Cen­tral banker calls for tax cuts, fea­si­ble tar­gets

Kathimerini English - - Focus -

Greece’s fis­cal mix is dan­ger­ous for the econ­omy, Bank of Greece Gov­er­nor Yan­nis Stournaras warned at the Del­phi Eco­nomic Fo­rum on Satur­day, where he also called on the gov­ern­ment to com­plete the bailout re­view im­me­di­ately.

“We have be­come a tax-cen­tered econ­omy,” said Stournaras, stress­ing that taxes should be re­duced and state ex­pen­di­ture cut for the econ­omy to grow.

“The Bank of Greece is call­ing on the gov­ern­ment to com­plete the re­view yes­ter­day,” added the cen­tral banker: “The longer the de­lay, the more un­cer­tain the fa­vor­able fore­casts for con­sump­tion and in­vest­ments will be­come. The medi­umterm tar­get should be the re­place­ment of con­sump­tion by ex­ports and in­vest­ments, as com­pet­i­tive­ness im­proves.”

As re­gards pri­mary sur­plus tar­gets, Stournaras voiced his pro­posal for 3.5 percent of the gross do­mes­tic prod­uct in 2018 to 2020 and 2 percent after­ward: “The fis­cal lee­way cre­ated would be used for tax and so­cial se­cu­rity con­tri­bu­tion cuts.” The 3.5 percent tar­get for the next 10 years would be too tough, he said.

To make the na­tional debt sus­tain­able, Greece needs “just a lit­tle push, a mild ex­er­cise of eas­ing.” His pro­posal pro­vides for re­duc­ing in­ter­est rates by spread­ing the high cost (some 10 bil­lion eu­ros) payable in 2022 across the fol­low­ing 20 years. Low­er­ing the fis­cal tar­get and smooth­ing out in­ter­est rates will bring the same or bet­ter debt eas­ing than the harsh decade of high sur­pluses pro­posed, the cen­tral banker added.

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