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Speech by the Eurogroup President, Paschal Donohoe, at The Economist’s “The World Ahead” Gala Dinner, Athens, 23 July 2021

Met dank overgenomen van Eurogroep, gepubliceerd op vrijdag 23 juli 2021, 16:00.

Thank you (efkaristo) for the invitation to address you this evening. It is an absolute privilege to be here in Athens. It is also a particular honour to visit Greece as you mark the 200th anniversary of the beginning of Greece’s journey to independence. I am also delighted to meet this evening the President of the Greece 2021 Committee, Gianna Angelopoulos.

Since my arrival in your beautiful country, I have had the opportunity to experience once again your legendary hospitality and I want to give special thanks to my dear colleague and friend Christos for his warm welcome and to Andrew for the introduction.

While we all have had to adapt to the pandemic through remote working and online meetings, events like this evening really bring home to me how much progress we have made.

Greece has achieved so much and contributed so richly to the world we live in today. In this regard, it is a lovely coincidence to be here on the day when the Olympic Games begin.

It is a further reminder of all the great things your country has given to the world and to Europe. Greece has given Europe our name; it is at the very foundation of our common cultural identity.

It is also 40 years since Greece joined our European Community and in January, we will be celebrating the 20th anniversary of our common currency, the euro.

So much has happened in so little time.

Learning from the sovereign debt crisis

In fact, we have come a long way. I can recall vividly, when Greece, like my own country Ireland, was invariably one of the top agenda items at Eurogroup meetings.

The sovereign debt crisis was an incredible challenge for both of our countries and for the euro itself. However, we have risen to the challenge. Greece and Ireland are no longer top of the Eurogroup agenda. This reflects the progress that has been made.

If anything, our shared experience in dealing with “once in a generation” type shocks is a particular asset as we continue to tackle the COVID-19 pandemic.

I want to take this opportunity to commend the continued and impressive progress your country has achieved in implementing reforms since exiting its third economic adjustment programme, three years ago.

I want to particularly recognise the leadership of Minister Staikouras. He is a highly respected Minister of Finance for Greece and also a highly valued member of Eurogroup.

One of the standouts is the implementation of the third and final pillar of the Guaranteed Minimum Income (GMI). Through this, Greece has put in place a very effective framework for providing social support and employment services.

It is also worth mentioning the successful reform of the Greek insolvency framework as well as many other measures including actions to reduce the amount of non-performing loans on the balance sheets of Greek banks.

These reforms were also instrumental in allowing the Eurogroup to reach an agreement in further strengthening the Banking Union through the early introduction of the common backstop to the Single Resolution Fund.

The reform implementation effort is all the more remarkable given the very challenging context of the COVID pandemic.

Greece’s progress was recognised unanimously at Eurogroup just last month, when we agreed to the release of the fifth tranche of debt relief measures worth €748 million.

So much has been achieved in recent times and of course further reforms and actions are planned. There is no doubt that Greece has gone through exceptionally hard times in the last decade.

However, your country, as well as my own, realises:

  • how strong and effective Europe can be when we act together.
  • how the support of European partners can act as a booster to national initiatives and policies.

The fact is that many of the measures and safeguards that we put in place over the past decade were crucial in tackling the economic crisis caused by COVID-19.

In contrast to the financial crisis, which some claimed was an existential crisis for the currency itself, the euro is now positioned as a key asset and symbol of our resilience and strength.

As President of Eurogroup, I have seen on a daily basis the strength of the collective response to this crisis.

As the economic prospects for the euro-area are brightening, it is fitting to reflect on some of the actions that we undertook to respond to the pandemic. I will then give you all a sense of our priorities through to the turn of the year.

Economic outlook post-pandemic

Firstly, on the economy, the latest Commission forecasts shows that the euro area is making a strong comeback with recovery well and truly underway.

We are now looking at a growth rate of 4.8 per cent for this year and 4.5 per cent in 2022.

For Greece, prospects also look promising with a growth rate of 4.3 per cent this year, rising to 6.0 per cent in 2022.

The Greek economy has shown its resilience over the past year. The actions taken by the government in response to COVID-19 have certainly helped to significantly cushion the economy from the worst effects of the pandemic.

This has been achieved through existing safety nets but also through new measures and helped by EU instruments, such as the SURE programme.

More generally, the impressive roll-out of vaccines across Europe is helping to turn the tide.

Europe is now the world’s most vaccinated continent, with 500 million doses having been delivered to the EU and over 65% of our adult population having received at least one dose of the vaccine. And this at the same time as we continue to export half of our production.

This is very good news.

In fact, a key priority for Eurogroup now will be to ensure that the current rebound translates into a fully-fledged recovery. For example, we will be closely watching how the summer tourist season fares across Europe given the uneven impacts of the pandemic to date on certain sectors and population cohorts.

This has been a constant theme of our discussions throughout the past year and most recently at our July meeting, during our discussion with the United States Secretary of the Treasury, Janet Yellen.

While the outlook has improved, we are all mindful that there is still much uncertainty given the risks associated with the virus and its variants.

