Stournaras: Energy crisis was unexpected

Stournaras: Energy crisis was unexpected

The price spike due to the energy rate hikes was completely unexpected, but its impact will be temporary and should not pose any long-term threats, central banker Yannis Stournaras said on Monday. He added that bringing Greece’s credit rating back up to investment grade in 2022 must be a national objective.

Speaking at the E-Kyklos think tank’s “Greece After” conference, Stournaras admitted: “We did not expect this crisis in energy prices, with the natural gas rate soaring five time higher. It’s an issue touching on dry weather, geopolitical tensions and of course the pandemic. This has been a perfect storm that was impossible to predict through financial models.”

He noted, however, that “those who say we are entering a stagflation period are rushing too much. This is not the 1970s, when energy took up a greater part of the economy. In the medium term we see no higher inflation either, which means we should not jump to conclusions about any rate hikes. At the moment we see no changes leading to a great increase in underlying inflation. Our forecasts for 2022-23 are for 1.5-1.6% in the eurozone,” said Stournaras, also a European Central Bank Governing Council member.

On the Greek economy, he said: “A rebound of 7% is certain for this year, and 4.5%-5% is also certain for next year. The outlook is also very positive.”

“Restoring Greece to investment grade next year should be our national objective, of the government, the central bank, the commercial banks etc. Yet even if Greece does not reach it, I believe the ECB will find a way not to stop suddenly accepting Greek bonds as collateral, as that would generate a major problem in the Greek economy. Why should the ECB punish Greece now that it is following a correct economic policy?” he wondered.

“We have learned the bitter lessons of errors after the Greece 2020 program we had drafted in 2012 was interrupted,” he said, referring to the fall of the Antonis Samaras government, in which he was finance minister. “This time the program will not be interrupted, I believe. It’s up to us not to miss the boat again, it’s passing right in front of us,” he stressed.

“What would worry me most would be if there are views that become dominant, without having learned anything from the lessons of the past,” he concluded.

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