NEWS Release - Speech by the Governor of the Bank of Greece Yannis Stournaras at Delphi Economic Forum II: Greece and the euro area going forward - Speaker: Yannis Stournaras
Ladies and Gentlemen, - It gives me great pleasure to be here today in Delphi to address an audience of such distinguished people, from academics to those involved in policy-making at the highest levels. In my speech, I want to focus on two main themes. First, Greece. What progress has been made? Where do we stand? What are the prospects for the economy not just over the short-to-medium term but also in the long term?
Second, I want to say a few remarks about the euro area. In particular I want to discuss the steps taken by the ECB in order to lessen the impact of the crisis in the euro area, including changes to governance in EMU. However, looking forward, the challenge facing the euro area is to make it more resilient to shocks and I will outline how, in my view, resilience can be enhanced.
Greece: the current juncture
The Greek economy is at a turning point. Growth turned positive in the second quarter of 2016 and, contrary to initial forecasts, it turned out positive for the year as a whole. Some recent softening of economic indicators can be put down to uncertainty in the face of delays in closing the second review of the programme. Hopefully this is now moving forward. A rapid closure of the review will help the economy to build on the 2016 over-performance and move quickly to a faster growth path.
It is important to emphasise just how far Greece has come since the onset of the crisis in 2009. Adjustment, particularly of the flow disequilibria which characterized the Greek economy on the eve of the crisis, has been considerable. The twin deficits have been eliminated. Between 2009 and 2016, the general government deficit is estimated to have shrunk by approximately 14 percentage points of GDP. The primary balance according to the programme definition is expected to have improved by 12 percentage points and is currently projected to reach a surplus of around 2 percent of GDP in 2016, against a target of 0.5 percent of GDP. Adjusting for the effect of the business cycle, the improvement in the primary balance comes in at more than 17 percentage points of potential GDP. This represents one of the largest fiscal adjustments ever undertaken.
The current account deficit as a percentage of GDP has fallen by 15 percentage points. For the last two years the current account has effectively been in balance. Labour cost competitiveness has been fully restored and price competitiveness is almost back at its level of 2000 and can be expected to continue to improve with the implementation of further product market reforms that raise competition in various sectors of the economy.
At the same time, sweeping structural reforms have been implemented covering the pension system, the health system, labour markets, product markets, the business environment, public administration, the tax system and the framework in which fiscal policy is conducted. The privatization programme is on-going, though there is a pressing need to speed up the process and actively attract foreign investment. Foreign direct investment would provide an additional boost to growth, not least by financing new investment.
page source http://www.bankofgreece.gr/
