“You know our interest rates overall have gone down. Greece is an international success. Why should we hide it anyway?” said, among others, the governor of the Bank of Greece, Yannis Stournaras, in an interview, in the context of the 7th Conference of the Circle of Ideas “Greece after VII”.
“We went through a lot, but because we too, despite the mistakes, setbacks, did what we had to do, ultimately all three governments that participated at the time. Three parties probably, finally did what they had to do. In return we got the largest bailout ever given to a country in economic history. I’ve never seen anything like this before. Now, for several years, we have been following an, I would say, orthodox, systemic policy, fiscal, in the financial sector, monetary of course because it is determined by the European Central Bank and mainly structural. I think that’s why we are what foreigners call an “international success story”, he added.
Continuing in an optimistic tone, Mr. Stournaras emphasized that we are doing quite well, not perfectly, but with continuous reforms, an orthodox fiscal and structural policy, we can continue on a positive path.
Wanting to highlight the points that can be improved, the governor of the Bank of Greece underlined that we see delays in justice, problems related to the land registry and pathologies in public administration, issues which, of course, are expected to be addressed immediately, since “we have excellent civil servants” and “wonderful scientists”.
Regarding the issue of tax evasion, Mr. Stournaras emphasized that the large tax evasion is an important problem of the state, which must be dealt with and that is why “things are being tightened”. “This year we will have a primary surplus of around 1% of GDP, we need to go a little over 2% to be sure of the future, to
Mr. Stournaras also spoke about inflation, as well as wages, saying that “The truth is that after the pandemic and especially after the energy crisis, we had a spike in inflation. There, the average wage may have decreased a little, because the nominal wage also increased, and it increased because the minimum wage increased a lot. Of course, the average wage does not rise as much as the minimum wage. We have calculated at the Bank of Greece that, when the minimum wage rises by 10%, the average wage rises by 5%. So we have a significant increase. From this year, however, real wages will begin to rise,” emphasizing that we must not forget that we came back “from the edge of the cliff” and we still have a way to go.
Regarding the GDP, Mr. Stournaras said that it will return “slowly”, but the per capita income will take time. The banks are back to great profitability, they are well capitalized and there is stability. “The State has benefited, the taxpayer has benefited.”
Speaking about the crisis, he emphasized that “The crisis left behind fear”, which is why the European Commission has put the famous Crisis Management Deposit Insurance on the table. Here is Rhodes, the governments must support it. The Greek government supports it and the Bank of Greece also.”
In closing, regarding interest rates, Mr. Stournaras said: “I think that in the previous ten meetings, we have reached the key interest rate, which is the deposit acceptance rate that the Eurosystem accepts from the Banks, from -0.5%, we have reach 4%. This is a very large increase.” adding that “if inflation falls below 3%, however, on a permanent basis and we have a way of knowing what is permanent”, there are improvements in the labor market and businesses absorb the increases, then “we can think at first a small reduction in the base rate.”
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