Eleni Varvitsioti (ΕV): Are we officially entering a second era of transatlantic trade war, or is this a high-stake negotiation tactic from the Trump administration? 

Mathias Cormann (MC): The first point, I would like to make, in response to the introductions, I’m not sure that the OECD needs to rethink its role. Our role is to provide objective evidence and facts on the outcomes of policy choices and I think the world needs a positive objective evidence, in fact, more than ever to help in forming their conversations and hopefully hope facilitate better decisions and the OECD is a platform and a forum to facilitate dialogue and international cooperation and to find common and shared solutions to shared challenges.  And I think the world needs that more than ever and we’re, of course, an organization that is based on the principles of freedom, democracy, market-based economic principles, the sustainable expansion of global trade international cooperation, which I think are all principles that remain highly relevant today.

Now when it comes to the US tariff announcements, I’m not privy to any particular information on what the intention is in terms of decisions from here, out of the White House, I would say, is that already in our most recent economic outlook in March, that we updated since December, which was before the 2 April announcement, and before the announcement this morning, we had already downgraded the outlook for the global economy in terms of growth outlook, we had already upgraded it when it comes to inflation, and of course in the lead up to our next economic outlook in June in the margins of Ministerial Council Meeting. Based on what has happened so far, if there is no further change, then we would expect that there would be a further reduction in the expected level of global growth, there would be further upward pressure, further increases in terms of inflation outlook. Of course, this is not the direction that we would want to go and the message that I’m in giving to everyone is that, to the extent that there are issues to be addressed in global markets and in the rules-based global trading system and there are, there should be better ways to address them then through unilateral tariffs, and we would encourage everyone to engage with each other proactively to find solutions on the bilateral and multilateral bases, including through the OECD, to tackle things like unfair trade practices to continue to make progress in terms of leveling the global playing field in terms of dealing with supply chain resilience issues, economic security and so on, but to do so without resorting to tariffs and by keeping markets open. I mean, that is very much the position of the OECD: we prefer and we stand for and we strongly encourage positive bilateral engagement, multilateral engagement to resolve any policy differences and issues rather than to pursue an approach of unilateral measures.

ΕV: But this doesn’t seem to be the case right now. So on your revision, how big would be the revision for a slowdown? 

MC: Well, we always go through an orderly process in revising our economic growth forecast. And we’ll be announcing that in early June, but the direction of traffic, based on what we know now is that, overall, if everything stays the same, we would expect global growth to be lower and inflation to be higher. As we go forward, if our assumption is right, if our hypothesis is right that this sort of widespread tariff measures lead to lower growth and higher inflation, then that will start to come through in the data, it will start to come forward in the evidence and hopefully improve the quality of the conversation here and in the United States 

ΕV: Minister, as an EU member, Greece is directly exposed to tariffs, maybe not in such extent as other countries. But there’s an estimation of one billion in direct GDP impact more or less. Are you more concerned though about second-order effects, I mean, rising global uncertainty, recession risk?

KYRIAKOS PIERRAKAKIS (KP): Let me begin by saying that it’s great to share the stage with Mathias Gorman, with whom I collaborated very closely in the context of my previous ministerial capacities in education and in digital transformation in the global strategy group. By definition, I will collaborate more now in this capacity and in those challenging times or I would say, interesting times as the Chinese proverb says, may you live in interesting times. Now vis-a-vis the Greek stance of this, we are a free trading nation in a free trading union. We are very skeptical of tariffs by definition; this is what we learn at school in fundamental economics from the repeal of the Corn Laws in the 19th century to the Smoot-Hawley Act of the 1930s. We learned that tariffs are bad for the economy. And this creates adverse effects. 

We don’t yet know what those effects will be per se. You mentioned the first-order effects: these are low for Greece, because we have a small share of exports to the United States; it’s less than 5% of our total share of exports. Primarily in agriculture products, cement, aluminum and a series of other industries, but limited (share).

It would be, though quite hypocritical to focus only on the first-order effects. Because a core element potentially for us would be the second-order effects: I would say out of 3 potential variables, the first one being uncertainty, which is problematic for the market; the second one being a potential recession happening in EU markets, which are the core markets that primarily affect us. And the third one would be the European response to the original American decision.

Especially with regards to the latter, I would say and reiterate again that we, as the Greek government, we would be very skeptical vis-à-vis responding to tariffs excessively with tariffs. I think that we should be very conservative in terms of how we treat this specific instrument, exactly because of the fact that we believe that this is adversely wrong for the economy; we, as a member-state of the European Union seek to primarily focus on protecting our national interests in this debate; we will, of course shape together collectively and implement the European decision, but as the primary stance, we are very conservative and very skeptical about the specific policy instrument. 

ΕV: Mr. Cormann, what do you think should be the EU level response? 

