse engineer it, you can create a competitive advantage out of it. And we should start thinking like that. We need a mindset change.
- [18:57]
B
I think this is all very good and very well received, I think also by the international community, both the business community and the policy community. I think what I have a bit of a difficulty understanding, there's a series of horizontal policies, you know, digitalization, education reforms and so forth, the openness, internationalization. But then also you talk about, at least at the European level, that you know, if you close to the technology frontier, let's say you can try to become the leader or maintain your position as a leader. If you're not, then you have to see how you diversify and where you go, we would say in my culture, so to speak, how you fit into the global value chain or the regional value chain. And usually that takes vertical policy interventions or subsidies, tax exemptions and things like that. Which sounds to me that you kind of delegate more to the European level.
- [19:54]
D
Is that to a large extent the structure of the single market mandates this? I mean, I mentioned telecom, for instance, because in reality having 27 telecom markets, 27 telecom regulators, 27 spectrum options. Let me use this case study for a minute. In my view on technological debates, what Europe can do to fail is to ask the following question. How can we build the European version of X? X being anything? If you think like that, this is failure 101. And whenever we have thought like that, be that cloud services, be that even now, AI, the question is, what can we do about AI in Europe? That's the wrong question to ask. The question is, how do you capacity build your champions? We have European champions on the ground. Take the first Trump administration, the policy of the first Trump administration on 5G. The antagonistic policy on 5G with China indirectly helped two European companies, Ericsson and Nokia. Did we take advantage of this? Did we create a value chain around those companies by having one spectrum auction in Europe and by creating one ecosystem around them to have 5G applications deployed throughout the unified European market? No. But a telecom company in Europe right now has to face 27 regulators, whereas in the United States it has to face one, the ftc. So in this regard, if you want to think in terms of large scale industrial policy, the global competition landscape, the only mechanism to do this is by leveraging the powers of the single market. And if there is one policy project that again this generation at the European level can and should deliver, it should be the Savings and Investment Union. Because at the end of the day, let's say you have a European startup. At some point the European startup will probably require the help of an American investment bank, which is not bad, which is excellent, but why should it be quasi necessary? Why shouldn't we be having the market capabilities to deliver it at the European level, within the European market? This is why this discussion should primarily be European rather than domestic at the member state basis. But we shouldn't be afraid to have it also domestically.
- [21:58]
B
Very good. I think this brings me to skip a few questions. I will come back to them. But indeed, in some regards, and definitely you as a finance minister seem to Greece, and definitely you as a finance minister seem to be championing this idea of European integration, completing the single market simplification, the 28th regime, perhaps for years of doing business and so forth. So a clear advocate for Europe. You come from a country which has been for a long time the Black Sea and so forth. So do you think that there is this attention, the willingness to listen? Do you feel that Greece's position is now a credible voice in the making of European, in the European policy making? Or they just applaud you for the digitalization of the public, of the governance, but then they are less receptive on ideas about how important it is to complete the Savings and Investments Union?
- [22:58]
D
No, I think that currently the Commission and most member states of the European Union are extremely receptive about this. The question is how quickly can we deliver certain policies and certain results. The discussion, let's say that you want a unified European market. The discussion is not only one of institutional design. We will deliver the institutional design. We might do that with delay, we might do that with national asterisks integrated in the negotiations, with a strong element of compromise in those discussions, as is always the European paradigm. But in reality here, what you also need to deliver is cross border mergers and acquisitions. You need to deliver pragmatic results on the table. And this is why we have credibility. William Faulkner's advice to young writers, which is for my student days, one of my favorite quotes show, don't tell it. UniCredit was a litmus test for us and now UniCredit has increased its equity share in Alpha Bank. Euronext is a litmus test for us. We want it to be part of a broader European liquidity pool in our stock exchange. German Chancellor, Chancellor Mertz recently said that Europe should have one European stock market in order to have one liquidity pool and reap the benefits of broader integration. We are for it because we view the opportunity cost of not having it and the full benefit of having it. And this is why we're supporting those cross border M and A s. This is why we're cognizant of the fact that if this is material, it will increase our growth stock, it will increase our growth rate projections for the future.
