Stournaras: Expansive fiscal policy to blame for Greek financial woe

Stournaras: Expansive fiscal policy to blame for Greek financial woe

Athens, March 22, 2016/ Independent Balkan News Agency

By Zacharias Petrou

The Governor of the Bank of Greece (BoG), Yannis Stournaras, explained the reasons behind the Greek economic crisis and the impact of the three MoU’s Greece has signed with international lenders on the country.

Speaking at an event organised by the ‘Citizens’ Movement’ in Athens on Monday, Stournaras said the financial crisis was not triggered by the austerity policies stemming from the MoU’s but an unjustifiably expansive fiscal policy, where state spending far outstripped state revenues for many years.

“The crisis in Greece has a name: a great risk of default of the Greek state at the end of the 2000s, chiefly due to an unjustifiably expansive fiscal policy that shot the budget deficit to giddy heights via a great increase in state spending, without a matching increase in state revenues. Everything that followed and the memorandums were efforts to avert default. These efforts obviously had unpleasant repercussions, but the repercussions of default would have been incalculable,” Stournaras said.

The BoG Governor said public opinion was never nurtured in understanding and adopting the necessity for deep economic reforms; this is the reason it is the only EU member-state still in a bailout program. In contrary to other countries, in Greece the public debate deepened uncertainty and eroded society’s trust in politics and institutions, Stournaras said.

Referring to the imposition of capital controls in 2015, the BoG chief said that it had caused distortions and indirect consequences whose results could not yet be assessed.

However, there is also a positive sides to capital controls, Stournaras explained, such as encouraging the use of e-payments which impact positively on both private consumption and tax revenues, while decreasing the size of the informal economy.