Central bank chief warns of risks of overtaxation

Central bank chief warns of risks of overtaxation

High taxes pose a risk to economic activity, Bank of Greece Governor Yannis Stournaras warned on Tuesday, adding that he is concerned about how the government intends to continue bankrolling the civil service once its bailout agreement with international creditors expires in August 2018.

Speaking at an event organized by the Union of Greek Shipowners, Stournaras said that a slump in shipping receipts in the second half of 2015 can be largely attributed to the capital controls imposed in the summer of that year and can therefore be reversed once the restrictions are lifted.

In 2016, he said quoting official figures, the capital controls and the low freight rates meant the shipping service inflows represented 23 percent of total service receipts, covering 35 percent of the trade deficit, while net receipts came to 29 percent of the services surplus.

An improvement to pre-2015 levels is already being seen in this year’s data for the January-September period, Stournaras added.

The central bank chief said he believes a further improvement is possible thanks to the planned relaxation of capital controls, but also because of higher global freight rates.

On a different note, Stournaras said that for Greece to tap international lending markets on favorable terms after the expiry of the current program, the government needs to successfully conclude the fourth and final review of the bailout. The country’s lenders, for their part, should specify what kind of support they are willing to offer Greece to help it sustain its positive momentum after the program’s expiry. 

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