The government appears determined to push its confrontation with Bank of Greece Governor Yannis Stournaras to the limit. On Monday it continued putting pressure on him at a central bank general meeting, in reaction to the former finance minister’s new warning on market risks and his reiterating the proposal for a precautionary line of credit after August.
Stournaras said the credit line has to be examined as a supplement to the so-called cash buffer, especially if market conditions are adverse. He added that such a prospect “should not be dramatized, as the European mechanisms were created to be used when needed.”
However, the credit line is not acceptable for the government as it entails conditions and monitoring, as opposed to the narrative of a “clean exit.” Therefore, the General Secretary for Fiscal Policy Frangiskos Koutentakis, speaking as representative of the state as the bank’s stakeholder, stated that “the effort for a smooth exit is significantly hampered when the country’s central bank disputes the sufficiency of the agreed procedure and reiterates the demand for a ‘precautionary support program.’”
Koutentakis added that the government and its creditors have agreed on the cash buffer and noted that Stournaras’s proposal, “regardless of intentions, objectively creates doubts about the prospects of the Greek economy” and increases uncertainty. For these reasons, he said, “I express disagreement with the proposal.” A similar intervention came from Hellenic Petroleum chief executive Grigoris Stergioulis.
In his speech, Stournaras cited the recent unrest on markets and stressed that such phenomena “have a greater effect on countries with a weak credit rating and less robust economy, which saw their state bond yields increase significantly.” He also reminded the meeting of the warning by European Central Bank chief Mario Draghi, who at last week’s Eurogroup said that “the return of the Greek state to the markets should take place with cautious steps,” an intervention that had drawn a strong reaction from Finance Minister Euclid Tsakalotos.
Stournaras predicted in his report presented on Monday that growth this year will amount to 2.4 percent, against a European Commission projection for 2.5 percent.