- [24:29]
B
So very good. This takes me to the question about, you know, starting from unity, that it would all be fantastic if everybody agreed and we know what is the objective function. But there's constraints that keep us on separate paths, if you want. But in a way, it is also about preference. There are heterogeneous preferences, as we say, across the European Union. Not everybody has the same vision. Now, in some way, Greece has also expressed some different preferences. With regard to the recent vote of the International Maritime Organization, for example, with regard to the Net Zero framework, I think there's some disagreements about the speed of transposition, Renewable Energy Directive, a bit of things like that. And in general, both the Prime Minister, I think also yourself has expressed a bit of a concern that with the green transition, we've gone too far, too fast to rethink it. We're not one size fits all. We're asking for a 10 year extension, I think, for the tax exemption on fuels for shipping and agriculture. So are we still setting agenda? Are we? If you want, on these issues, diverging from the European Court about the European project, how do you feel this is negotiated with, you know, the different preferences from different parts of the European Union?
- [25:56]
D
First of all, we do have heterogeneity of preferences. If I may deviate a little, if I may deviate a little bit before I answer your question, which is because I was the one expressing those, let's say, deviations of our national opinion on certain issues at the European level, let me say that the recent calculation of the imf, which we are discussing on the hidden barriers that exist between member states, the tariff equivalence, 110% in services, 44% in manufacturing, has a tacit assumption of homogeneity of preferences, which is mistaken. But having said that, barriers do exist, exist between member states of the eu and we should, and we need to eliminate them. Having said this, we are ambitious, climate wise and we have proven that as a government in the last six years. If you see our track record on wind and solar, it's second to Denmark's. The fact that we became in 2024 a net electricity producer, a net electricity exporter, for the first. For the second time, actually. Historically, the fact that we have been doing a series of reforms on the energy policy sphere, we have a climate ambition. At the same time, every society needs to integrate many goals at once, sustainability and competitiveness, and needs to integrate those goals from a social cohesion perspective and from a fairness perspective. And at each point we are trying to strike the right balance. In the imo, we abstained, we didn't veto, but we felt that this policy was prudent given the structure, the size and the interests of the Greek fleet and our interest as an economy on other areas. If you look at the length of our shores, of our shoreline, if you look at our geography, where we stand in Europe, you mentioned those specific goals. I can even more bluntly mention the Tobacco Directive, which we recently had a different opinion compared to what the Commission presented. But why did we do that? We're against the taxes. I'm at the llc. It would be imprudent to say that I'm against the Pigouvian tax. But having said that, the last time we saw very significant tax increases, for instance in tobacco, given where Greece is situated on the map, we had a spike in illicit trade. So you need to integrate many parameters in your analysis. When you strike a position and when you formulate the position, you should be doing that from the lens of your national interest to a certain extent. But you should be strategic at the European level on the other. And if we try one size fits all approach at every policy area across the board, bluntly, we will fail. The smart way to move forward is by integrating all the parameters and having a social cohesion perspective when you take the decision. And this is what we're trying to do.
- [28:31]
B
Okay, you mentioned. Actually I'm going to take you back to Greece. In your interview in Bloomberg today, I think you mentioned that the objective and the goal is to repay the first loan from the adjustment programs 10 years before time in 2031. And also, of course, you know, this means that, you know, the objective of running continuous primary surpluses continues. There is an argument that perhaps this is a bit, you know, a continuation of austerity policy. One could expand more, reduce VAT rates which affect poorer households and so forth. I mean, there's also European discussion about VAT rates, you know very well. Do you think there is a trade off here between the drive and obligation to ensure that Greece is on the right and stays on the right path in terms of fiscal responsibility, growth and so forth, and a trade off with kind of diffusing the proceeds of that growth and supporting, you know, addressing cost of living considerations, household incomes and so forth.
