Stepping up Greece’s growth rate is key to economic recovery
Government officials as well as representatives of banks and businesses speaking at Delphi all agreed that Greece not only needs to beat the 1 percent growth rate forecast in the medium term by the International Monetary Fund, but also the 2-2.5 percent seen by the government and the institutions in the coming years. The growth rate must be accelerated in order to make the debt sustainable and to achieve convergence with other European states, the conference was told.
“We need fresh ideas to accelerate recovery and raise the growth rate, because a 2 percent [growth rate] will not be enough,” said Dimitris Liakos, an adviser to Prime Minister Alexis Tsipras.
Speaking on Thursday, however, former Bank of Greece governor Giorgos Provopoulos said that it would take a mammoth effort to even achieve the 1 percent growth rate predicted by the IMF because of demographic trends and labor productivity. Provopoulos warned against a toxic mix of reform fatigue, anemic growth and difficulties in refinancing debt that would force Greece out of the bloc.
Society and the political system must adopt a long list of reforms, Provopoulos said. Meanwhile, German Ambassador to Greece Jens Ploetner pointed out the public administration and the judiciary as most in need of long-term reform, as indicated by German investors. Nevertheless, he did acknowledge Greece’s reform progress.
Sabina Dziurman, director for Greece and Cyprus at the European Bank for Reconstruction and Development (EBRD), agreed with Petros Doukas, chairman of Capital Partners SA, that Greece really needs to step up its growth rate (5 percent, according to Doukas), and stressed the need to restructure businesses and reduce nonperforming loans. On the same panel, Yannis Manuelides of Allen & Overy pointed out a series of legal changes that must take place in order to attract investment.
Domna Maria Michailidou, a lecturer at Cambridge University, underlined that the Public Investment Program is constantly underperforming and stressed the need for public and private sector cooperation.
For his part, Jeroen Dijsselbloem said Europe needs less banking activity and more growth in capital markets. The Dutch politician said he was initially a friend of Greece out of necessity, but has become a true one now.
National Bank of Greece CEO Pavlos Mylonas said that if mergers in the bank sector were to follow American norms, then Greece might end up with just one lender.