MC: Well, I think that the line that my good friend Kyriakos put forward is a very sensible line. A trade war and back-and-forth tariff wars is not in the interest of anyone. And I think we need to try in the best possible way, in a calm, strategic and coordinated fashion to engage with what is emerging and find ways and hopefully support it by objective data and evidence in a not too distant future to engage in a more constructive bilateral and multilateral dialogue to find better ways to deal with some of the issues that have been rightly identified as in need of being resolved when it comes to global markets and the rules- based global trading system.

ΕV: Elon Musk recently suggested a future with zero tariffs between EU and the US. Do you think this is a fantasy or could a transatlantic free trade agreement take place? 

MC: That’s a great aspiration. It’s one that I strongly support and I wish Elon Musk great success in persuading the President of the United States along those lines. 

KP: Broadly speaking, as I mentioned, we are against tariffs; your first question was, “is it a policy or is it a negotiation?” Every policy has an element of negotiation, tacitly, or vividly, or by articulating it; but even tacitly, there are game theoretical elements in many such policies. How you respond to the original decision made is what will define the spectrum and the number of rounds that we will have in this game. I mentioned the Smoot-Hawley Act of the 1930s: it was not a unilateral tariffs act on behalf of the United States; it involved a series of rounds of responses which eventually led to an average level of tariffs on behalf of the US being at 60% and which further led to a deepening of the Great Depression. This is why one should be very conservative in terms of defining what has happened and saying that this is the end result. It’s not the end result: it will be defined by our further response to this. Ideally we want a zero tariffs environment, but we should also be frank vis-à-vis the challenges we face as a Union.

For us, the Draghi report, the Letta report should be the North in the compass. What does the Draghi report say? It says that we have internal barriers within the European Union -in manufacturing they’re in the area of 45%, in services they’re in the ballpark figure of 110% of equivalent tariffs. We should be focusing a lot on removing those barriers, because if you look at the trade of services and goods happening within the European Union, it’s less than half compared to the trade of services and goods happening within the States of the United States, so we should focus more on this. And we should focus more on barrier removal and diminishing of administrative burdens within the Union. 

ΕV: Is this though the discussion that takes place with your colleagues in Europe right now, or there’s also the danger that, Washington might try to do unilateral agreements with each member-state? Do you feel that there’s a will to be all united and have a common answer? 

KP: I think this will happen by definition, we’ll be heading to Poland at the end of the week for the ECOFIN and the Eurogroup meetings: we are by definition a trade union so, by definition, we should have a single response which will be collectively shaped by the discussions that we will have with our colleagues with the other member-states, and to answer to your first point. Yes, implementing the Draghi report and removing internal barriers is a topic of discussion of those debates, and it should be. 

ΕV: Mr. Cormann, do you think this trade shock, if actually is applied, could be an opportunity? Are there chances to reorient towards, but for Europe, I mean, towards new markets, attract new businesses and diversify? 

MC: Well, look, I certainly hope that the situation we are currently in is not the situation where we end up, in the final analysis when it comes to US tariffs on economies around the world. But having said that, and again, I mean, I very strongly support what Kyriakos has just said and that is that the EU has got an incredible asset, which is its common market, but it’s not leveraging that asset to its full potential. And when it comes to the services market, in fact, intra-European trade barriers have gone up instead of going down. And then of course, -I’ve said in my opening remarks just now- if the European Union lowered its intra-EU trade barriers for services for the same extent as it occurs in the US, GDP would grow by about 7% over the next 7 years. And so there are things that in the digital services market, there are clearly things that need to be done in order to ensure a cross-section of regulatory setting to better harmonize and remove barriers of the capital markets union. It’s long overdue to harmonize insolvency regimes and so on, and if what is happening out of the United States now provides further impetus and political momentum to tackle some of these long overdue reform priorities, then that’s going to be a good thing for you. These are things that Europe should be doing in any way. And I do hope that what is happening in the United States will ultimately be adjusted back to a better setting, but, if this provides an impetus for Europe to make some decisions that need to be made, then that’s going to be a good thing. 

ΕV: Ιn the Greek economy: recovering resilience funds are finishing in 2026. We have 7 years of strong growth. Foreign direct investment is still below the EU average, there is uncertainty, and we said, which doesn’t really help. How do you plan to reboot some kind of momentum? I mean, is there any way that you can find other patches that there could be growth? 

KP: Well, I would say, by doubling down on the pre-existing policy that we have on fiscal stability on the one hand,which is not a policy choice, post-IMF bailout, it’s a regime, and we should be following this regime, because it’s fundamental, it’s existential for our economy. And on the other hand, on unleashing a spectrum of reforms, where the role of the OECD is critical vis-à-vis the toolkit and how to diminish administrative burdens and implement reforms within your economy. 

