Prime Minister Mitsotakis, a financial expert, scraps populist policies and implements intensive structural reforms.
Spata Business Park, 33km east of Athens, the capital of Greece. Microsoft, the world’s largest software company, is building its first data center in Greece here. Microsoft plans to invest 1 billion euros (approximately 1.44 trillion won) by 2025 to build a 19.2MW (megawatt) data center on an 85,000㎡ site. In Thessaloniki, the second largest city after Athens, pharmaceutical company Pfizer invested 650 million euros (about 938 billion won) to create a digital innovation research complex. Thessaloniki is the hometown of Pfizer CEO Albert Bourla.
A large number of multinational companies, including Amazon, Boehringer Ingelheim, Volkswagen, Cisco, JP Morgan, and Meta, are investing in Greece. The scale of Greece’s foreign direct investment (FDI) in 2022 is 7.928 billion euros (about 11.442 trillion won), a 48% increase from the previous year. This is a 76.8% increase from 2019 before the COVID-19 pandemic, and is the highest since statistics were officially compiled in 2002.
Investment enthusiasm is revitalizing the market. Greece’s stock market growth rate over the past year (as of the 4th quarter of 2022 to the 3rd quarter of 2023, reflecting prices) amounts to 43.8%. In addition, with the end of the COVID-19 pandemic, the tourism industry, which can be said to be the foundation of the Greek economy, is growing explosively. Last year alone, more than 10 million tourists visited Greece, creating an economic effect worth 21 billion euros (about 30.3 trillion won). The economy is also improving as the tourism industry, which accounts for 18.5% of Greece’s gross domestic product (GDP) as of 2022, is revitalizing.
Greece, once called the ‘sick man of Europe’, is recently experiencing a revival. Greece, which has been bailed out three times due to sovereign default since the 2008 global financial crisis, is showing the highest economic growth rate among European Union (EU) member countries due to a decrease in national debt and investment by foreign companies. Greece’s GDP growth rate was 8.4% in 2021 and 5.9% in 2022, which is far higher than the EU average GDP growth rate (5.4% in 2021 and 3.5% in 2022). The European Commission estimated that Greece’s GDP growth rate will reach 2.2% in 2023, and is expected to maintain an upward trend thereafter, reaching 2.3% in 2024 and 2.3% in 2025. Exports also increased. As of 2021, Greece’s product export scale has increased by 90% compared to 2010. During the same period, the average export size across Europe only grew by 42%.
The national debt-to-GDP ratio, which had been over 200%, also dropped to 171%, the lowest level in 11 years, in 2022, and appears to have fallen to 160% in 2023. International economic experts predict that Greece’s national debt ratio will be lower than Italy’s (144.4%) by 2026. Greece also repaid the bailout loan it borrowed from the International Monetary Fund (IMF) in 2022, two years ahead of schedule. Global credit rating agencies Standard & Poor’s (S&P) and Fitch upgraded Greece’s sovereign credit rating to ‘investment grade’ in October last year. The ‘junk’ label was removed for the first time in 13 years. As a result, foreign pension institutions and large investors can now purchase bonds issued by the Greek government.
British weekly current affairs magazine ‘The Economist’ named ‘Country of the Year’ last year among member countries of the Organization for Economic Co-operation and Development (OECD) with the best performance based on five economic indicators, including core inflation rate, inflation rate, GDP growth rate, employment growth rate, and stock market performance. ‘ Greece was selected. The Economist highly evaluated it as “a surprising turnaround for Greece, which was considered a byword for an insolvent country.”
The reason Greece has been experiencing such serious economic difficulties is because of its excessive populism, to the point where it is called a ‘welfare paradise.’ Former Prime Minister Andreas Papandreou, who led the left-leaning Socialist Party, was assessed as having plunged the economy into a quagmire during his two terms in office from 1981 to 1996. Former Prime Minister Papandreou implemented an unconventional welfare policy, saying, “We will do whatever the people want.” Despite the fiscal deficit, he implemented policies such as free education, increased pension and minimum wage, and free medical care.
