An informative debate in Frankfurt over Greek debt

Posted by Antonis D. Papagiannidis 06/06/2017 0 Comment(s) Economia Blog,

The interesting and to-the-point Conference, organised by The Economist in Frankfurt (the seat not only of the ECB but also potentially of Eurozone finance now that the City is grappling with Brexit woes) over Greek debt, was extremely informative for whomever would try and follow the latest twists and turns of the "Greek saga".


 "Everybody who is somebody" in the Greek adventure was present, with Benoit Coeure of the ECB deploring that, while "Greek authorities did important progress to adopt the measures of the second review [of the ESM Programme]" no clear decisions over Greek debt were taken in the latest Eurogroup; while Greece's own Euclid Tsakalotos put it somehow differently: "everybody agrees that Greece kept its undertakings [...] now we need satisfactory clarity over the mid-term measures for Greek debt".


But the intervention most apposite to the current situation was the one from Yannis Stournaras, Governor of the Bank of Greece, who proposed a cut to the (promised) exorbitant primary surpluses of 3.5% of GDP for several years, with a significant portion of lower surpluses being allocated to growth-inducing measures.  Stournaras proposed that Greece should go from 3.5% to 2% of GDP of primary surplus "along with mutually agreed reforms". He also proposed that a further period of 8.5 years be granted to Greece as interest-payment holiday, with further "relatively mild debt relief measures" making Greek debt sustainable/serviceable over the longer term. Stournaras also stressed the need for a change from a policy mix with heavy taxation toward better use of the asset the public sector possesses in Greece.


Commission Vice-President Pierre Moscovisi insisted (through a televised message) that the current second review of the Adjustment Programme could be soon achieved "making it possible to build on the progress made". Moscovici's prediction for the growth potential of the Greek economy would be of 1.3% of GDP over the long term - a percentage that somedays later was leaked as being the one used in a scenario proposed by the ESM as a "Plan B" for Greece.


Declan Costello, head of the Troika/Quartet for Greece put his emphasis on the implementation aide of the structural measures agreed with Greece. To his opinion, the problem Greece faces is no longer fiscal in nature but rather a competitivity issue and a matter of public administration reform.


Nicola Giammarieli, head of the ESM mission to Greece, stated that "it is growth and reforms that will ensure debt sustainability". To him, Greece should rather focus on privatisations, banks' NPLs and generally speaking to reforms rather than on debt.


In the same Conference, Alexis Charitsis (a alternate Minister of Economy and Development) talked of "a growth momentum building up" in Greece; he also gave data about the growth in exports (+24,5% in March 2017 over last year) is well as in retail sales (+9.6% in February 2017 over last year). He also made it clear that much of the rebound hoped-for would benefit importantly from access of Greece to ECB's Q.E. programme.

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