A message about financial caution and coordination of political forces in this direction was sent yesterday, on the eve of the elections, to the governors of the Bank of Greece, Yannis Sturnarasin his speech at the Greco-German Chamber.

He asked for a permanent return primary surplus close to 2% of GDP after 2023, so that the support measures against the pandemic and the energy crisis remain targeted and temporary, and available European resources are used effectively so that risks to debt sustainability. He also emphasized that “the absolute orientation of economic and especially fiscal policy towards the acquisition investment grade for the bonds of the Greek state, this must be an immutable national goal.”

Raising the question of elections directly, he argued that “the political forces must unite and come to an agreement in order to fulfill the basic obligations of economic policy and preserve what has been achieved through Greek economy last decade.”

With a primary surplus of 2% of GDP, the interest on the public debt can be fully covered. Mr. Sturnaras said that in this way the risks will be controlled, despite the increase in Greek bond yields. However, he stressed that in the long term, uncertainty increases, as debt refinancing will be carried out on market terms, “which excludes the possibility of relaxation in terms of the required level of primary surpluses.” In fact, the next decade, according to the Central Bank, is a “unique window of opportunity” for debt de-escalation, since only a small part of it will be refinanced on market terms.

The Central Bank emphasizes that the restoration of the investment level should be an immutable national goal.

It is noted that the budget of the current year includes a primary surplus of 0.7% of GDP, while the State Accounting Department, in view of the preparation for the presentation of the medium-term program, recognizes in April that the target for the coming years should be 2% of GDP, because that’s the only way the downward spiral of debt happens. In addition, the Commission’s analysis in the first oversight report since the memorandum is based on the assumption of a permanent primary surplus of 2%, while the 2018 agreement with Brussels called for 2.2% of GDP.

Noting the progress the country has made, Mr Sturnaras predicted a growth rate of 1.5% this year (compared to 1.8% set by the government) and about 3% in the next two years, compared to 6% in 2022 . Inflation is forecast by the central bank. to 5.8% this year (up from 5%) and 3.6% in 2024 (up from 2%). The debt will be reduced to 160% of GDP in 2023, at a level also foreseen by the government.

Yesterday’s speech by the head of the central bank also contained appeals to European institutions. He said it was time for bold decisions, and as part of the revision of the Stability and Growth Pact, he advocated the creation of a central fiscal instrument that would be used to deal with symmetrical shocks such as a pandemic, war, etc. He proposed the transformation of the Recovery Fund into a permanent mechanism, as well as significant changes at the level of economic management. We must act, he said, on time and in advance before another major crisis erupts.