BoG governor Stournaras: Greece can meet its fiscal targets next year

Greece can meet its fiscal targets next year, the head of the country’s central bank said on Tuesday as he warned that the biggest risk the economy faced would be a failure to conclude the latest bailout review.

Athens and its official creditors are at odds over the country’s fiscal targets as well as labour and energy reforms that are part of Greece’s second bailout review.

Meanwhile, a rift between the European Union and the International Monetary Fund over Greece’s medium-term primary surplus targets has also clouded Greek hopes for a swift conclusion of the review.

“Despite the positive projections … serious risks remain,” Yannis Stournaras told a conference in Athens. “The main risk would be the eventuality of failing to reach agreement on the second bailout review and any delays in implementing the programme or backtracking.”

Greece’s budget aims for a 2017 primary surplus – which excludes debt servicing costs – of 2 percent of economic output, slightly higher than the 1.75 percent bailout target.

In 2018, the bailout terms demand the surplus increase to 3.5 percent of output. Athens says it cannot maintain a surplus at such levels beyond 2018.

Athens hopes to reach an initial deal with its lenders on reforms this week and conclude the review by the end of the year. A Eurogroup meeting of euro zone finance ministers on Dec. 5 will discuss Greece’s progress and debt relief measures.

A second Eurogroup meeting may take place later next month, Greek and EU officials have said. Greece’s medium-term fiscal targets and how long it can sustain them will also be on the agenda.

Greece’s economy expanded for the second quarter in a row in July-September, statistics service data showed on Tuesday, boding well for a stronger recovery next year after a protracted recession.

Stournaras said lowering Greece’s primary surplus target to 2 percent of economic output from 3.5 percent after 2018 when its financial aid programme ends would help boost growth.

On Monday, Finance Minister Euclid Tsakalotos suggested the target be reduced to 2.5 percent of GDP. Athens would then be able to offer tax relief for businesses to boost competitiveness.

Source: Reuters