- [29:43]
D
I think we're in a positive feedback loop. First of all, there are two elements in your question which I would like to unbundle a little bit. The first one is VAT and whether or not we would be slashing VAT taxes. I think that if there's one thing in our fiscal policy that my government has huge credibility on is limiting taxes. We have cut 83 taxes in the last six and a half years. But in the recent Thessaloniki program, of which as Minister of Finance, my team and I were responsible for shaping and then presenting it to the Prime Minister for his decision, we had a dilemma. I mean, we didn't really have a dilemma, but let's, let's take it intellectually. What's the intellectual dilemma? You have a fiscal space. The fiscal space was 1.76 billion euros for 2026. Excellent. So once you have the this fiscal space, you start thinking about how to optimally target it. So let's say you have the following dilemma. You want it to reach households. If you cut income taxes, it reaches households directly. If you decide to channel it at VAT taxes, it goes indirectly. And I have a study from the bank of Greece and from the governor. Mr. That says that only two out of ten euros effectively reach the household when you get the VAT tax. So when you have those two things in front of you and you want that 1.76 billion to reach households, I think it's self evident that you will decide to cut direct taxes rather than indirect taxes if you are to make a decision. So for us, it was never a dilemma. Second, you have the new fiscal framework of the European Union and this discussion about primary surpluses. First of all, the surpluses are primary, they're not headline surpluses. Because if you look at the 2026 budget, we have a primary surplus projection of 2.8, but we will have a balanced budget as a final projection. We have a debt to serve. And the more we're serving that debt, this means that we're removing weight, excess weight from future generations. And when I'm saying future generations, I'm not necessarily referring to my children. I'm referring to people in the next five years or 10 years. So this is fundamental to make, first. Second, we don't take those decisions in a void. We, we take those decisions within the context of the new fiscal framework of the European Union. And even if you have a surplus, the new fiscal framework of the European union mandates. All 27 countries have agreed upon this. It mandates that you agree upon spending goals regardless of where your surplus or your deficit is to a certain extent, because it can be a function of a recession. And then the idea is that you spend the same. If you are in a recession mode, the policy is countercyclical. If you're in growth mode, you end up serving your debts more effectively. This is more or less what Keynes said that you should be doing in his theory, in his general theory. I understand the argument of this. I also understand the argument why we should be having some extra fiscal space for certain things which we did. Defense. There was the escape clause for defense. There was the perception and the reality of the existential issue of having an invasion of the European border in the European country. And we decided that we needed extra fiscal space to fund our defense Priorities. And for a country like Greece, this was historically and traditionally the case. We had more elevated levels of defense spending, we had levels approximating the NATO goal. But other countries like Germany didn't and they decided to do a U turn in their historical defence policies, which they did. So there is a level of accommodation. Could it be higher? Could we add a layer of flexibility? Yes, we could. But our goal as a country again is to be on this positive feedback loop that I described at the beginning. We want to have positive fiscal balances and we want to have positive growth rates. We're growing at a higher pace than the European Union right now. We still have room to cover, to converge. We're changing our economic model. We have not fully changed it, but we're in the process of changing it. I mentioned investment to GDP and exports to GDP as to KPIs into parameters. We also need changes in productivity. We also, we also need industrial policies at the European and at the Greek level. But at the end of the day, if we keep it along the same path, I am extremely optimistic that Greece can indeed make it and completely end up being not only a story of a rebound or a story of a comeback, but the story of renewal.
- [33:50]
B
Very good. And we all want that. Of course I want to move a bit away from the economics in your current portfolio and go back to, to five, six plus years ago when you're tenured as Minister of digital governance, which of course where you did the flagship set of very big reforms, the introduction of gov CR electronic certificates with COVID the vaccination certificates, which was a European success or the model. I guess the whole digital transformation of this has become a case study of effective governance. It's quoted left and right for Europe. I would like you to talk to us about your experience if you want your personal experience of that coming into, you know, into the job, if you want. Not from a lengthy political career, more or less as a technocrat, but also not necessarily being from within the family of the, of the, of the governing party. Did you face a lot of resistances? We talk about resistance by public administration to implementation. Did you manage to find buy ins that you leveraged for the reforms? What was your experience of the whole process of transforming really the governance, the public service in Greece?
- [35:12]
D
That's a very dense and a very big question.
- [35:14]
B
We don't have many. Many.
