Bank of Greece Chief Stournaras Says Economy Can’t Take More Handouts

FILE- Bank of Greece Governor Yannis Stournaras. (Photo: Eurokinissi/Giorgos Kontarinis)

ATHENS – Continuing to clash with Prime Minister and Radical Left SYRIZA leader Alexis Tsipras, Bank of Greece Gov. Yannis Stournaras said the government’s policy of handouts to woo back voters with elections coming is taking a deep toll.

Stournaras, who has said the government’s picture of the economy is too rosy as a slow recovery is coming from a more than nine-year crisis, said there ‘s no “fiscal space” this year for more giveaways such as the new, permanent pension bonuses being given.

On top of cutting taxes less than he raised them, the bonuses are an iota of what pensioners lost in cuts during the crisis and it was pictured by political rivals as an open bid to buy votes ahead of the May 26 elections for European Parliament and Greek municipalities and general elections later this year.

New Democracy has sizeable leads and the Conservatives chief, Kyriakos Mitsotakis, said he would undo some of the austerity imposed by Tsipras after he said he wouldn’t, before bowing to European creditors in 2015 to get a third bailout, this one for 86 billion euros ($96.37 billion.)

Stournaras, who had been finance minister under a New Democracy-led coalition, told the state-run Athens News Agency that potential investors are still wary over reforms being undone and with political instability.

Greece emerged from eight years of 326 billion euros ($365.33 billion) of three rescue packages on Aug. 20, 2018 but still hasn’t been able to make a full return to markets with a 10-year bond sold at interest rates far higher than the bailout terms.

Stournaras said figures for the general government in the first quarter of 2019, released by the General Accounting Office, show that the Greek state will post a primary budget surplus of 3.5 percent of Gross Domestic Product, bigger than expected, and the handouts source.

That does not include interest on debt, the cost of running cities and towns, state enterprises, social security, some military expenditures and the state holding back payments and refunds due people and companies.

Stournaras said if the handouts are kept up that the primary surplus will fall below that 3.5 percent goal set by the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM.)

“The nervousness that exists in the bond market over the past few days, to a certain degree reflects the concern on the part of investors regarding (Greece’s) fiscal developments,” he said.

Finance Minister Euclid Tsakalotos, a Marxist economist forced into bowing to the lenders’ tough terms, said Stournaras should “carefully review the economic indices to ascertain that the necessary fiscal space exists for benefits.”