MacroPolis

This Thursday the new Greek Prime Minister Kyriakos Mitsotakis travels to Berlin for his inaugural meeting with representatives of the German government, most prominently Chancellor Angela Merkel. His official visit to the German capital is the second leg of his European travels, having visited Paris and met with President Emanuel Macron the week before.

Mitsotakis and Merkel know each other from previous encounters in Berlin and Brussels. But it is the first head-to-head meeting between the German Chancellor and the newly elected Greek Prime Minister. The symbolism of the visit is telling. Merkel is in office since November 2005. During this 14-year period, Greece has had seven prime ministers, four of which have visited Berlin to meet the Chancellor since 2010, namely Giorgos Papandreou, Antonis Samaras, Alexis Tsipras and now Mitsotakis.

The continuity of the office holder in Berlin and the coming and going of prime ministers in Athens informs us about some of the challenges that await Mitsotakis during his policy deliberations in the Chancellery. First and foremost, before any specific agenda item is addressed, there is a certain credibility deficit that continues to haunt any incoming Greek prime minister when discussing his policy priorities with government representatives in Berlin. This deficit in trust is not personal, nor something to do with Mitsotakis in particular. Rather, it is grounded in the conflicting experiences and obstacles assembled during the past decade in the bilateral relationship of both countries.

Mitsotakis will therefore have his work cut out when he opens his dossier and discusses politics with Merkel. The Greek Prime Minister should bear in mind that after a tumultuous start in the first six months of 2015, the German Chancellor subsequently established a constructive working relationship and personal chemistry with his predecessor. Various government representatives in Berlin and a large part of the German media regarded the Tsipras’s departure with regret. He was viewed in different federal ministries as the Greek prime minister who complied like none of his predecessors with the stringent policy requirements and fiscal austerity demands of the official European creditor institutions. This behaviour earned Tsipras the title of ‘delivery boy’ in the German press.

What can we expect to be on the priority list of policy issues being discussed between Merkel and Mitsotakis? Fiscal policy making, refugees and migration as well as foreign policy are natural agenda items. The work in progress to establish a Greek-German Youth Institution (Das Deutsch-Griechische Jugendwerk / Το Ελληνογερμανικό Iδρυμα Νεολαίας, https://agorayouth.com/) and the further consolidation of the Greek-German Assembly (http://www.grde.eu/el/index.html) may not feature in the top third of the priority list. They will hopefully receive new impetus from the change of government in Athens and the recent arrival of the new German ambassador, Ernst Reichel.

The fiscal policy-making agenda of the Mitsotakis government will be of prime interest to the German officials. For the German Finance Minister Olaf Scholz, Greece’s adherence to the primary surplus target of 3.5 percent of gross domestic product until 2022 remains a critical benchmark for confidence-building policy making. There is currently little appetite within the chancellery and the ministry to publicly endorse flexibility in favor of reducing the quantitative target or the duration of the fiscal compliance corridor. The policy challenge therefore remains: To what degree is fiscal policy in Athens able to stimulate investment and aggregate demand when Berlin insists on compliance with the primary budget surplus regulations?

Prime Minister Mitsotakis would be well advised to underline that his government has the political will and administrative capacity to keep public spending under control while simultaneously trying to create fiscal space by other means. One such area concerns increasing funding for public investment projects earmarked through the European Commission’s NSRF/ESPA 2014-2020 financing period. According to official data released this past week, Greece only absorbed 4.9 billion euros of the 19.7 billion euros earmarked in the current seven-year ESPA budget. That amount corresponded to a level below 25 percent absorption rate for Greece. Talking with Chancellor Merkel about the legitimate constraints of the current primary surplus targets should go hand-in-hand with the urgent improvement of such a track record of EU funding absorption levels.

On the foreign policy front, Chancellor Merkel will be keen to hear what Mitsotakis now has to say about the 2018 landmark agreement to solve the name issue between Greece and North Macedonia by former prime minister Tsipras and his counterpart in Skopje, Zoran Zaev. Merkel invested considerable political capital in supporting a mutual solution at a time when Mitsotakis emphatically opposed the agreement as leader of the opposition. In Berlin, political observance to the Athens-Skopje name agreement is a benchmark indicator for building trust and reliability between Merkel and Mitsotakis.

Finally, a word of caution for Mitsotakis regarding tone and context. He will be arriving in Germany’s capital at a time when political debate is consumed by environmental issues, climate change activism and the demand for higher taxes on meat consumption. Every policy issue worth its salt is currently being linked with environmental impact assessment in Berlin. It could therefore pay dividends for the Greek Prime Minister if his policy dossier also includes references to green technologies, waste management and the closure of illegal landfills in Greece.

It remains to be seen after Mitsotakis’s Berlin visit if a new chapter in constructive dialogue and mutual trust can be written as far as Greek-German relations are concerned. The Greek Prime Minister will have warm words for Merkel but it is verifiable action that the Chancellor will be looking for once he returns to Athens.

*Jens Bastian is an independent economic analyst and financial sector consultant, based in Athens, Greece