ECONOMICS Bloomberg Businessweek July 29, 201927PHOTO
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○ Greece’s new prime minister
must move quickly to capitalize
investors’ goodwillKyriakos Mitsotakis is a man in a hurry. Just days
after being sworn in on July 8, the new Greek prime
minister announced that parliament wouldn’t be
breaking for its traditional summer recess. There’s
just too much work to be done.
Yields on the country’s benchmark 10-year
bonds have fallen to record lows since Mitsotakis
was elected, a sign that investors embrace his
business-friendly message. On the campaign
trail, the 51-year-old former banker and man-
agement consultant promised to lower taxes
and jump-start €11 billion ($12.3 billion) worth of
projects that have fallen victim to the country’s
crippling bureaucracy.
To keep sentiment from souring, Mitsotakis
must waste no time in demonstrating that the first
Greek government elected after the 2015 bailout
has the stomach to overhaul the economy and
curb corruption, red tape, and tax evasion. He’ll
also need to convince a crisis-weary populace that
he can lead the country into better times—while
facing many of the same constraints from credi-
tors that his predecessor, Alexis Tsipras, did.
On the plus side, Mitsotakis inherits an
economy that’s on the mend after contracting
by a quarter during Greece’s decade-long debt
crisis. Growth was 1.9% in 2018 and is on track
for about 2% this year. Foreign direct investment
climbed to €3.6 billion in 2018, the most since- The Athens Stock Exchange General Index
has advanced more than 42% this year, making it
the world’s top performer.
Before they commit more money to Greece,
business executives and money managers will want
to see if the prime minister follows through on his
campaign promises and if the measures stick, says
George Stamas, president of the Hellenic Initiative,
which was founded in 2012 mostly by U.S.-based
Greeks to help shape the country’s recovery. “They
will wait to see during the first 100 days what the
legislative actions will be and whether Greeks will
take to the streets again,” he says.
The scion of one of Greece’s most politically
prominent families—his father was a prime
minister, his older sister served as foreign minister,
and his nephew is mayor-elect of Athens—
Mitsotakis attended Harvard and worked at Chase
Bank and McKinsey & Co. in London before tak-
ing up politics. While his New Democracy party
enjoys a comfortable parliamentary majority,
which will help speed passage of legislation, he’s
demonstrated he won’t shy away from conflict.
After he was appointed administrative reform
and e-governance minister in 2013 by then-Prime
Minister Antonis Samaras, Mitsotakis oversaw
the firing of thousands of state employees. The
move was a stipulation from creditors, including
the European Commission and the International
Monetary Fund, who engineered a succession of
rescue packages that have totaled about €290 bil-
lion. He later scrapped the right of civil servants
to take six extra days off a year if they worked at
computer screens for more than five hours a day,
calling it an “anachronistic” privilege.
Mitsotakis is targeting growth of 4% a year by- To attain that goal, “Greece needs to attract
a volume of foreign direct investment that’s at
least double the current €4 billion per year,”
says Wolfango Piccoli, co-president of Teneo
Intelligence, a London-based consulting firm.
Reviving stalled projects will be one of the prime
minister’s top priorities, he’s said. Among those are
Hellinikon, a plan to transform the site of a former
airport on the so-called Athens Riviera into a sprawl-
ing, master-planned development. Renderings for
the project, which will sprawl across a site more
than two times the size of New York’s Central Park,
depict luxury apartments and hotels set amid lush
gardens, in addition to a casino and marina.
Valued at €8 billion and expected to gener-
ate more than 75,000 jobs, Hellinikon has been
mired in red tape for about five years. Its back-
ers include Greece’s Lamda Development, China’s
Fosun International, and Eagle Hills Properties of
Abu Dhabi. “This project must not be delayed, not
even for a minute longer,” said Mitsotakis in an
interview with Bloomberg in October. “One way
or another, Hellinikon must get off the ground
in 2019.” Not surprisingly, the first meeting orga-
nized by Adonis Georgiades, the new economy
and investments minister, was with representa-
tives of Hellinikon’s investors.
To advance existing projects and draw fresh
capital into priority segments such as high-end tour-
ism, renewable energy, and agricultural products
like wine and olive oil, Mitsotakis will have to tackle
what Stamas calls Greece’s “four deadly sins”: a
slow judicial system, a corrupt public sector, and
a Byzantine tax code, and excessive bureaucracy.
“Changing the tax system can drive changes for the
other sins as well,” Stamas says.
The prime minister wants to quickly legislate
some ambitious tax changes. Plans call for the cor-
porate tax rate to fall from 28% to 20% by 2021.
○ Foreign direct
investment in Greece
€ 4b20
2009 2019*