The expected shift in the eurozone monetary policy with the earlier-than-expected rise in interest rates due to the strong inflationary pressures adds new risks to the Greek economy.
The rise of the state’s cost of borrowing is the first obvious effect, but not the only one: Economists and government officials are fretting over a possible slowdown in investments, as investors may choose safer and more profitable options for their capital, such as bonds. Consumers are also about to slow down their consumption further, contributing toward the weakening of growth.
Businesses will take a blow, the same analysts explain, as the cost of borrowing will grow and servicing their obligations will become costlier, while their turnover may also suffer.
At the same time more loans may turn bad, especially if the phenomenon of rate rises lasts a while.
Finance Ministry officials are also worried the high interest rates may lead to pressure for achieving higher primary budget surpluses, as interest payments will cost more, reducing any fiscal scope for tax breaks.
However, the biggest and ultimate risk is the return to recession, the government officials note, although there are some protection elements, the main one being tourism, which looks set to return to 2019 levels.
Another protective shield is, according to ministry sources, the fact that the national debt has been arranged to a great extent with a fixed interest rate (averaging at 1.4%) and has a long maturity (averaging 20 years). For immediate needs, in case of a sudden rate rise, there is always the cash cushion of €39 billion.
The government expects no reduction in investments, as banks have already amassed a large volume of capital available for lending, plus there is the instrument of the Recovery and Resilience Fund for businesses to take out low-interest credit.
Officials note that at the moment there are investment projects totaling 3 billion euros that banks are examining ahead of their financing by the fund.