The Governor of the Bank of Greece (and member of the Board of the ECB) Giannis Stournaras left open the possibility for the European Central Bank (ECB) to increase its key interest rate slightly towards the end of the year.
Speaking at the Economic Post conference, Mr. Stournaras said that the ECB must be very careful with the “interest rate weapon” in its attempt to deal with the jump in inflation, as he said it is “supply-side inflation. , which can not be tamed by monetary policy measures “. Nevertheless, as he said, “there may be a slight increase in the interest rate towards the end of the year”.
Regarding the consequences of the war in Ukraine on the real economy, Mr. Stournaras said that it is possible that there will be a reduction in GDP from 1% to 2%. In any case, the final impact will depend on the duration of the military operations. However, he appeared reassuring about the impact on the red loans front, stating that so far there are no signs of an increase. He said that with the data so far, there does not seem to be any doubt about the goal set by the banks to reduce the percentage of red loans to single digits by the end of the year. However, he hastened to clarify that the picture at the moment can not be representative of the real situation, as several loans are still in state aid status.
He was also reassuring about the course of public debt service, predicting that the country is not at risk of a new debt crisis, given that today the average refinancing rate is only 1.4%, which is lower than that of Italy and Portugal. However, he stressed the need for the country to acquire the so-called investment grade as soon as possible, describing this project as a “national goal”. “We have learned our lesson,” he said, adding that “we can not have irresponsible fiscal policies.”
Referring to the developments in the financial sector, the governor of the BoG called on the banks to grant more loans, as he said that after the big reduction of the red loans, the total loans of the four systemic banks are only 120 billion euros. As he said, it is in the interest of the same banks but also of the national economy to increase the credit expansion in the private sector. Finally, he argued that the country could become a hub for green energy.
Source: AMPE
Source: Capital
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