- [35:16]
D
We don't have many. Lots of time. But what I would say I will go straight to the core lessons. If there are two lessons that I had three lessons. The first one is that digital is not about digital, it's about management, it's about a mindset shift, it's about changing the way you offer services to citizens effectively. It shouldn't be called the digital ministry, it should be called the service design ministry. Governments were never designed. They have occurred. They have occurred as an accumulation of decentralized decisions by a ton of policymakers historically. And this is why when you want to be served by your government in bureaucratic places, you end up for a life event, having to visit five different public services, seven different public services, 15 different public services, because some policymaker has taking a decision somewhere in some piece of law to add an extra layer for something and this third layer for something else. So generally you need an architect, you need someone who can redesign government employing digital means. But not only generally, changing the way design works introduce design thinking in government. So lesson number one, if you are asking the question, what can we do about AI in the Greek government? You are asking it's the wrong question. Because sometimes it can be AI, sometimes it can be a simple SMS offering a service, which was the case in COVID vaccinations. So think in terms of design lesson number one for me. Lesson number two, as a second step of the first lesson, when you design policy, we're at the lse, we're at the preeminent institution of government. When you design policy, historically, you typically have a lawyer in the room and an economist in the room. You also need to have someone who understands digital in the room too. Not someone who knows code, someone who understands how to instrumentalize technology optimally in a specific situation, which is what we tried to do in COVID 19. This was what the Prime Minister decided. Then we were doing the first lockdown and the Prime Minister had the mindset to call upon his digital team and say, okay, in France, in the lockdown, they're using pieces of paper. Can we think of something with technology that can eliminate, eliminate the use of paper in the equation? And my third lesson, which is very close to the heart of the public policy school preparation, preparation, preparation, meaning that if you have a very clear view vis a vis what you want to achieve, if you have the team, if you have the laws already, the decrees, the design of the ministry that you want to have, if you know what you want to do and you have done your homework, then delivery can be quite quick in those things. And in most things, I would argue in government, strategy is delivery. It's not about strategic vocabulary. Writing 40 page memos and thinking about people are actually, I think and this is a lesson of our times. People are bored of grand political narratives which are not founded upon solid delivery of policy change. People want to see the delivery. They want to see prose rather than poetry. To think of the old Mario Cuomo.
- [38:19]
B
Code, people do, and service users do. But public administration people may have resistances.
- [38:27]
D
I didn't answer.
- [38:28]
B
Interest groups may have blockages, may give you blockages. So there must be some way, some, you know, you. I don't want to say that you hold the Matipone, but you did it again also in the Education Ministry, where you introduced reforms, some of where were not that conflictual. So, for example, you know, vocational educational reform. Although maybe there you may have faced resistances, but definitely. So overcoming the obstacle of Article 16 for the internationalization or the introduction of non state universities in Greece must have taken some skill and, you know, some sort of handling. So what do you think is the kind of the good recipe for the, you know, how reforms succeed? Because we have so many cases of Greece for failed reforms or repeated reforms.
- [39:13]
D
I know that you have focused a lot on this research wise also the Hellenic Observatory, reform technologies and how to deliver reforms, the political economy of reforms. I have to say I loved Tony Blair's book, which I read recently on leadership. I loved it because it has. I think any policymaker who plans to assume office should read that book because even though he was a prime minister many, many years ago, he gets. That's the fundamental answer. What we typically learned at school is that you need to do the difficult things at the beginning, in the first 100 days, let's say you plant a seed and you see the outcome of that reform at the end of your tenure, if you're lucky. But he has an asterisk. He says the exception is digital things that you can deliver, digital projects that you can deliver. And the big part of the book is actually focusing on this, on digital policy. And there are certain things which we delivered when I was at the digital minister, when I was at the digital ministry, which we did in hours, not even in days, we had the problem and we needed a quick fix, we needed a quick solution. Many people have said, to answer your question, was this digital transformation of Greece an outcome of COVID 19? I think this is wrong to say because the plan was already there in 2000, from 2019. What COVID 19 did was effectively two elements offer two additional elements. What was nice to have, what was something that Greeks wanted. It rendered it necessary because we needed to have state continuity. So certain services should continue to be Delivered under distress. And second, it offered us at the European level, the rrf, the post Covid reconstruction funds of the eu. We would have never managed to fund our full digital ambition had we not had this, had we not had the RRF when we were doing the plan at the beginning. I mean, there are people from my team in the room. We did that back then. We were trying to codify the projects from a gap analysis perspective in 2019. The projects, of course not of the first four years, those were delivered