ESM calls for fiscal prudence

The highlights of the 'Banking Summit', organized by the Money Review website

ESM calls for fiscal prudence

While the measures Greece has taken in the last couple of years mean the Greek debt is more sustainable today, Athens will still need to display fiscal prudence from now on, stressed Rolf Strauch, chief economist and management board member of the European Stability Mechanism (ESM), at the Banking Summit organized in Athens by Kathimerini’s Money Review website on Tuesday.

The European official welcomed the government’s target for primary surpluses as of next year, saying it is crucial for maintaining market confidence. Fiscal prudence, he added, will support debt sustainability in the long term and will not depend on any rate changes in the future.

The government may indeed have set a primary surplus target for 2023, but that was before the war broke out in Ukraine, changing the conditions and possibly the targets, depending on the decisions to be made at the European level.

Finance Minister Christos Staikouras told the same conference that the government intends to return to “realistic surpluses” once conditions allow for it. He went on to admit that the war will have an impact on inflation and growth, but said it will not derail the economic recovery.

Strauch conceded that Greece’s rebound has been robust, but added that risks obviously exist. He further spoke in favor of targeted support measures and warned that interest rates will not remain as low as they currently are.


Also at the Banking Summit, the chief executives of Greece’s four systemic banks expressed their optimism that the war in Ukraine will not lead to an increase in bad loans. National Bank’s Pavlos Mylonas said conditions from inflation and the war are slashing growth expectations to 2.5-3%, from 4% recently. His Eurobank peer, Fokion Karavias, added that the the economic slowdown will be manageable, but warned conditions do not favor Greece’s return to investment grade.

Piraeus Bank’s Christos Megalou noted that the Greek economy will outperform the eurozone and growth will come to 3-4% this year, as his Alpha opposite number, Vassilis Psaltis, forecast that the economic shocks will be absorbed with the help of another great tourism season.

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