ECONOMY

Stournaras: ‘ECB policy is right, inflation temporary’

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The European Central Bank’s loose monetary policy remains appropriate and the rise in inflation is temporary, Greek central bank chief Yannis Stournaras was quoted as saying on Friday.

Stournaras, an ECB Governing Council member, told financial daily Naftemporiki there were no indications of inflation-linked pressure on wages globally with the exception of the United States. Inflation will retreat to below 2% in the eurozone in 2023, he said.

“The ECB’s monetary policy remains appropriate in the current context,” Stournaras said. “The current rise in inflation is largely temporary and inflationary pressures will ease in the coming years.”

Eurozone inflation exceeded 4% last month, twice the ECB’s target. ECB President Christine Lagarde has said the bank is very unlikely to raise interest rates next year, calling the outlook for inflation over the medium term subdued despite a present surge policymakers have attributed to supply chains knocked out of sync by the Covid-19 pandemic.

In the same interview, Stournaras urged nonperforming loan management companies (servicers) to exploit an existing regulatory framework and to make a more efficient management of debt.

The central banker said that NPLs were gone from banks’ balance sheets but the debt was not disappearing. It is therefore important, he said, “that NPL servicers manage the stock of NPLs more efficiently. This means exploiting an out-of-court mechanism for debt settlement and a recent new law on debt settlement and bankruptcy. It is important that servicers offer sustainable solutions to debtors or a more efficient management of collateral – when necessary – to facilitate the return of debtors to the production process.”

He stressed that successful management of NPLs by servicers is a prerequisite for the success of the Hercules program.

Stournaras also noted a significant increase in private-sector deposits, currently exceeding 180 billion euros and returning to March 2011 levels. The stock of NPLs has fallen to €29.4 billion from €107 billion in March 2016.

The central banker further reiterated his estimate that the country’s gross domestic product will grow by 7.2% or more this year and by around 5% in 2022. The latest government projection for 2021 is 6.1%.

[Combined reports/Reuters, AMNA]