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Economy

Bank of Greece Chief Sounds Caution Despite Growth, Pushes Reforms

ATHENS – Greece should not become complacent about its still surging recovery, which has been a remarkable comeback from the economic and austerity crisis of 2010-2018, Bank of Greece Governor Yiannis Stournaras warned. He urged that reforms should continue.

Speaking to the central bank assembly, he noted that data are showing some stagnation after the economy expanded by almost 6% in 2023, driven by record tourism. However, this comeback is slowing in 2024.

Stournaras, who served as Finance Minister in a former coalition government led by New Democracy with the PASOK Socialists, emphasized the need for fiscal prudence. He stated that primary surpluses of at least 2% of the Gross Domestic Product (GDP) are necessary.

While all rating agencies except Moody’s have given Greece an investment-grade status, attracting more foreign investors, he mentioned, “Political, fiscal, and financial stability are public goods that must be preserved, especially in Greece, which just a few years ago emerged from the biggest economic crisis in its modern history.”

He added that the international competitiveness of the Greek economy, after significantly improving in previous years, showed signs of stagnation or even a slight retreat in 2023, amid a deteriorating environment for international trade.

He cautioned that there are weaknesses that could undermine the rebound, including the still lagging efficiency of the state, long delays in the judicial system where cases can take up to 10 years or more, and the notoriously sluggish bureaucracy.

The bank has forecast a 2.1% primary surplus, which does not cover the costs of debt – Greece is still repaying much of €326 billion ($354.11 billion) in three international bailouts – running state enterprises, and some military expenditures.

Despite the rescue packages, the debt rose by 10.7% in 2023 to 161.9% of GDP, a level that Prime Minister Kyriakos Mitsotakis deemed unsustainable when New Democracy was out of office. He now says it is manageable.

For 2024, the debt is estimated to be 152.3% but is expected to decrease in nominal terms for the first time since 2019, when the Conservatives took over. Growth is projected at 2.3% in 2024, compared to the government’s more optimistic forecast of 2.9%.

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