A two day Economist conference, hosted by Athens in July, was billed as a keynote discussion with the new Greek administration to gage their posture on matters ranging from the potential of the country following its emergence from three stringent bailout programmes, EU concerns such as the threat of another economic crisis, or what is required for the European bloc to be more decisive on the world stage.
In addition to high profile European, American and Russian guests, the conference also – and most notably – hosted the Foreign Affairs Minister of the newly christened North Macedonia, Nikola Dimitrov, symbolising the ending to a decades long dispute with Greece in the shape of the recently signed Prespa accord – the main achievement of which was the renaming of the Balkan state from its previous contentious title of Macedonia.
The name of Greece’s neighbour mirrored that of its northern Greek province, a historic cradle and the birthplace of Alexander the Great. Having been the source of tensions between Skopje and Athens for over 27 years, the reaching of an accord between both countries was deemed a crucial victory for the west, as it meant Greece would at long last lift its veto on North Macedonia’s accession to both the EU and NATO.
While the New Democracy party has been a firm opponent of the Prespa accord – especially when it was in opposition – newly elected Prime Minister Mitsotakis has stated that his administration will not hinder North Macedonia’s progress toward EU accession. Nonetheless, the Greek government is expected to keep the Macedonian administration under scrutiny to ensure that all aspects of the accord are fully upheld.
“The Prespa Agreement was not the main issue during the election campaign period. Kyriakos Mitsotakis has repeatedly stated that he would not put into question an agreement that has been ratified by the Greek state”, explained Nikolaos Tzifakis, Associate Professor of International Relations at the University of the Peloponnese, adding that if North Macedonia continues to respect and implement the Prespa Agreement, including the vital provisions on political and economic cooperation, the country should not be concerned about Greece hindering its developing relationship with the EU.
“Athens is not expected to change course on the question of North Macedonia’s accession negotiations as long as the implementation of the agreement advances smoothly”, said Tzifakis.
In the meantime, it is anticipated that the Mitsotakis government will take steps to further promote the Macedonian brand of Greek products – considered key to bolstering the image of the Northern Greek region, bearing in mind that goods manufactured in the region are now trademarked as Macedonian.
The Mitsotakis government hosted his international guests from a position of strength, which was not something his predecessor Alexis Tsipras was in the habit of enjoying. While Tsipras deserves considerable credit for catalysing the reforms required by Greece’s creditors under the economic adjustment programme, and steering the country’s return to economic normality, the price exacted by the Greek people meant he was unlikely to retain enduring popularity.
Tsipras did, however, help re-establish the country as a stable harbour in a volatile neighbourhood, and effectively neutered troublesome populist movements such as Golden Dawn. Establishing excellent relations with the US was one of his most notable achievements, as was the signing of the Prespa accord, for which both he and his Skopje counterpart Zoran Zaev were nominated for the Nobel Peace Prize.
However, the Prespa agreement is believed to have contributed to the downfall of Tsipras. Allowing Skopje to retain the Macedonian name was an affront to many Greeks, both on the hard left and hard right, who saw it as a sign of weakness – a vision mirrored by Mitsotakis’ New Democracy party.
New Democracy’s landslide win means Mitsotakis now presides over an absolute parliamentary majority, giving far greater latitude to pursue the reforms the centre-right party deems vital for the country’s economic turnaround.
With opportunity though comes responsibility, and the challenges facing the new government are substantial. In addition to considerable internal hurdles, Mitsotakis has the opportunity to assert and increase his country’s influence on the foreign policy stage. While Prespa offers the Greek business community a long sought after opportunity for better market access to the Balkans, the agreement is also key in bolstering stability in the wider region, providing the new administration with the opening to consolidate Greece’s reputation as the stable centre point of South Eastern Europe.
Speaking at the recent Economist conference, the US Ambassador to Greece, Geoffrey Pyatt, said “Greece is a pillar of stability in the region”, and added that the ambitions of Greece and the US were aligned throughout the Balkans, Eastern Mediterranean, Black Sea and the Levant.
“Greece has also transformed from being a source of problems to a source of solutions for the strategically important region of the Eastern Mediterranean”, he added, saying that Washington was eager to “take our excellent bilateral relations to the next level”.
Evidence of the bolstering of this relationship can be seen in Greece’s inclusion in a new landmark piece of American legislation. The United States Senate recently endorsed a major bill, entitled the Eastern Mediterranean Security & Energy Partnership Act. This legislation would enhance Washington’s support for Greece, Cyprus and Israel in the fields of defence and energy cooperation – of particular importance to Greece as a key guarantor of security in the divided Republic of Cyprus.
The breakaway “Turkish Republic of North Cyprus” – which is only recognised by Turkey – emerged following the Turkish invasion of Cyprus in 1974, in response to a military coup backed by Greece. Regional tensions have lately been on the rise, due in no small part to moves by Ankara aimed at drilling for oil and natural gas within Cypriot waters, included in its Exclusive Economic Zone.
While Turkey’s actions have brought about condemnation from international powers including the European Union and the US, Turkish President Recep Tayyip Erdoğan insists his actions are within international law.
