NEWS

Inflation worries central bank

The Bank of Greece has warned of the danger of inflationary pressures building up and has called on the government to take measures. Central bank Governor Nikos Garganas met with Prime Minister Costas Simitis yesterday and discussed this issue, noting, as he said, that «maintaining inflation at levels above the EU average harms the economy’s competitiveness in the mid-term, undermines the growth rate and creates conditions for an increase in unemployment.» The central bank is concerned that while inflationary pressures last, basic markets and services continue to function in a non-competitive environment and the so-called hard core of inflation seems to be maintaining its upward trend, showing up domestic structural problems in the economy. All indications are that inflation in 2003 will be close to the 4 percent level. It is characteristic of this that the Public Power Corporation has announced annual increases of 3-4 percent for the next two years. With inflation pressing, public finances continually burdened and the economy continually losing competitiveness, the Bank of Greece can be expected to demand – in the annual report that it will present to Parliament on Friday – swift moves to promote structural changes that will contribute to the smoother functioning of markets and an increase in competitiveness. Greece’s harmonized inflation in October rose to 3.9 percent, from 3.8 percent in September, well above the eurozone average of 2.3 percent. Economy and Finance Minister Nikos Christodoulakis, after a separate meeting with Simitis, argued that inflation can be partially explained by Greece’s strong economic expansion.