By Vassilis Kostoulas
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A top Greek bank executive and analyst this week reiterated that finally concluding the second review of the Greek program, and possibly the third review, is a necessary condition for lifting the last remaining capital controls in Greece.
Athens-based Eurobank Group’s chief economist and deputy general manager, Platon Monokroussos , in an interview with “N”, echoed previous assessments that a large amount of households’ savings are “under the mattress”, a massive figure he estimated at between 8 to 10 percent of GDP.
Capital controls were imposed by the Tsipras government in late June 2015 in the wake of the announcement of a controversial referendum to decide creditors’ terms at the time.
Asked about creditors’ insistence on high primary budget surplus targets (3.5 percent of GDP) after 2018, given that the 0.5-percent target for 2016 was exceeded eight-fold, as well as the question of how realistic such goals are, Monokroussos said.
“A portion of this over-performance is structural, in nature, and is related to efforts to improve (the state’s) tax collection mechanisms. The primary budget surplus target is 1.75 percent of GDP for 2017, which is, by all accounts, attainable; possibly, the goal of 3.5 percent of GDP for 2018 is also reasonable,” he said, adding:
“However, due to the unemployment problem, Greece cannot achieve such surpluses for an extended period of time. The country needs fiscal space, in other words, lower fiscal targets. Every one euro more in public revenues, or one euro less in public spending, equates to one euro less of national GDP. Of course, the over-performance in the primary (budget) surplus (goal) demonstrated to creditors that targets are achieved.”
In terms of another burning issue for Greece’s systemic banks, namely, the immediate need to better manage non-performing loans (NPLs) and non-performing exposures (NPEs) towards significantly reducing the total, Monokroussos first reminded that the bad debt-GDP ratio in Greece is the second highest in Europe, after Cyprus.
Without touching on forecasts or projections for NPL and NPE reduction, he merely referred to several “positive steps” in terms of improving the institutional framework, such as allowing the sale of loan blocs on the secondary market and the out-of-court settlement law, which he said is based on European best practices.
“Of course, it is still too soon to determine how this framework will perform in the coming period, but it is a positive development, in terms of the institutional framework,” he added.
Facts about investment in Greece in after 2009
Total investments in Greece, as a percentage of GDP, dropped from 20 to 23 percent, before the crisis, to 11.5 percent, whereas the EU average hovers at 20 percent. In general terms, the Greek economy must, over the next five to 10 years, gradually increase total investment outlay by 10 percentage points of GDP.
Nevertheless, most analysts agree that such an increase in investment cannot be achieved only through domestic consumption. For instance, private consumption in Greece currently reaches 70 percent of GDP, while the corresponding Eurozone average is 55 percent.
In fact, as a percentage of GDP, private consumption has actually increased, given that it was roughly 65 percent in the pre-crisis era.
As such, the emphasis is on investment and greater exports. The latter, in fact, have increased, from 20 percent of GDP to 30 percent, yet even here the level of exports as a percentage of GDP, lag far behind the EU average.