by very quick and easy platforms. The big things, the digitization of the cadaster, which was, which is about to be completed. It has been an issue in, in Greece since the reign of King otto in the 19th century, but we will be delivering it. So those things required significant funding. Creating a simple platform on power of attorney required zero funding. We did that within a couple of weeks through government public services. So certain things had resistance, but COVID 19 I would say eliminated the resistance to a certain extent because we needed to ensure state continuity for service services offered to citizens and corporations. But other than that, the strategy was there, the policy was there, the mindset was there. We understood what we needed to deliver. And to offer a disclaimer, the whole job hasn't been completed yet. We have digitized 2200 services. The question that I was receiving from colleagues, friends, in interviews after some point was, okay, you have digitized 2,000 services out of how many? How many? What is the universe of services? No government in the world knows the answer to this question. I think that we do because we have a platform called mitos, which is publicly available and where you can see that we have mapped more than 5,000 services, meaning we have mapped the bureaucratic steps each one of those services entails. Step one, step two, step three, the relevant paperwork, the relevant laws, average time, average cost, etc. And you can see that half of it is European laws mingling with Greek laws and the other half. And in a way, I think this is quite crucial because frankly, what you can't measure, you can't reform. So we measured ourselves. Have we done the job? I think we have done a big part of it. This is why in a recent poll that I saw, the development of gav GR was perceived to be the second most popular reform in the history of the country after the establishment of the NHS. And they were close. One of them was 89%, the other was 88. I think this is going to be a very significant policy decision to digitize our country and our economy. But we need to Finish the job. And there are still services that we need to offer, simplify and add to that portal so that at the end of the day we go Estonia, meaning that Estonia was always the north in the digital conflict. You can do all things in Estonia digitally, but three, get married, get divorced and buy a house. So in a way we need to offer a digital alternative to all the public services of the land. And I think that Greece is on the path of doing it and we're doing it in a very interesting manner because Estonia recreated itself after the collapse of the Soviet Union. We did that in times of challenge, in times of hardship, and it was much above what we had promised in the 2019 campaign. And this is why I think people across the board, regardless of politics, they were positively surprised, especially during the pandemic.
- [44:06]
B
Right. And sometimes you need a crisis in order to overcome the obstacles. I need to open it up for questions. Also people on the online. If you want to contribute your questions as we. As you collect your thoughts and indicate. If you want to ask. I want to ask you 30 seconds. A question with a 30 second answer. Are you concerned that without the RRF it won't be as easy the extra money of the rrf, it won't be as easy to do half of the things that were possible through RRF. 30 seconds.
- [44:41]
D
I won't give you a 30 second. I'll try. The RRF is not only about funding, it's about targeting funding. The good thing about the RRF, which now will be part of the new MFF of the European Union, is that every penny is matched to a reform. This means that the impact of the RRF will be lasting in my view. On top of the traditional MFF funds, which will now have the RRF structure, we need to have private catalysts and those cross border M and A together with the strategy that I attempted to describe before in order to further catalyze growth. But growth is not only a funding story, growth is a reform story. It's a category regulatory burden story. It's a growth story overall for Europe and the barrier removal story for Europe. So it's a mindset change and this is what we should be achieving. So I'm always concerned. My job is to be concerned, but my job is also to offer solutions to what I have in front of me, both me and all the cabinet members of this government and all governments, I would say. And I am optimistic about the prospects of Greece.
- [45:42]
B
That's very reassuring and very good to hear. I would love to continue the discussion. We'll have hopefully other opportunities. But now is the time for our audience. Can I take a question from the gentleman with the white shirt over there? And then we'll go a bit further back to the lady with a black top in the middle of the Perfect.
- [46:05]
D
Thank you.
- [46:05]
E
Thank you very much.
- [46:05]
B
Can you please identify yourselves and ask a quick question instead of giving a lecture?
- [46:09]
D
Yes.
- [46:09]
E
Amazing. So I'm Anastasia Goyas. I work with banks and other financial institutions to leverage AI. Thank you for all the work you've done with digitalizing Greece. So my question is you mentioned during your conversation how growth should reach every household and Greek stocks have been rallying, the index has been rallying, yet only 10% of Greeks have money in invested in the Greek financial and the Greek equities etc compared to 60% of Americans. And I want to know just what your agenda is for making investing more popular, especially among amongst the younger generations in Greece.
- [46:43]
D
Yep.
- [46:44]
E
Thank you.
- [46:45]
B
Thank you very much. So we'll take the lady 4. Roseback.
- [46:52]
D
Hi.
- [46:53]
B
Hello.
- [46:53]
D
My name is Marina and I'm a.
- [46:55]
A
PhD candidate in economics at UCL.
- [46:58]
D
I really like your remarks and you.
- [47:00]
A
Mentioned a lot of times the economic model and productivity.
- [47:04]
D
I would be keen to know more about what reforms are on top of your agenda and what you really want.
- [47:10]
A
To achieve perhaps by the end of.
