In the context of the recent meeting of the E.K.T. in Athens, the governor of the Bank of Greece, Yannis Stournaras, gave an interview to the financial magazine Handelsblatt, regarding the “freezing” of interest rates, the economic ramifications of the war in the Middle East, and the Greek economy.
The decision to stop raising interest rates was made due to the uncertainty prevailing due to the current conditions. As the economist explains, “although the deflation process is progressing in line with our expectations, economic activity is much weaker than we estimated in September, […] while also the financing conditions are more strict than expected”.
In addition, “a new source of uncertainty is the conflict in the Middle East” and although the stock and energy markets have partially reacted, “we do not know exactly what is going to happen and how many countries will be involved”. As has happened in past crises, during the first period “markets just wait” in anticipation of developments. This is happening even now.
Regarding the case of the Greek economy in particular, the governor of the Bank of Greece considers that the signs are particularly positive, because “in addition to the favorable economic and financial developments, the Greeks seem to have decided to move away from populism […] and now there is a clear political horizon”.
Also, although the economy is still far from pre-crisis levels, “in recent years there has been steady progress on all fronts, as well as a convergence towards the per capita income of the Eurozone, combined with a rapid fiscal consolidation”.
In view of the above, one can say that the country is “leaving the crisis behind in the sense that the country’s fundamental economic figures are more stable and balanced, while the most important problems that led to the crisis or were its results have been resolved”. Now it remains to focus on the remaining issues: “the effectiveness of the state, delays in the delivery of justice, the quality of infrastructure.”
Welt: The crisis is not over
Welt, however, although praising the economic leaps the country has made in recent years, adopts a more pessimistic position on the future of Greece, stressing that “the crisis is not over yet”.
The German media estimates that “Greece will continue to struggle for decades to manage its huge debt. In addition, the economy is still essentially facing significant problems. The most pressing of these is the investment boom. This phenomenon is normal in the context of the recovery after a recession and is expected to fade in a few years. That is when it will be seen how sustainable the development course of the Greek economy is, as well as whether it can reach the rest of the Eurozone countries on a permanent basis.
There is still much to be done in this direction. The country needs more reforms to have strong and independent institutions, a faster and more efficient justice system, impartial bureaucratic processes and independent media. And in these the Greek governments have made only partial progress in the last decade.”
As Welt points out, “the fact that in the recent election campaign there was almost no discussion of reforms is a bad omen. Instead, Prime Minister Mitsotakis promised more spending on social measures – because the long recession and austerity measures have damaged society, with Greece now having one of the highest poverty rates in the EU, while high inflation combined with low wages cause existential concerns even in the middle class.
The citizens of Germany are painfully experiencing the consequences of the fact that, in a period of economic prosperity, politicians prefer to delay some important structural reforms. Whether Greece can avoid such a mistake remains to be proven by the newly elected government,” the German media concludes.
Source: Deutsche Welle