The European Commission should play a greater role in the Greek bailout and push for reforms, rather than the IMF’s obsession with fiscal adjustment, Evangelos Mytilineos said in an interview with EURACTIV.
Evangelos Mytilineos is the Chairman and Managing Director of Mytilineos Holdings S.A.
He spoke to EURACTIV’s Senior Editor, Georgi Gotev.
How do you assess, as a leading private sector stakeholder, the current state of play of the Greek business environment?
It looks like Europe is at a crossroads at the moment. Europe is faced with two issues that have come up in the last few months, and I am referring, of course, to the refugee crisis and the Brexit issue. So the agenda of European leaders and governments looks pretty full and heavy these days and as a result the Greek issue is less important than it was some months ago, in 2015. That doesn’t mean that the situation in Greece has become any better. But I am under the impression that it’s not at the top of EU leaders’ agendas at the moment.
It seems that the situation is not that bad since Standard & Poor’s upgraded Greece’s economy.
That was a very good move that we expected, to be honest, after the recapitalisation of Greek banks, and (the) excellent tourist season that we had last year. We expected some kind of an upgrade. Whether that was a trend or an isolated incident remains to be seen. We all hope this is a trend, but there are still so many things to happen before that becomes a real trend, and as you realise, we are not there yet.
Let’s talk about monopolies. I think your company knows monopolies pretty well. I would also like to raise a question regarding the role of the European Commission. Is the executive very important (in solving) long-standing structural problems in Greece?
Well, since we are part of the EU and the eurozone, the Commission is important to us, as it is for everyone. Now, whether the Commission has played a positive part in the Greek crisis, whether it has assisted Greece in specific reforms, or anything else that could be supportive to the Greek economy, and society, is open to debate. There are many good things that have happened, but also many things have been delayed, while in other things, in my opinion where the emphasis has been put by the IMF, it means more on the fiscal side than the reform side, which is the ultimate goal of the Commission.
So, I think, at the moment, unfortunately, fiscal adjustment comes first. Regarding the reforms, there are a lot of reactions from the Greek administration and system, because nobody wants to change what has been the norm for decades.
I think there is a role here for the Commission to push for much more reforms than have been agreed last summer (in the MOU between the lenders and the Greek Government).
I see a coincidence between what you are saying and what the Greek government is saying: that there is more need for the Commission and less need for the IMF.
I absolutely agree. Everybody says the same, except our friends the Germans, who for their own political reasons insist on the participation of the IMF in the Greek bailout. The IMF has great know-how, to deal with situations like the Greek one. The know-how did not prevent them from making mistakes in the Greek programme, however, as they themselves have admitted.
But things have developed in a way that it’s much more important for the Commission to intervene, because Greece has been slow in real integration into the European Union and its regulatory environment. That is unfortunately the case, and that’s where the Commission comes in to push for this integration, through reforms.
Electricity prices are very high in Greece. Comparatively, in neighbouring Bulgaria, they are very low. Is it so difficult to supply cheap electricity? What is preventing this from happening?
These are two questions. One is the interconnectors in the grid between neighbouring countries and Greece, and the other is the actual price level of electricity in Greece.
Let’s start with the second one. Unfortunately, the collapse of the fuel prices, oil, gas, coal and so on has not dramatically affected electricity prices in Greece. In the last month, lower prices have been introduced by private suppliers, much less than the incumbent PPC. I am under the impression that in the months to come, competition will slowly start bringing some benefits to the consumer.
Regarding interconnectivity between Bulgaria and Greece, there is a band which has a limited capacity. There are imports taking place from Bulgaria to Greece, but the volumes are not big because (of) the band.
When you say despite the fact that electricity prices of global market are coming down, that this is not felt by Greeks, this brings some sort of disenchantment with Greek politicians.
I am afraid that’s the case. I think you are right. Greek people read everywhere and watch on TV that because of the collapse of the oil price, electricity prices have also come down significantly.
The Greek economy has not seen that yet, and there are many reasons why this has not happened. Not least because of the structure of the Greek economy in the Greek energy sector.
Is Greece an energy island?
In a way it has been, but there have been some slow improvements in the last 2-3 years. We as a group have managed to open up the energy imports into Greece back in 2010. Until that time, only the state company, DEPA, could import LNG gas volumes or pipe gas into Greece. In electricity, there is also interconnection. Between Greece-Bulgaria, Greece-Italy, slowly Greece-Turkey, interconnection is coming. This island situation used to be the case, but we have some slow improvement, which I hope will be sped up.
