The crisis in Greece was not been caused by austerity measures, according to Bank of Greece governor Yannis Stournaras, but rather by an unjustifiably expansive fiscal policy. Speaking at an event organized by the ‘Citizens’ Movement’ he warned that today’s economic hardship were caused by poor management in the last decade.
Irresponsible policies, he said, “pushed the budget deficit to giddy heights via a great increase in state spending, without a matching increase in state revenues. All that followed and the memorandums were efforts to avert default. These efforts obviously had unpleasant repercussions, but the repercussions of default would have been incalculable,” he said.
The former finance minister stressed that the debate that predominated in Greece has not been “sensible” and has created illusions among the public. These misconceptions were preventing the public from understanding the need for and adopting deep reform. The result, he charged, is that Greece’s fate continues to hang in the balance.
Of the four countries that had to enter special programs to avoid default, only Greece continues to be in trouble. In Ireland, he pointed out, the growth rate is now approaching 8 percent. By contrast, the tone of public debate has only served to deepen uncertainty and has eroded trust in Greece’s political system and its institutions.
Referring to the imposition of capital controls in 2015, Stournaras said they had had caused some distortions and unintended negative consequences whose results could not yet be assessed, but also had helped promote the use of electronic payments, and improved private consumption levels and tax revenues. At the same time, he said the size of the gray economy had been reduced.
