Both the European Central Bank and the European Commission have taken a stand in favor of fiscal expansion, which should help Greece’s proposal for a reduction to the primary budget surplus target, central banker Yannis Stournaras revealed on Tuesday. The governor of the Bank of Greece was addressing the Parliament’s Financial Affairs Committee in the context of discussing the central bank’s Interim Report on Monetary Policy.
Stournaras argued that if the primary surplus target is reduced from 3.5 percent to 2.2 percent of gross domestic product in 2021, “debt sustainability will not be affected, while economic growth will be bolstered with the parallel implementation of privatizations.”
“The lower fiscal targets will allow for a further reduction of taxation and strengthening of public investments,” the central banker said. “These prospects, combined with the acceleration and expansion of structural reform implementation, will benefit the potential gross domestic product and the long-term sustainability of the public debt,” he added.
Stournaras also noted that the economy is facing a series of challenges, including “the high public debt, the very high rate of nonperforming loans, the country's largely negative net international investment position, the high rate of long-term unemployment, the projected demographic deterioration due to the aging of the population, the economy’s slow digital transformation, the large investment gap created by the multi-year recession, and low structural competitiveness.”
For the acceleration of growth, the Bank of Greece chief cited a series of conditions, including having a single status of insolvency, “which the government is processing and will apply in the first half of 2020.” That was an issue to which Finance Minister Christos Staikouras also referred in the context of the same debate, saying that this emerges as one of the central points in the government agenda for the year’s first half.
Staikouras called on borrowers to have their dues arranged by April 30, when the current protection system expires, adding that he is not happy with the rate of inclusion in the platform for protection of main residences.