Greek citizens are protesting in front of parliament in June 2011 against the conditions for providing bailout funds proposed by the International Monetary Fund (IMF). WikipediaA representative example is former Prime Minister Papandreou’s policy to increase jobs. He hired a large number of civil servants in the name of providing jobs, and the number of civil servants increased to 850,000. It was one in five working age people. The wages they received were 1.6 times higher than the private sector average, and the total monthly salary of public officials exceeded half of GDP. Another example of excessive welfare is pension. The pension for the Greek retirement generation has an income replacement rate of 95%. It’s almost the same level as when I was working. In the end, national debt soared, and even major industries such as shipping and tourism were hit hard by the 2008 global financial crisis, ultimately leading to catastrophe. From 2010 to 2015, Greece received bailout loans totaling 289 billion euros (approximately 416.5 trillion won) three times from the IMF and the European Central Bank (ECB), barely preventing national bankruptcy.
However, former Prime Minister Alexis Tsipras, who led the radical left coalition (Syriza) that won the 2015 general election, rejected structural adjustment and austerity policies from the IMF and others even though the country was deep in debt. He continued to pursue populist policies to win the favor of voters, including significantly raising the minimum wage. Former Prime Minister Tsipras rejected calls for austerity measures, criticizing creditor countries such as Germany and France as ‘predators’. Eventually, as the economy worsened, Syriza lost the 2019 general election, and former Prime Minister Tsipras was forced to step down.
Greece’s revival was thanks to the policies pursued by Prime Minister Kyriakos Mitsotakis of the center-right New Democracy Party, who came to power after winning the general election at the time. Prime Minister Mitsotakis placed economic growth as his top priority, abolished many populist policies such as free medical care and the pension system, and promoted intensive structural reforms. In addition to drastically reducing the number of civil servants, he promoted tax increases, public sector wage controls, widespread privatization and pension cuts. He also improved the investment environment to meet international standards, including breaking down bureaucracy and establishing a national transparency organization to prevent corruption. He also introduced a cash receipt system to boost the underground economy. Prime Minister Mitsotakis lowered the corporate tax rate from 28% to 24% and the dividend income tax from 10% to 5%, and introduced a program that grants EU residency status to those who purchase real estate worth more than 500,000 euros (about 721 million won). It also started attracting foreign capital by establishing a new company. The New Democratic Party, which succeeded in reviving the Greek economy, won a landslide victory in the general election in June last year, and Prime Minister Mitsotakis succeeded in reappointing his term.
Prime Minister Mitsotakis can literally be said to be the savior of the Greek economy. His father, who comes from a prestigious political family, is Konstantinos Mitsotakis, who served as prime minister from 1990 to 1993. Her older sister, Dora Baco Iannis, was the first woman to serve as Mayor of Athens and Minister of Foreign Affairs. He entered politics by being elected as a member of the National Assembly in 2004. He served as Minister of Administrative Reform from 2013 to 2015, and was elected party leader in 2016.
Prime Minister Mitsotakis is a financial expert with extensive knowledge and practical experience in the overall economy. After graduating from the University of Athens in Greece, he received a bachelor’s degree in sociology from Harvard University in the United States and a master’s degree in international policy from Stanford University. After earning a master’s degree in business administration (MBA) from Harvard Business School, he worked at Chase Bank in the UK and McKinsey, a global consulting firm.
When the COVID-19 pandemic broke out early in his administration, Prime Minister Mitsotakis minimized the damage compared to other European countries through rapid lockdown measures, tracking of infected people, and a successful vaccination campaign. Afterwards, he decided that the most important thing to revive the Greek economy was to boldly abolish populist policies. He pushed through drastic restructuring and market economic policies despite resistance from some people. As a result, the Greek economy cruised despite the energy crisis and inflationary wave caused by the heightened geopolitical crisis caused by Russia’s invasion of Ukraine last year.
Prime Minister Mitsotakis is actively promoting the ‘Greece 2.0’ plan, a five-year mid- to long-term economic growth program starting in 2021, to make Greece the most prosperous country in Europe. Through this program, which invests a total of 58.9 billion euros (approximately 85 trillion won), including 31.2 billion euros (approximately 45 trillion won) of the EU recovery fund, the Greek government is investing in △green transition △digital transformation △employment and talent development △private investment and economic development A total of 106 projects are being implemented in 68 fields, centered around four sectors including transformation. Prime Minister Mitsotakis emphasized, “Greece is no longer Europe’s ‘black sheep’ (a nuisance),” and added, “Greece is now being reborn as the most stable country in Europe.” The American New York Times evaluated, “Greece, which had debts it could not repay, has now become the fastest-growing country in Europe.” Greece, once called the ‘land of myths,’ is rewriting the myth of new resurrection.
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Jang-Hoon Lee, international affairs analyst [email protected]
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.