Bank of Greece Warns of Lavish Pre-Election Promises

The governor of the Bank of Greece (BoG), Yannis Stournaras, warned political parties in Greece on Wednesday that their pre-election promises could derail the economy.

“The analyses carried out by BoG have pointed out the dangers inherent in fiscal populism due to the pre-election period,” Stournaras said. “It would be unthinkable for the next elections to jeopardize the achievements we have achieved with so many sacrifices.”

Governing New Democracy and main opposition SYRIZA are engaged in a battle over lavish promises and handouts prior to the parliamentary elections of May 21.

BoG: No fiscal place in Greece to accommodate pre-election promises

“There is no fiscal space in Greece to accommodate all these pre-election announcements. Of course, I understand that before the election, many say things which are not going to be implemented,” Stournaras said in an interview with Imerisia newspaper.

Prime Minister Kyriakos Mitsotakis announced recently the introduction of a “Youth Pass”, i.e. the support of 150 euros for each young person who reaches adulthood (200,000 beneficiaries per year), for cultural and tourist activities as well as for transport.

He also promised to reduce the ENFIA property tax by 10% on the condition that the owners will insure their properties against natural disasters, and raises in the salary of civil servants through family allowances. He also pledged that he would raise the average income of Greek workers to 1,500 euros during the next four years.

SYRIZA is pledging a 10% increase in the salaries of the public sector, an increase of 7,5% in pensions in addition to a month’s extra pension, a reduction of taxes on petrol and VAT on food.

Among other things, the Leftist party is also promising to increase the tax-free limit to 10,000 euros. It also pledges to spend 7.5% of the Greek GDP on health and 5% on education.

New Democracy says that the cost of the SYRIZA program amounts to over 20 billion euros per year.

The head of the Bank of Greece notes that “there has clearly been an improvement in the fiscal situation in recent years, especially after the pandemic”, a development due to “the overperformance of the economy, the positive impact of inflation on indirect taxes, but also better tax compliance through the increase of electronic transactions”. ”

“The drop in public debt as a percentage of GDP is significant. Of course, we still have the highest debt in Europe as a percentage of Gross Domestic Product. We are not yet investment grade. We have not yet achieved a cyclically adjusted primary surplus of 2% of GDP to ensure long-term sustainability of the public debt”, Stournaras said.

He expressed the hope that the new government to be elected will maintain fiscal prudence:

“I believe the new government that will be elected will keep the country’s commitments, and its programmatic statements will be consistent with the country’s fiscal balance conditions. And also that it will propose appropriate reforms to increase the growth rate.”


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