Let’s talk about gas. There is more and more gas available, and gas has been discovered close to Cyprus, Israel. Maybe in the future, it will also start flowing from Iran. It seems that Greece has a chance to become a gas transit route. LNG is also coming to Greece. It looks like a historic chance for Greece to become a gas hub for the EU and the wider region. How do you see that as a leading businessman in the energy field?
As you are probably aware, our M&M subsidiary company and its affiliated companies, together with our partners in (the) gas business in Greece, consume 40% of (the) total gas requirements of the country.
So we have a vested interest in the gas market functioning. We have a vested interest in grids operating properly, not to charge the consumers excessive amounts, and so on.
The possibility of Greece becoming a hub is actually very positive. I would say it has been the cornerstone of successive Greek governments. To get to the situation where Greece can become a real hub with the substance inside, we need to have some developments which are all on the way to happen. That’s of course the materialisation of TAP project (pipeline), it has got to be the IGB interconnector between Bulgaria and Greece and the reverse flow of course. We need to open up, by all means, the Romanian-Bulgarian interconnector, which has been dramatically slow in happening, and that deprives us of connectivity with the rest of Europe.
There have been technical problems there. It seems it has collapsed under the Danube, and they have to do it again.
I am not an engineer and I don’t think that it’s such a large-scale project. I think the delays could also be political. The Commission has taken this very seriously.
So if you have the TAP, the interconnection with the European hubs, the IGB and possibly Iranian supplies and another FSU (floating unit where LNG is stored and gasified) in Northern Greece, as has been anticipated for some time, I think the answer is yes, Greece has a lot of possibilities to become a hub. One has also to take into account the new gas finds in (the) Southeast Mediterranean, in Israel, in Cyprus and now north of Egypt, between Egypt and Crete, all adding to the situation of Greece becoming a hub.
How about an additional Russian route? We don’t know what shape it could take. First it was South Stream, then Turkish Stream. Now it’s not clear, but there are talks about the Poseidon pipeline that will take gas to southern Italy. Do you think that Russia is a threat or an additional source? How do you see it from the business perspective?
I think that Russia is going to be the major supplier of gas to the EU for many years. This does not mean that the EU or the Commission should stop looking at alternative supplies. There is no question about it. My impression is that Russian gas is very low cost gas, and the pipelines (were) built years ago, so this is a stranded cost. So if you consider that the Russians have a cost less than 50 cents per MBTU, even the price that we have today, $4, is eight times the cost. So they can sell at these prices, and make money. Going forward, Russians will fight for market share, and not so much for price. They have been adjusting their sales prices closer to the market, leaving the very rigid oil index that they used to have some years ago.
They are adjusting because they want to defend their market share and I think they will ultimately manage to defend it. Now the terms they are going to sell the gas (at) will probably have to be adjusted to the Commission’s requirements, and of course we all expect to see the outcome of the investigation the Commission has started some years ago on the issue.
Do you think that the political climate, which is not very good between the EU and Russia on the one hand, and Russia-Turkey on the other hand, influences the business world that you also belong to?
Nobody likes tensions like the ones you are talking about. The situation between Russia and Turkey and the Syrian conflict is terrible, what is happening in Syria is terrible, and I hope that this peace truce that is now in place is going to last. But talking about Russia and the EU, I think we have more to share with Russia than to divide us.
What is currently happening is not good for either party. We have to try our best, and the senior European political figures should try their best to find solutions to work with Russia. It’s not always easy to co-exist, but we will co-exist. Russia is a big supplier of raw materials. It’s a big market for the EU. We need them. They need us.
Your company, Protergia, is the largest private electricity producer in Greece but small compared to the state monopoly. Can you please describe to me how you co-exist, how you cooperate?
Public Power Corporation (PPC) has been the state electricity supplier for almost 60 years. And it has been the main source of support to the Greek economy and households for 60 years. I have a great respect for PPC, I have to be honest with you. They have always been an efficient company. But this efficiency unfortunately has been lost in the last few years, I have to say. It’s a pity.
However, a monopolistic situation like that which developed over the years, it was okay in the ‘50s, ‘60s but it’s not okay anymore. It’s not according to the EU rules and the market rules.
So i think that slowly but steadily, PPC is going to reduce market share. Private suppliers are going to increase market share, and bring better balance and equilibrium in the market that will help both businesses and households.
I think slowly and painfully we are getting there.
You know here in Belgium, I can choose between 15 suppliers. Can Greeks imagine something like that?
As a matter of fact, PPC has a huge market share I think the latest figures indicate something like 94% but the rest of the 6% is shared among 6-7 suppliers, so we are slowly getting there. PPC will see its market share going down for the benefit of the consumer, of course. This is the ultimate goal.
