Greece’s fiscal mix is dangerous for the economy, Bank of Greece Governor Yannis Stournaras warned at the Delphi Economic Forum on Saturday, where he also called on the government to complete the bailout review immediately.
“We have become a tax-centered economy,” said Stournaras, stressing that taxes should be reduced and state expenditure cut for the economy to grow. “The Bank of Greece is calling on the government to complete the review yesterday,” added the central banker: “The longer the delay, the more uncertain the favorable forecasts for consumption and investments will become. The medium-term target should be the replacement of consumption by exports and investments, as competitiveness improves.”
As regards primary surplus targets, Stournaras voiced his proposal for 3.5 percent of the gross domestic product in 2018 to 2020 and 2 percent afterward: “The fiscal leeway created would be used for tax and social security contribution cuts.” The 3.5 percent target for the next 10 years would be too tough, he said.
To make the national debt sustainable, Greece needs “just a little push, a mild exercise of easing.” His proposal provides for reducing interest rates by spreading the high cost (some 10 billion euros) payable in 2022 across the following 20 years.
Lowering the fiscal target and smoothing out interest rates will bring the same or better debt easing than the harsh decade of high surpluses proposed, the central banker added.