In a turbulent international environment, Greece for the first time stands out positively, Bank of Greece Governor Yannis Stournaras said on Monday in a radio interview.
Speaking on Skai radio, the central banker noted that the Greek economy is growing at twice the rate of the rest of Europe, while its most important achievement in recent years has been reducing public debt as a percentage of GDP by about 10 points annually.
“We cannot say that wealth is distributed exclusively to the rich. Very few believed we would manage to overcome the crisis, and we should preserve this achievement,” he said. “Fiscally, we have left behind the bad past, but we must now emphasize reforms. Overall, we are doing well, but not perfectly – we can do better.”
“The strong revenue performance creates fiscal leeway, and the European Commission has signaled that some of it can benefit citizens. We are reducing debt by 10 points a year, this is the most important success,” he added, stressing that Greece will not return to the brink of bankruptcy if it continues on this path. “Of course, if the prime minister were to hand out checks again, we could find ourselves back in 2010. Redistribution through income tax proves more effective than any VAT reduction,” he emphasized.
Responding to a listener, Stournaras said that what matters for the Bank of Greece is compliance with European Commission rules, which are now more flexible and set a ceiling on each member state’s spending.
“When investments lag, productivity and real incomes also lag – it is a chain reaction. Due to the crisis, we fell very low in terms of purchasing power. Now we are slowly converging with the European average, at a rate of 1.5%. If we raised salaries by 30% tomorrow, we would go bankrupt. You cannot increase wages in a country unless you first increase productivity. Productivity means reforms and investments that make the economy more flexible. Since 2019, Greece has seen a 60% increase in investment, with four-fifths of it in productive sectors.”
Regarding the minimum wage, he said that in all countries it involves some degree of state intervention. “If this were not the case, it might be lower than it is today. But this does not mean the state determines all salaries – the minimum and the average wage are different things,” he said.
“Unfortunately, there is no silver bullet. To grant wage increases, there must be a reflection of productivity,” he added.
At the same time, he referred to negative aspects of the country’s economic reality, such as the fact that some citizens still do not earn a monthly salary. “That is why the government should focus on the most vulnerable. Greece’s inflation is higher than the rest of the eurozone,” he said.
“Inflation is forecast at 3.1% for 2025, gradually easing to 2.6% in 2026 and 2.4% in 2027. Prices rose globally after the pandemic disrupted supply chains, and then Russia invaded Ukraine, but since then inflation has been gradually falling. This can only be addressed by increasing wages in line with productivity, as well as discipline in public finances.”
Finally, he urged bankers to adjust their interest rates, warning that competition from digital banks such as Revolut is looming.