The growth, the… gap and the banks

The growth, the… gap and the banks

The Prime Minister Kyriakos Mitsotakis’ pre-election promise of … growth up to 4% arriving for the Greek economy has been postponed. Reportedly, growth rates are expected to settle for 1.9% this year. As for next year the government’s desire would be to “raise” its projections to 3%, a point the Prime Minister had set as a priority after the elections. Yet not even the Bank of Greece Chief Yiannis Stournaras has gone on to make such optimistic estimates – he set the bar just above 2%for 2020, something the IMF did a few days ago.

Beyond that, an important issue for debate with the institutions is the use of the 37 billion-euro safety cushion, with the government looking to give banks a push in an effort to reduce their red loans in their portfolios.

Banks are working to reduce the volume of non-performing loans, which amounts to 80 billion euros, in order to reopen their lending bills and boost their profitability, with the State being required to chip-in with 9 billion-euro guarantees.

According to Deputy Finance Minister G. Zavvos, the Greek State formally submitted a request to DC Comp a few days ago with its approval expected within the next few days, so that by 20 October a draft law incorporating state guarantee legislation can be prepared and submitted to Parliament.

Amongst other things, institutions have so far found a fiscal gap for 2020. This occurs despite the fact that, according to information, institutions estimate that there may be a budget gap of up to 1.8 billion euros (worst case scenario) in 2020. This is why questions are raised as to whether the tax cuts announced by Mr. Mitsotakis while at TIF will be implemented or whether they will be accompanied by negative – this time – countermeasures.

Besides these ones, the discussions that follow will continue with the Greek government and the institutions staying apart, looking to secure a positive report by the Commission at the end of November on Greece’s fourth post-monetary assessment.

The Greek side has reportedly put forward a series of initiatives which has already implemented or intends to do so immediately, looking to acquire full responsibility for any reforms that may arise.

Regarding the fiscal data and the projection for the growth rate of the Greek economy, the focus is now on submitting the preliminary draft budget on October 7 to the Parliament and sending it to the Commission on October 15 as part of the European Semester. /ibna