- [47:12]
D
Your term in the ministry.
- [47:14]
A
Thank you.
- [47:15]
B
Okay, thank you. And can we take one question, a third question here from the.
- [47:21]
F
Hi, I'm Nicholas. I'm a student here studying international political economy. And I guess my question is more on the European level. It seems like a big problem that we've been running into recently is that we're almost too reliant on foreign technologies, mostly from the US but increasingly from China. And it doesn't seem like it's necessarily a problem with innovation because we're seeing a lot of it in Europe, but it's almost more a problem of diffusing those technologies to the European market. And I guess my question would be what exactly are the challenges that we're seeing with that and what are steps that we can take to kind of get access to those startups to grow more and in the long term and reliance on foreign technologies.
- [48:10]
D
So I'll start from the last one and then landed to to the nation state, to the member state of Europe. So starting from the last one there are many challenges. I use telecom as an example because telecom is the low hanging fruit that we had in front of us and we didn't deliver in 2020. Very quickly, let me tell you what we did in Greece and why I think it doesn't suffice. So we have an auction in Greece for five June 2020, which got 372 million million euros out of the market. 93 million 25%. We used to establish a fund which was then used to fund 5G applications. Deutsche Telekom invested in that fund. It's a great story. It's a great fund. It's around €100 million. It's small. It's small for European standards. Imagine the counterfactual. You have one auction where you have 5 billion euros at the European level from that auction, let's say conservatively, even more. And you use half of that money and you leverage it through the European Investment bank. And then you fund a broader ecosystem and you do industrial policy as you suggested. You offer free access to startups at the spectrum, you connect the story better with universities, and on top of this you fully build the Savings and Investment Union and you have access to capital at a much higher rate than what you previously did. And a unified European European market. That's the counterfactual, that's the KPI to be had. So this basically means that we need to deliver all of the institutional reforms that we can. We need to have more cross border M and A is because we don't require for clear markets in everything. And at some point we need to pick who the European champions are in technology because we have companies that sit at the technological frontier. I mentioned the telecom, the infrastructure of players of telecom. I can mention asml, I can mention many players who sit at the technological frontier in Europe. And we should try to think about how to build ecosystems around them. On the other topics we can be synergistic. Generally speaking, it's not very smart in technology to be antagonistic with the front runner. You can try to have a second mover advantage, which many people have historically in technology. But primarily your industrial policies should focus on the winners. European Champions, that would be my code word. Together with the delivery of the siu, the Savings and Investment Union. Now I said the couple of acronyms. Is that an easy thing to deliver? The answer is no. But the opportunity cost of not deliver of non delivery at this point is huge. And it's becoming more acutely big every year. So we all understand that we should somehow be delivering this on reforms on the domestic agenda. I wouldn't necessarily handpick one or two, because the positive feedback loop that we tried to create was a triangle. On the one hand we wanted to have fiscal prudence, because if you don't have fiscal prudence. If you cannot service your debts, fundamentally you have a problem. Second, we wanted healthy banks. And NPLs used to be non performing loans, more than 40%. Now they sit at below 5%, they're 3.5. And the third pillar is reform. Is your question. We have delivered many reforms. Some of them are bigger, they're more underlined reforms like the ones we discussed on digital or even the education reform that we discussed before the cadastral reform process. There are many types of reform that need to be delivered. I wouldn't hand pick one. I would just tell you the recent reform that we did, which is very close to my heart, which is the reforming our tax policy which touches upon the demographic issue of Greece, because you mentioned productivity of the paper that we recently that we discussed before. But this is also the other side of the coin of the demographic problem that we're having in Greece, which is acute and it will affect growth unless we manage to further increase productivity in the coming years. So what we did in Greece was we changed our tax rates. We reformed our tax system on the base of demographics. The effective tax rate for families with four kids and above at the base rate is zero. The effective tax rate for an under 25 year old and young adult who is entering the labor market at the base rate at the lower rate is zero. And we did that because we want to have a different mindset on how we tax citizens throughout Greece. And we will also be eliminating real estate taxes in villages around Greece with less than 1,500 people. This has a unified, a cohesive policy approach on demographics. I'm not claiming here at the stage of the LSA that this will solve the acute demographic problem of Greece, because it will not. But it acknowledges the problem and it's part of the solution which includes many elements and has many ingredients. Final, final point of capital markets. I forgot to answer this. So we recently had a capital markets reform. We passed the capital markets law on the first week, effectively was the first week at my tenure at the Finance Ministry. It was prepared by the economic team and by my predecessor. We had some additional touches ourselves. I believe that the Euronext acquisition, should it become material next week, will also be part of the story of this change of mindset because being part of a broader liquidity pool in Greece, a broader European liquidity pool changes the incentive structure. Overall it's different to have an isolated stock market monopoly and different different to be part of a broader European liquidity pool with seven other countries. I think we will need additional reform on our capital markets. We need to pass even better laws and remove extra barriers that might still exist. I would ideally like to see the most innovative capital markets institutional framework in Greece. And final point, because I used to be the Minister of Education, we introduced extra classes in financial literacy when I was there because we fully understand that this is also an area of policy that we need to fully focus on. I'm not saying that this is a magic wand, but we need to do many things at once in order to achieve a better result in the area that your question touches upon.