Now having said this, if you look at what’s happening with investments over GDP, we dropped to 10% in terms of investments as a share to our GDP in 2019, and now we have reached 15.5%, the EU average is 20%. So there is an investment gap, but 60% of that gap is covered. We need to run faster, we need to implement even more reforms; we need to think out of the box in terms of implementing them.

I will just cite one such reform in the context of my previous “hat”: the Private University Bill, which has been a debate in Greece for decades, apart from having an educational impact, has an economic impact. If you look at what the 12 proposals include vis-à-vis their announcement, it’s a half-a-billion investment without (counting) the spillover effects and without the multiplier effect in the economy, announced in terms of buildings and human resources, hiring professors within the next 5 years; there’s an analysis currently being made vis-à-vis the GDP impact of this, which is probably going to be much higher. So, unleashing such reforms was the debate in the Economic Council, which we had a couple of days ago, where all the economic-line ministries have to coordinate in terms of diminishing regulations, cutting red tape and orchestrating our actions better. You can see that in many things: take data centers; we passed a very targeted regulation back in 2020, a piece of legislation. Rendering Greece a public-cloud-first policy country at the beginning, which was a signal to Microsoft, Amazon and Google to come and locate their data centers here. This should be met by cutting red tape in terms of where they will be located, zoning etc, and there were some delays in terms of that. This better orchestration will allow unleashing more growth in the future: that’s the best policy option that we have. And I think that we can act also in terms of our fiscal performance, which everyone knows is universally acknowledged to be sound as a signal to the markets that this place is actually a beacon of stability. 

MC: I’m sorry, I just need to correct one data point that I previously provided. And that is, our estimates indicated that if barriers to service trade into EU are reduced to US levels, the level of EU labor productivity would be almost 7% higher after 7 years.

ΕV: Minister, you spoke about red tape and reducing it. Do you have any concrete steps underway? Since the beginning of the crisis, we’ve been talking about reducing red tape, but in so many sectors, there’s so much licensing, so much bureaucracy in order to start a business, get a license in something…how are you aiming to reduce that? 

KP: Well, Greece, unlike most other places that I know of, actually has a data set of mapping the full scope of services and processes that it has vis-à-vis the interaction that the government has with citizens or corporations. Actually, we’ve never communicated this to the extent that we should have. We communicated digital services, gov.gr, but there is a platform called Mitos (mitos.gov.gr) where we have codified the full scope of services that we offer to citizens and corporations. And I think that this is effectively an X-ray of the Greek state. No other country that I know of has done this at such a comprehensive and granular scope.

Mapping is (only) the first step; now you need to solve it. It is properly mapped. It has mapped around more than 5000 services that we offer to citizens, the equivalent for businesses is business process engineering, so we should do state process engineering, and we should primarily focus this on processes where you have a strong multiplier effect in the economy. Buying and selling property is the obvious one, but I would say that there are many others which we have debated for a long time and we haven’t yet diminished the steps. And what you will see in this platform, which is publicly available and you can access it, it is that for every specific service that we offer to citizens, the explicit number of steps, the paperwork required, the digital services associated, the average cost, the average time, the relevant legal frameworks, everything is there on the platform…

ΕV: So the mapping is there, but from mapping to actually reducing the red tape?

KP: Well the only proper response is a tautological one: you do it (only) by doing it, and now is the time to do it, it’s there. We have the political will to solve it, and we plan to coordinate together with the other ministries, which touch upon the specific services in the specific steps. The Ministry of Investments, Mr. Theodorikakos, the Ministry of Interior… We will all collectively cooperate to increase government efficiency in the coming months. It will be a goal publicly set by the Prime Minister. We have to do this, it’s part of the Draghi report, the spirit of the Draghi report which touches upon, of course, the trade of goods and services between EU member states ; we should also focus on our own red tape. So, in the spirit of this report, we plan to do the same in the coming months. 

ΕV: One of the major problems in the Greek economy and is always highlighted by the IMF reports, is the shrinking Greek population. And I want to ask Mr. Cormann, what should the Greek Government do about it? Is it managing migration that could sustain long-term productivity? Is it up-skilling? 

MC: Firstly, we’ve got to acknowledge how much work the Greek Government has actually done in boosting employment participation, and in bringing down very sharply the unemployment rate here in Greece. The unemployment rate in February was at 8.6% down from the peak of about 27.9% back in 2013, and the long-term average is about 14.9%. So, the unemployment rate is remarkably low so on a long-term average. It is also true that the employment participation rate in Greece is still well below the OECD average. So, there is actually still a lot that can be achieved by boosting the level of workforce participation for both men and women and to make up some of the impact of population aging, on participation rights over the medium-to-long term.

