Garganas urges restraint to boost country’s competitiveness
Bank of Greece Governor Nicholas Garganas yesterday urged strict adherence to fiscal discipline and persistence with structural changes, particularly regarding the country’s social insurance system and the National Health System. «I am not scaremongering, but, rather, drawing attention (to the risks) so that citizens are informed about the solutions and likely painful measures that will be proposed to them,» he told Parliament’s economic and monetary affairs committee. Garganas noted that Greece’s inequality in the distribution of income was among the highest in the European Union, and expressed concern that six years after the country’s adoption of the euro, it has yet to achieve relative price stability – which is a hot issue for the vast majority. He partly blamed the phenomenon on shortcomings in the educational and taxation systems, but also on the behavior of social partners (unions and employers) who have not adapted to the new environment of the euro. Garganas urged the continuation of measures to maintain fiscal stability. «Fiscal stabilization will have to continue for many years, as we have the second-highest rate of debt in relation to gross domestic product in the eurozone.» He said social partners had to contribute to the maintenance of salaries at reasonable levels and to price stability. «The key is boosting competitiveness, as many sectors of the economy are not competitive and there are abuses of dominant market position and harmonized practices,» Garganas said. El Dorado in bank profits Greece’s central bank heard strong complaints, mainly from opposition deputies, on the very high level of interest rates in Greece, compared to the rest of the eurozone, and their contribution to rising prices. Former PASOK economy minister Yiannos Papantoniou spoke of an «El Dorado» of bank profits, while others argued banks levied or imposed abusive charges and terms of credit. Ilias Kallioras wondered how it was possible to claim that there was effective competition among banks as regards interest rates when their profits soared from year to year. Garganas’s answer rather surprised deputies. He said banks’ net profits last year rose 19 percent on average («a fair level, a good sign of health»), while those of previous years were rather circumstantial or one-off. He reiterated warnings about household credit growing too fast, saying that 12 percent of borrowers were doing so beyond their means. He also said that credit cards were the most predatory form of consumer credit. Finally, Garganas said the recent turmoil in financial markets was a timely reminder that risks to the global economy cannot be underestimated «The flight from risky investments which caused a fall in China’s stock indices was a message to investors to price risk more correctly,» he said.