- [53:59]
A
Hi. I'm interrupting this event to tell you about another awesome LSE podcast that we think you'd enjoy. LSE IQ asks social scientists and other experts to answer one intelligent question like why do people believe in conspiracy theories? Or can we afford the super rich? Come check us out. Just search for lseiq wherever you get your podcasts. Now back to the event.
- [54:26]
B
Okay, thank you. I need to take a couple of questions from the online audience and I will do so. But please, we should have time just a bit for a couple of questions from the audience. Again, so there's a noise number of questions that relate to the issue of quality of institutions and quality of government in Greece. I'm kind of very, very broadly paraphrasing, but is there some sort of concern that maybe, you know, the economic policy making is doing well, the government is doing internationally quite well, but there is some sort of erosion of democratic the functioning of democratic institutions in the country? That's the one question. Another question from colleague Vicky Price. It says that a new survey by the European Union of poverty, subjective poverty, suggests that the percentage of Greeks feeling in poverty is very high, just under 70% compared to 17% for the EU average. How do we explain this and does it volume?
- [55:35]
D
To answer the first question and to paraphrase a very quoted politician, there is nothing wrong about Greece that cannot be solved through what is right about Greece. And in this regard, if you see what the headlines were, because we all know institutions and economics interact acutely, by definition, you cannot have sustainable economic growth without quality of interest institutions, especially in Greece or in places like Greece. And having said this, what was the headline? I realized this today to a certain extent in Bloomberg in the morning. The headline 10 years ago was tax evasion in Greece is high. Did we manage to solve for this? To a very large extent we did through two mechanisms. The first one was digital. We introduced digital technologies in our tax system. The second one was institutional. We created an independent tax authority which was responsible for collecting taxes and for taking its own decisions, which are not affected, with the exception of laws that we pass in Parliament, by the Minister of Finance and by a government. And it works. It worked. So do we have institutional failures in Greece, most of them, I would say acutely chronic, which now, one after another, we need to continue resolving? Yes, certain ones we managed to resolve quickly, like the one I described before. On others, we also made mistakes and the mistake was not acting fast enough. I think that we have a different culture, a culture of correcting mistakes, a culture of acknowledging mistakes and the culture of understanding what needs to be corrected quite quickly through the mechanisms that work. And it's not by accident that I'm using the Independent Revenue Authority, because in the agricultural subsidies case, for instance, which mentioning myself, which is a story of failure, it's a story of chronic failure, but it's a story of failure which further manifested during our time. We know how to correct it, and we're correcting it through the institution, through the mechanism of the Independent Revenue Authority, which was the same mechanism, the same institution that is solving for tax evasion. So I am optimistic that one after another we know how to create the building blocks of solving for all of those problems without saying that those problems that don't exist or aren't still there. But I mentioned Jenga before as a game. You know, I've said this many times, but it's a favorite story. The other game that I would like to mention, which used to be one of a professor quote, a professor quote of mine from my years in the United States, is that the most political game in history is Tetris. And. And when we were asking why is that the case? He replied, because it includes the fundamental political lesson. Successes evaporate, mistakes accumulate, and spot on. We understand that what we have already delivered is a given and what we still need to deliver is there. But what I'm saying is that we have the culture, the mindset and the will to deliver it.
- [58:32]
B
And the second question was some questions about subjective poverty. Yes, and I was last year, almost a year ago, reporting that 13, I think percent over 10% of Greeks face material food insecurity.
