Regling: The growth goals of Greece are achievable

The head of the European Stability Mechanism, Klaus Regling, characterized achievable the goals for the growth of the Greek economy.

He pointed out that the targets for a growth rate of 3.5% this year and 6% in 2022 are achievable and are the basic scenario of the ESM, talking about the Greek economy at the Economist conference.

The head of the ESM added that the risks still remain, as the new coronavirus mutation could have a negative impact on tourism, for example.

In any case, he noted, we should take efforts to strengthen the growth potential of the Greek economy. He, then, noted that more targeted measures are needed, focusing on supporting employment and business investment.

The Greek economy, he said, was much more resilient at the start of the pandemic, as, the last decade, Greece proceeded to a comprehensive and painful but necessary adjustment, which restored its competitiveness and market access, eliminated the budget and current account deficit and brought about healthy growth.

Mr. Regling said that Greece had the opportunity to support the economy with measures throughout the pandemic, but noted that these measures costed more than 15% of GDP in 2020-21.

Recovery Fund

Mr. Regling said Greece would benefit from the 31 billion euros available from the Recovery Fund, while congratulating Mr. Staikouras and the government on their recovery plan. At this point, he added that we should keep in mind some important long-term constraints on growth prospects, such as the management of public enterprises, the ability of the banking sector to lend to the economy, the level of non-wage costs and the rigidities in labor market. Not all of these reforms, he continued, are included in the recovery plan.

On top of that, he stated that there are some issues we should face on the implementation of the plan, as there are some risks due to weaknesses of the administration.

Mr. Regling also said that we need to keep in mind debt sustainability. Low interest rates, he said, are now easing concerns, but they could rise once the European Central Bank completes its program. This, he stressed, does not mean that we are moving into a new debt crisis.

However, the measures we take to deal with the pandemic have significantly increased the debt and, once the recovery is stabilized, Greece will have to follow a credible fiscal path. “If this is combined with the commitment to reforms that boost growth potential, Greek debt can remain sustainable,” he concluded.