Economy is on right path, minister, top banker agree
The economy is on a good path and reforms are being implemented, Economy and Finance Minister Giorgos Alogoskoufis and Bank of Greece Governor Nicholas Garganas agreed after their 60-minute-plus meeting yesterday. Garganas forecast continued strong growth in 2006 and Alogoskoufis said this will be helped by «numerous signs of recovery» in the other European economies. In 2005, Greece achieved all its budget targets, Alogoskoufis said and stressed that a great effort will be made this year to reduce the budget deficit to below 3 percent of Greece’s GDP for the first time after Greece’s entry into the eurozone, in January 2001. Garganas said that inflation in 2006 will be slightly lower than in 2005, when it averaged 3.5 percent. Last year, he said, there were adverse repercussions on inflation from the government’s raising of the value-added tax (VAT) levels to 9 and 19 percent (from 8 and 18 percent previously) last April 1. He warned, however, that the oil market remains a serious factor of uncertainty, despite a recent trend toward price stabilization. Once again, Garganas warned debtors about taking on more debt at a time when interest rates are rising. «I have repeatedly stressed that households should borrow according to realistic estimates about their ability to pay back the loans. As you know, we have ordered banks, when providing credit, to make sure that the monthly debt repayment installment not be higher than 30-40 percent of households’ monthly earnings,» he said. The Bank of Greece has requested private market research company ICAP to conduct a survey on households’ excessive indebtedness. A similar survey conducted three years ago had showed that at that time Greek households’ well-being was not threatened by excessive debt. Household indebtedness is still lower than the EU average but has increased extremely fast in recent years and credit expansion continues. Garganas was asked to comment on the agreement between EFG Eurobank’s management and its employees to have its branches at two big shopping malls, in Athens and Thessaloniki, open on Saturdays. Garganas said that this was not the central bank’s business but also reminded that the Bank of Greece has repeatedly called for more flexible labor markets. Alogoskoufis approved the agreement. «It is very good when structural reforms are implemented by consensus,» he said.