That is why economic policy will remain supportive and agile through 2021 and 2022 and all euro-area finance ministers are agreed on the importance of avoiding any premature withdrawal of fiscal support. This was the central message in our Eurogroup statement in March.

Economic response to COVID

While we are now in the early stages of recovery, it is important not to lose sight of what has already been done on the economic policy front. In simple terms, the response has been extraordinary and marked by an unwavering degree of coordination and consensus.

There are a number of areas that I can highlight.

These include:

  • unprecedented national budgetary policy measures including automatic social supports as well as new discretionary measures
  • the early decisions to activate the general escape clause (March 2020) and to relax state-aid rules
  • wider European

The latter includes three key safety nets agreed by Eurogroup to the value of €540 billion - SURE, the ESM’s Pandemic Crisis Support and the EIB’s pan-European guarantee fund. The SURE scheme alone is estimated to have supported somewhere between 25 and 30 million jobs.

Eurogroup also agreed (at the end of last year) to the ESM Treaty Reform and the early introduction of the backstop to the Single Resolution Fund.

All of these measures meant that crisis-related funding was able to flow in a more efficient and effective manner.

The safety nets also pointed to a real sense of shared ownership in Europe - that we are stronger acting together as one, rather than as a collection of individual countries.

On top of all of this, we also of course have Next Generation EU.

This investment and reform package will channel €750 billion of investment to where it is needed most to reinforce the Single Market, intensify cooperation and equip our economies to drive the green and digital transitions.

I was delighted to see Greece’s national recovery and resilience plan being amongst the first batch of approvals last week with a very positive assessment from the Commission. Your plan, amounting to about 16.3% of GDP, is a great opportunity to deliver stronger economic growth.

The Plan includes a particular focus on climate change [37.5% of the total envelope] with wide-ranging actions for the electricity network, renewable energy and energy efficiency. There is a very robust commitment to embracing the digital transition [23.3% of the total envelope] with plans to invest in 5G and fibre networks but also measures to digitalise elements of the public administration.

The plan also has a real focus on small and medium-sized enterprises. These firms are ultimately the bedrock of our economies given the employment and incomes they generate.

I think the plan is ambitious, well-designed and offers so much potential and upside for people.

It addresses the investment gap that has held back growth in Greece in the past decade, while also facilitating the modernisation of the economy with a view of promoting export-led growth. It has the potential to increase GDP by between 2.1 and 3.3 per cent by 2026.

Eurogroup Priorities

While the deployment of the Recovery and Resilience Fund will be an undeniable booster for the economies most affected by the pandemic, there is still a lot of uncertainty and the risk of long-term economic scarring.

This brings me on to some of our priorities for the rest of the year.

On the budgetary policy side, there is unanimity on the need for a supportive stance in 2022.

As the recovery gathers momentum, we will also need to move from broad-based (income and liquidity) supports to more targeted measures. This will need careful management and clear communication.

We also need to acknowledge the very high levels of borrowing at present right across the Euro Area. We will need to navigate our way to lower and safer levels of indebtedness once the recovery is firmly underway.

Eurogroup also needs to make further progress on banking union to facilitate the economic recovery.

Greece, like Ireland, suffered in the last crisis. Our hard-earned resilience and common political determination to build a more robust and well-capitalised financial system in Europe meant that our financial sector was in a position to absorb the impact of COVID-19, rather than amplify it as we saw a decade ago.

However, we need to do more to ensure that Europe’s economic recovery is on a solid footing.

Much of my recent work has centred on drawing up a work plan to complete all the elements of the banking union. I have counted on Greece’s vocal support.

While we have made progress, we are still not quite there in terms of a consensus that we need for an ambitious plan.

Over the remainder of this year, I will continue this work to reach agreement.

Conclusion

So that brings me to the end of my brief remarks and a whistle-stop tour of our work and priorities at Eurogroup.

We have achieved so much over the past year and I would again like to thank my Greek counterparts for all of their work and effort over these challenging times.

Greece is seen as an authoritative voice on so many economic policy matters and a wide range of EU policy files, ranging from the pandemic response, to strategies around an effective and orderly reopening of mobility within the EU.

Travelling to Athens has been seamless and I think we owe a lot to Greece for the leading role you have played in the EU on this issue. Prime Minister Mitsotakis was the first to think ahead and propose the concept of a Digital COVID cert back in January, when he wrote to President von der Leyen. The speed with which this has been adopted and implemented is extremely impressive.

So to leave you with a thought.

When we are watching the Olympics, many events require the views and scores of judges.

Competitors will be ranked based on a range of criteria in a very public fashion.

As a finance minister, our actions are also constantly being assessed, analysed and critiqued.

Events like tonight, offer you the opportunity to give your own views and suggestions.

I do think we have achieved a lot so far in tackling COVID-19.

While there were some mistakes and delays along the way - none of us had ever faced a global pandemic - I do think that we have achieved so much.

Many of our decisions and actions, from the fiscal rules, to income and liquidity supports, to wider EU schemes including NGEU would simply have been unimaginable a year or so ago.

So returning once again to the theme of the Olympics:

  • we are in a race;
  • a race between infections and injections;
  • between recovery and recession.

But, this is a race that we are now winning.

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