But your interest might be the same as the consumer. You are also interested in cheap electricity.
Absolutely. Through our industrial facilities, we consume a massive amount of electricity. We need on average 5-6% of total Greek electricity requirements. So, we as a group again, have a vested interest to see a competitive electricity price for businesses.
If European regulation is slow or ineffective, other regions of the world will take over some businesses. Metallurgy, aluminum smelters, refineries, many sectors may disappear, just because the regulation did not work.
I think there are changes on this one. Some years ago, not many, I was at a gathering here in Brussels and there was a Commissioner, (who’s) name is not important, and we were talking about the environment and the cost for the businesses. I made a point to the Commissioner that for us, as big industrial consumer of electricity, there is no future in Europe with the then- envisaged environmental policies.
And the Commissioner turned to me and said: “But we don’t want heavy industry in Europe anymore. Haven’t you realised?”
That was a few years back. But since then, we have all come a long way. At the moment, the Commission wants to be much more pro-business and pro-industry, by the way.
They have set the goal of 20% for the European GDP to be covered by the industry. Unfortunately, in Greece, we are far from there.
We stand at 9% I am afraid and one the reasons is the totally non-competitive energy pricing. And it’s not only the price of energy, gas and electricity offered by the state-owned companies or private suppliers. It is also the taxation. This is more important what we said before.
At the moment, do you know that the excise tax for gas consumed by industry in Greece is almost 40%? What are we talking about? The price of gas for us is irrelevant. Taxation is more important. Why? Because the emphasis of the Greek adjustment is much more on taxation rather than reforms.
But if you tax an industry like ours or others that competes in a global environment, if you put a tax of 40% on the gas, whereas in other EU countries or elsewhere is 5%, 8% or 10% or 12%, how can Greek companies compete?
You talked about that Commissioner, who said that Europe does not want heavy industries. I’m thinking about the thousands of environmentalists who came to Brussels from across Europe, demonstrating for several days. Would the Commissioner dare to tell them this?
Yes, that was an unfortunate reply by the Commissioner. Everybody present was stunned to hear that. As I said before, now I think the Commission is in a totally different mindset. They want to support production and the industry. We are in a different situation now.
Does the European Commission back the efforts of the private sector for a liberalised energy market? Does it listen to your voice?
The Commission always listens to the voice of the private sector. There is no doubt about it. Now, what does that mean in terms of measures and making things done? There are certain reforms for the energy sector forseen in the three memoranda. The third MOU, signed in the summer of 2015, includes many reforms for the energy sector. It’s up to the Commission not to the Troika, because the Commission is the driving force for reforms in Greece. It’s up to the Commission to see these reforms to implementation. We think that the Commission must do its best, and the EU is still much accepted by the Greek public. Not at all the IMF.
How about the government of Alexis Tsipras? He is leftist. How can you expect that he will lead Greece in the right direction?
The fact that a government is left-wing or right-wing does not mean that it does not comply with the European rules. Mr Tsipras’ government, or any government, as long as he wants and we want to be member of the EU, we have to go by the rules.
So after a period turbulence in Greece in 2015, I think the government now acknowledges that very well and in many ways they are trying to get things done in the right direction. It’s not a matter of right or left. This is realistic policy.
Because there is not much room for manoeuvre.
Of course there is not much room for manoeuvre. Of course you can apply your political programme. But when the political programme clashes with EU rules and regulations, you have to adjust accordingly. I think the government is learning, and it’s learning fast to go this way.
Brain drain phenomenon seems to be an open wound for the Greek economy. As an industry, do you feel that this causes harm to Greece’s economy? How do you think this issue could somehow be under control?
This is very true. Brain drain is killing the economy, and I can tell you that as a big group, when we want competent people for certain jobs in a country where unemployment is more than 25%, in many cases we cannot find them. Because of brain drain.
So, brain drain is socially unacceptable. It’s such a negative phenomenon. It splits families. It sends people to migrate. It’s very bad.
On the other hand, it is bad for business as well. We are doing our best to support schemes that are against this brain drain of young people. But this has to do with politics rather than individual businesses.
We (and) other groups are doing our best. But it’s more politics here.
The Commission, probably, is more open to help solve things than the IMF?
Yes, because the Commission, through the reforms, and through the support of businesses in Greece can possibly – I am not saying it has happened – create employment. The IMF, in my eyes, does not look as if development and creation of jobs is a top priority. Its main priority is fiscal adjustment.