Bank of Greece Governor Yannis Stournaras warned the country’s political parties to avoid any handout talk that could jeopardize Greece’s course back to investment grade, in his Intermediary Report on Monetary Policy released on Wednesday. He also noted that any difficulties in the formation of a government after the upcoming general election could pose a serious risk to the national economy.
“The implementation of investments and reforms based on the Greece 2.0 plan, as well as the maintenance of fiscal reliability and stability can make it possible for Greece to be upgraded to investment level next year,” noted Stournaras.
“This is a very important objective, especially amid the tightening of monetary conditions and the deterioration of international financial conditions, which have had an upward effect on Greek bond yields. In this context, given that 2023 is the year of national elections, the coordination and understanding of political forces is required in order to implement the basic commitments of economic policy and preserve what the economy has achieved in the last decade.”
Macroeconomic forecasts are highly uncertain, the BoG head warned, with a number of potential factors threatening a further slowdown in growth. These factors are a further escalation of the war in Ukraine, higher and longer-lasting inflation, a new wave of the pandemic, a new generation of nonperforming loans, a low degree of EU fund absorption, a delay in the formation of the new government, and the geopolitical tension in the East Mediterranean.
In that context Stournaras calls for economic policy to place an emphasis on the following sectors: containing inflation impact on household incomes; implementing the investments associated with the Recovery and Resilience Facility; keeping salary costs competitive given the upcoming minimum salary hike; tackling labor market distortions; accelerating the transition to “green” energy and security of energy supply; and strengthening the credit sector’s resilience.