Skilled migration can be an important part of the answer in Greece. I guess there’s a language question that sort of comes into this, which makes it perhaps a bit more challenging than for other economies, depending on the types of jobs, and yes, I mean, making sure that you optimize the outcomes, that you optimize productivity of your human capital in your country, including through high levels of education and skills development (upskilling, reskilling) making sure that the skills development matches the needs of the economy. These are all important parts of the overall strategy – but let me just say that the most important opportunity for Greece is really to continue to work towards lifting the level of workforce participation across the Greek economy. There is still opportunity to improve.

ΕV: Do you have any specific recommendations? 

MC: What we are recommending to the Greek government is to continue to pursue efforts to incentivize increased workforce participation, to continue to reform education and skills development approaches – which the government is doing – in order to help boost productivity. 

ΕV: You have praised Greece’s fiscal performance and digital transition (led by) the Minister (in his previous capacity as Minister of Digital Governance), but there hasn’t been enough justice reform and public sector reform… What would you pinpoint as the major sector that needs to reform as soon as possible?

MC: In terms of in Greece, I mean, what we are essentially saying is to stay to course when it comes to fiscal consolidation and bringing down the level of debt, pursue reforms to boost labor productivity. And I mean, this is an across-the-board proposition. I mean, these are probably the 2 most important areas of focus for the government that we noted they’re continuing to pursue. 

ΕV: One of the metrics where Greece (is criticized to be) lagging is in the foreign direct investments. When you see foreign investors, what’s the main issue that they have, and how can you facilitate someone to come and invest in Greece when we’re not back in 2018, where wages were lower and opportunity was larger? 

KP: Well, I would say, looking at Greece, circa 2019, if I were to make a comparison using the language of a computer scientist, I would say that Greece always had the hardware, but lacked the software, which was having the specifics that you needed to have on the ground for investment to unleash its potential, and have the maximum effect. The fact that Greece was politically unstable was a huge problem. Political stability is something that the investors seek, and political stability is what we currently have. 

ΕV: But we have (stability) and investors are still lagging…

KP: So I would say a full scope of things, political stability being one of them, the investment grade being another, the escalation of debt that being another… So if you look at the metrics, the fiscal health of the economy is better; what we should do even more systematically is to do all the scope of the reforms that you mentioned before. Basically, things where we collaborate with the OECD: removing barriers, cutting red tape, further reform of the justice system and public administration, making the level playing field more leveled compared to what one would face internationally. But, overall, the fiscal status and the political and economic stability status of Greece is something which, I would say, investors much appreciate in the interactions that we already have with them; we need to remove the rest of the barriers. 

ΕV: But about what you’re saying, we’ve heard it many times from your predecessors as well. Does this mean that it’s really hard to happen, or that there was no political will? Why this time will it be different? 

KP: Well, political will is there. It is hard to happen. There are certain areas where we have been debating things for a very long time, and it took us some time to mature. I mentioned the private university bill. The discussion of this was since 1986. It happened by this government. The discussion of digital transformation is something which I remember since when I was a student. It happened by this government. A series of other reforms are happening by this government for the first time. To be frank, the reforms that Greece needed in 2019, the scope of those reforms was 360 degrees. It was huge. So, some things have already happened. Some things have yet to happen. The political will is there, the message of the public, and basically what they said by voting us is “complete those reforms”.  So, what I can say is that we plan to do the job, and we will.

ΕV: Mr. Cormann, are you satisfied by the reform power of the country or should the Government do more in certain areas that you think are a major impediment for growth?

MC: I think that over the last five or six years, the Greek economy has been very much on the right path. Growth has been strong. The unemployment rate has come down very rapidly. There has been a rapid reduction in the level of debt as a share of GDP, even though it’s still very high by OECD standards. It came from about 180 percent as a share of GDP in 2019 just before the COVID spike to about 150 percent thereabouts at the end of last year. The forecast is for it to go below 150 percent this year. So, that’s all good. The main areas to focus on as I’ve said is labor productivity in Greece which is still much too low compared to the OECD average. I think that the workforce participation of older people – when I say older, I mean people in their 50s in Greece is well below the OECD average. Workforce participation of women across the Greek economy is below the OECD average. They are all areas where the government can do more work. And we would certainly encourage a continued commitment to fiscal consolidation and debt reduction as a way of further building resilience in the context of future economic shocks, but also to create capacity with spending pressures related to population ageing…

ΕV: (Minister,) would you like to do a final comment? We have 15 seconds.

KP: We plan to collaborate very closely with the OECD vis-à-vis integrating and metabolizing the message on the specific policy recipes that they will provide in order to provide the maximum boost to the economy by reforming it, especially in the areas where we see the highest potential of producing those reforms.

ΕV: Thank you very much both of you.