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Stournaras: End capital controls

TAGS: Finance, Banking

Bank of Greece chief Yannis Stournaras announced on Friday that he will propose the immediate lifting of all remaining capital controls, more than four years after restrictions were imposed by the previous government.

The central banker met on Friday afternoon with Prime Minister Kyriakos Mitsotakis, telling reporters on his way out of the PM’s office that capital controls are “no longer of use.”

“The Bank of Greece will recommend to the government that they (controls) be fully lifted the soonest possible,” he said.

According to a statement by the PM’s office, Mitsotakis and Stournaras agreed that “the reform policies being put forward by the government will bolster growth and create additional fiscal space for it to carry out its program.”

Athens appears to rely on the growth impact of tax cuts, which are indeed being viewed positively by the country’s creditors, in contrast with the handouts announced by the previous government in May, which were seen as containing growth.

Stournaras said that while the projections for this year show that the primary budget surplus will come to 2.9 percent of gross domestic product against a target for 3.5 percent, there is scope for adjustments that will correct the shortfall forecast.

Sources say the BoG governor told Mitsotakis and Finance Minister Christos Staikouras that there are tools for negotiating the reduction of the primary surplus targets and the creditors are generally inclined to help, provided they are informed in time about any measures and there are no surprises, as was the case with the measures in May.

Talks also focused on nonperforming loans and, according to the PM office’s statement, the government plans to tackle the problem by using a “combination of the proposals from the Bank of Greece and the Hellenic Financial Stability Fund.”

The Finance Ministry is concerned not only about the budget target for 2019 but mainly for 2020, when the tax cuts the government intends to introduce are in full force. Kathimerini also understands there are worrying developments on the 120-installment debt repayment plan, particularly as regards social security debts, with takings so far remaining at low levels.

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