Bank of Greece (BoG) governor Yannis Stournaras this week appeared critical of the latest wave of tax increases, direct and indirect, passed by the government as part of last month’s 5.4-billion-euro austerity package.
The austerity package was mostly comprised of a set of measures aimed at meeting memorandum-mandated fiscal targets.
Stournaras, whose positions were detailed in a monetary policy report submitted to the Parliament president on Wednesday, warns of an excessive emphasis on tax increases, which could backfire, i.e. increased recessionary pressure that will cause less revenues and a failure to meet fiscal targets.
The BoG report and the influential Greek central banker also caution that restored growth in the recession-battered economy would be threatened by a delay in implementing already agreed to reforms, along with intensification in the flow of refugees arriving from Turkey and the unforeseen, as they said, course of the global economy in the wake of a possible Brexit.
Additionally, the report echoes Stournaras’ proposal for a lower primary budget surplus fiscal target after 2018, from 3.5 percent of GDP to 2 percent.
In line with the leftist Greek government’s recent announcements, Stournaras and the BoG also predict a marginal return to growth for the Greek economy in the third quarter of 2016, a development expected to ameliorate the overall recession for the year. The latest assessment, by the Greek side, at least, cites a 0.3-percent decrease for 2016, on an annual basis.
Finally, in reference to the conclusion of the first review of the Greek program (third bailout), Stournaras called recent decisions by the Eurogroup on Greek debt relief “timid”.
