Giannis Stournaras stresses that subsidies should be focused primarily on those hard hit by revaluations.
With a clear definition of the boundaries between citizen support and the risk of economic diversion, Yannis Stournaras, via an interview in Sunday’s Kathimerini, outlines the next moves in economic policy.
“There is a possibility for selective measures,” he notes, stressing at the same time that these should have a temporary character and clear content, in order to ensure the stability of public finances. His position coincides with the assessments of top government officials and comes at a time when inflationary trends continue to put pressure on households.
As he explains, inflation in Greece stands at 2.6%, lower than the Eurozone’s 3.5%, but with accuracy persisting in essentials. In this context, the need for action is a given, but it cannot take an across-the-board form, he argues.
The governor of the Bank of Greece stresses that aid should be focused on specific categories, especially those hard hit by appreciation.Targeting is a prerequisite for a substantial effect without unbearable costs for the state coffers.
“There is no room for universal interventions”, he says, while focusing particularly on the duration of the measures. These moves ought to have an expiry date and be withdrawn when conditions normalise. The experience of the pandemic period and the energy crisis, with its massive support programmes, offers lessons, but is not a guide for the future.
At the same time, a key point of his analysis is the fiscal space. Yannis Stournaras says the country has made progress, with a primary surplus of 1.4% of GDP in 2024 and a forecast for a rise towards 2%. This improvement allows for some movement, but in no way allows for complacency.
Fiscal policy
Special mention is made of the current account deficit, which despite narrowing remains high at around 6% of GDP. This, along with international turbulence, acts as a disincentive for a looser fiscal stance. On the tax front, he proposes a review of tax exemptions, showing that there are resources there that can be tapped.His approach is to rationalise the system rather than imposing new burdens to finance actions without additional taxes.
At the same time, he warns again of the risk of stagflation, stressing that geopolitical crises and energy costs can upset plans. An economic slowdown in an environment of austerity narrows the scope for any mismanagement.
On government revenues, Yannis Stournaras focuses on the FPA and electronic payments, noting that their spread is the strongest weapon against tax evasion. He says the use of plastic money has already increased VAT collectability, boosting the figures without changing the rates.
He also notes that there is other scope for gains through digitisation and cross-checks, which will support targeted interventions, protecting the budget from losses.
For the banking sector,he urges an increase in deposit rates, highlighting that the adjustment so far has fallen well short of the rise in loan rates. The improvement in yields for savers may act as indirect relief at no fiscal cost.
Yannis Stournaras’ message to the government ahead of the Thanksgiving International Fair and the staff that will take decisions with the prime minister is clear and provides the economic guide to the measures to be announced.
Save measures are allowed only with strict targeting, short duration and adherence to the fiscal plan.The decisions in the next period will be judged on the balance between social need and the international credibility of the Greek economy.