Regional Tensions and Military Concerns
Any potential confrontation between Greece and its old enemy Turkey would have a ripple effect across the Eastern Mediterranean, and further afield. With Erdogan wounded by recent electoral defeats, the Turkish move near Cyprus puts it in perilously close quarters with a newly confident Greece. Militarily, both countries have impressive resources at their disposal.
The new Greek administration has been forthright in its appraisal of the situation in Cyprus. At the end of July, Prime Minister Mitsotakis visited his Greek Cypriot counterpart Nicos Anastasiadis in Nicosia, saying that ending the Turkish occupation of the island’s northern region was a “top priority”, and that any reunification without the departure of the Turkish military presence from Cyprus would be “inconceivable”.
Even during the massive challenges endured throughout Greece’s economic crisis, defence spending has always been a priority for Athens, with an eye firmly focused on Ankara. It has, for example, the largest fleet of battle tanks in Europe. With over 1,300 armoured vehicles, it has six times more armaments than the UK Armed Forces, but still almost 1,000 less than the Turkish Army.
In an interview with Foreign Affairs magazine in 2017, Thanos Dokos of Athens-based thinktank, ELIAMEP, explained that there is still considerable wariness amongst the Greek military of their Turkish neighbour. “The more conservative school of thought among Greek officers is that a large-scale conflict of unknown duration across the Greek-Turkish border can’t be excluded, and thus Greece needs to maintain its high number of battle tanks”, said Dokos.
Tensions between the two nations have not been helped by frequent incursions into Greek airspace by the Turkish Air Force. The Greek military frequently needs to scramble to intercept, and is currently considering upgrading its fleet of F16’s to the next-generation of F35’s to potentially eclipse its Turkish counterparts. Turkey was recently barred from the F35 programme after purchasing significant quantities of Russian military hardware.
Greece’s high defence spending is another addition to the plus column of its relations with the US, which has been highly critical – particularly under the Trump presidency – of the defence spending of EU NATO member states.
Rebuilding EU Relations
The election sweep of New Democracy also gives a rare, albeit welcome, boost to the EU in the shape of an overwhelming victory for a centre-right pro-European party.
Considering the continuing tumult in Poland, Hungary, the UK and particularly Italy, Mitsotakis has the opportunity to use his mandate to reshape the country’s relationship with Brussels. In contrast with its relationship with the US, the economic austerity endured by Greece led to, perhaps understandably, a cooling of pro-EU sentiment in the country as the bloc sought to shore up the eurozone with a diet of austere reforms for Athens.
On the financial front, Mitsotakis has pledged to stick to EU fiscal targets to ensure continuing reform of the Greek economy, also stating that his primary objective is to kick-start the economy by slashing taxes and regulations, while attracting investment. Most importantly, though, Greece’s new premier has set out to renegotiate terms that the Tsipras government agreed to with international lenders, in a bid to reduce the tax burden on workers, and stimulate private sector growth.
Greece committed to maintaining a primary budget surplus, before debt costs, of 3.5 percent of GDP until 2022. However, the measures have hampered government spending and, according to critics – such as the IMF –constrained the economy’s recovery.
Following a meeting between Mitsotakis and the Chief of the EU’s Stability Mechanism, Klaus Regling, the ESM chief said that the EU is a long-term partner for Greece, as a member state of the Union, and that Brussels would be willing to help the government in its efforts to boost competitiveness and sustainable long-term growth.
In terms of taxes for the average Greek, cuts were announced this year by former Prime Minister Tsipras, in the run up to the elections that deposed him. These tax cuts were welcomed by the New Democracy movement, yet they accused Syriza of continuing to target the middle class with high taxes that would continue to diminish the Greek economy.
The Mitsotakis government has set out to legislate an array of ambitious tax cuts. These include a corporate tax rate of 20 percent by 2021 – down from the current 28 percent – halving the levies on dividends by 2020, along with the suspension of the capital gains tax on property and sales tax for construction, for a three-year term.
Greece’s new Minister for Economic Development and Investments, Adonis Georgiadis, said it was his government’s ambition to turn Greece into the most business-friendly nation in the EU, through the riddance of much of Greece’s much-lamented bureaucracy through new legislation that would be introduced to parliament before autumn.
Georgiadis added that the country needed to attract investment, in an attractive business environment, in order to meet fiscal targets and satisfy the country’s creditors. “The European Union wants to have a success in Greece. We will give success to the European Union. We are proud to be Greeks, we are proud to be Europeans”, said Georgiadis.
With this gathering momentum, Prime Minister Mitsotakis can now call on Brussels to back his nation in playing a pivotal role in the Southern Europe region, which has long been pinpointed by the EU as vulnerable to overexposure to both Chinese and Russian influence.
Greece is also on the front line in the simmering – but far from over – migrant crisis, and a main receptor country for refugees arriving in the EU under the deal which the bloc struck with Ankara to help stem the flow of refugees in 2016. With a change of leadership in Brussels in the shape of new EU Commissioner Ursula von-der Leyen, and the newly elected administration in Athens, the opportunities are there for the strong bilateral ties to be re-established and for the EU to recognise the steps Greece has taken to move on from being a drain on the Union’s resources, to becoming a stable and potent partner in the region.