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GreeceBusinessNot enough fiscal space to allow all pre-election announcements, BoG governor says

Not enough fiscal space to allow all pre-election announcements, BoG governor says

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Interest rates will continue rising in 2023 and will remain at high levels until 2025 when the European Central Bank is expected to achieve its goal to combat inflation, Bank of Greece’s governor Yannis Stournaras said on Wednesday.

In an interview with “Imerisia” newspaper, the central banker warned there is no fiscal space to allow the implementation of political parties’ pre-election announcements, while referring to the investment grade, he said that credit rating agencies will take their decision after hearing the new government’s policy programme. He added that it would be best to have a stable government with a long-term horizon to take all decisions necessary to obtain the investment grade. Decisions that will be included in its policy programme.

More specifically, Stournaras said that the cycle of interest rates rises was nearing its end, but he stressed that we have not yet reached the end. “We cannot say how many increases will be made. This will depend on estimates on inflation, economic growth and financial conditions. As things stand now and if there would not be anything dramatic ahead, we can say that within 2023 interest rate increases will end,” Stournaras said.

The central banker reassured that Greek banks were well capitalized, they enjoy good liquidity rates, they have strict supervision and undergo extreme stress tests often. He said that the likelihood that anything could happen to Greek banks was thin. Stournaras said that the economy was on the right track but the country needed a confirmation of credible economic policy for the coming years and definitely needs a stable government.

Commenting on political parties’ pre-election announcements, he said there was not enough fiscal space to allow all these announcements. “Of course, I understand that ahead of the elections things are said that cannot be implemented because if we evaluate correctly everything it is said then we exceed by far any available fiscal space,” the central banker said.

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