Fresh fiscal warning from Stournaras

Fresh fiscal warning from Stournaras

Bank of Greece Governor Yannis Stournaras asked on Tuesday that the country’s fiscal achievements be continued in order to protect the credibility of Greece’s economic policy.

In his Review of the Greek Credit System, Stournaras reiterated the central bank’s opinion that a fiscal gap of 0.6 percent of GDP is emerging following the handouts promised by the outgoing government. The BoG sees this year’s primary budget surplus ending at 2.9 percent of GDP  against a commitment to achieve 3.5 percent. In this context the warning over the need to keep up the fiscal achievements is of particular significance, since – as the report points out – that is linked to the consolidation of market trust over the economy’s prospects.

The review includes clear criticism of the fiscal policy of excessive primary surpluses, saying it has prevented economic activity from getting the required boost. It adds that the slashing of public expenditure has also had a negative impact on the growth momentum.

Regarding the handouts announced last month, Stournaras says they have created uncertainty about the 2019 fiscal target and led to a temporary reversal of the downward course of bond yields.

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