- [58:51]
D
I would tell you that any non positive indicator worries me, and I said this before myself, there are still challenges to be met, citizens to be supported, businesses to be supported, and many moves that need to happen at the Greek level. But if I look at the macro data I mentioned before, convergence to Europe in real income PPP, it was 62% in 2019 and 70%. Now, if you look at average inflation, 21% since 2019, minimum salary has increased by 35%, average salary by 28%. Now those are numbers. Do they hide certain things? Yes, they do. Because if you look at the spike in electricity prices, spike of food prices, or the spike in rents, which is on all other topics, we're below the EU average. Performance in rents were not. And in rents we are not. Because we started from a very low point ourselves. We were after an existential crisis of 10 years. So the rebound effect also as a function of growth was more vivid and more evident. We fully understand that there are specific citizens and many people that we know who are facing very significant challenges if they live in rent and if they have income challenges through the lowest basic thing at the lowest income brackets, they need to be further supported. We're doing our best to achieve this. And if you look at the last tax reform that we delivered, it had this mindset at its core. This is what we tried to do. But is there a magic wand to solve for all of those problems simultaneously and converge with the EU average at once? I think that modern Greek history teaches you you that whomever over promised that this could be delivered by a single piece of law or a single line of law fundamentally ended up costing more to the economy. And we paid a very high level of tuition. So in this regard, right now what we need to achieve is to continue along the same path and to continue delivering as quickly as we can, as best as we can. Challenges are still there, we need to meet them.
- [60:42]
B
It means that we run out of time. I don't know if you would have the kindness to take another couple of questions after you have the opportunity, but we'll keep it very short. So I want a question by the gentleman over there and the gentleman exactly at the meeting.
- [60:56]
D
Thank you very much. So Minister, 15 years ago a lot of European governments were offering Greece advice on what to do. Now like Rachel Reeves has her budget coming in two weeks time. Do you have any advice for her.
- [61:13]
B
For the uk?
- [61:16]
G
Hi, my name is Floris, I am a student here at the Alessia, the Department of Economics. And as any self respecting student, I spent my evening reading the public debt managing authorities report. So what I saw was frankly insane. Our debt is very well hedged. The effective rate we're paying is 1.8%. It's a hedge fund manager's wet dream. To be frank. Why do you feel the need to pay this debt prematurely? It's a thing you have reiterated again and again. Can't this be used more productively? That's my question.
- [62:03]
D
Thank you. The answer to the last question is no, it can't. And if you ask the pdma, the Public Management Authority, they will tell you that this does not interact with our public spending. It's a function of the EU directive that I mentioned before. So we wouldn't be able to differently if we had a different policy use that funds to channel them directly to Greek citizens. At the same time, what the pdma, the Greek PDMA is doing, and I can tell you that they're doing a wonderful job under any government. They are the most phenomenal public servants that you can meet. I think they should have an award, to be frank, visa with what they achieved. Because the numbers that you cited at the beginning, today's numbers, because I spoke with the head of the PDMA, is the average rate of 1.75. The website says 1.79, but the real number is 1.75. Average rate, weighted average maturity, 19 years, whereas the European average is 8.5 years. If you see what they did with the yield curve, they are phenomenal. So what they truly believe is that this repayment that we're trying to do ahead of schedule, it's acting very well, both in terms of fixing the yield curve, but also in terms of signaling to the markets that Greece is not only back, that Greece is also open to investment and Greece is credible. Final point, do I have any advice? I don't have any advice because what I said at the beginning, I will reiterate, the word hubris is Greek. I don't plan to fall on that trap. But what I can say is we have learned many lessons out of this experience. And the core lesson is that Greece incurred a lot of collective social pain because of what happened in the previous decade. Let's not do it again. Thank you.
- [64:02]
E
Minister.
- [64:02]
B
Thank you so much. It's been really, really a pleasure to host you at the lse. The conversation was very enlightening. But also, if I may say, thank you for everything that you've done for the country and I wish you every success in the future. And let me thank again the Hellenic Bucket association for the collaboration organizing this event. And of course, stay tuned. Follow our events and our other activities through our website and the social media. Please, let's do another round of applause now.
- [64:45]
A
Thank you for listening. You can subscribe to the LSE Events podcast on your favorite podcast. Apply and help other listeners discover us by leaving a review. Visit lse.ac.ukevents to find out what's on next. We hope you join us at another LSE event soon.