Higher productivity could lead to an increase in salaries, Bank of Greece governor Yannis Stournaras underlined in a recent interview with the public broadcaster.
This is the only way for a sustainable increase that will not be offset by inflation.
As a small market, Greece suffers from supply issues, which means that cartels with unified practices develop more easily.
“Greece needs higher production of tradable goods and services. We need more producers. Many producers left due to the crisis. Businesses closed. We need growth. We need to remove all remaining obstacles. There may be some sectors of economic activity that keep production low and prices higher.”
The large range of imports covering the domestic demand that our own production cannot cover is another reason for inflation.
And this latter constitutes the notorious production gap that we could compare to the black holes that “swallow” entire planets.
In order to cover the production gap and increase labor productivity in Greece, investments are needed. Describing how this process will evolve, the central banker noted: “Investments and reforms. In other words, the most important determining factor of productivity is investments, it is capital. When the worker has a good computer with him, he can use artificial intelligence. He will certainly produce more than if he does not have one. So, capital is the important factor for increasing labor productivity, but also overall productivity.”
Productivity requires investments, which are increasing, but not at the rate we would like.
However, the central bank advocates for an investment growth rate that does not place additional strain on the current account deficit.
According to Stournaras, the absence of such a correlation would require sufficient domestic savings in Greece – something we unfortunately lack.
