Interview with ECB President Christine Lagarde conducted by Alexis Papahelas on 30 October.
November 4, 2023
When you were in Athens last week You talked about Greece’s resilience and its miraculous ability to recover. Can you please tell me how this happened? How did Greece become a success story?
When I look at the main performance indicators in assessing the economic and financial situation of Greece. I see overall improvements: in employment, growth, fiscal situation. and debt-to-GDP ratio, Greece has completed several reforms on its to-do list. Of course, that’s not all. There is still a lot of work to be done. I understand there is still more reform to come. But overall The results of the country’s efforts are impressive. And this has not gone unnoticed by those whose job it is to rank economies and assess credit ratings. This is evident from the two recent decisions that raised Greece’s credit rating to investment grade. I think it’s a huge testament to the country’s efforts. This turnaround is thanks to fiscal adjustments and reforms implemented. but also the determined efforts of the Greek people and the Greek authorities.
Does a high debt-to-GDP ratio worry you?
The debt-to-GDP ratio is around 160% at the moment. It has dropped significantly over the past few years. And it is clear that this downward trend needs to continue in the future. I know there is more to come. But it is clear that Greece has responded to this challenge with determination. And the results are already clear to see.
Have you ever been really worried about Grexit? Do you think it is possible?
There are two periods when a threat may actually occur. The first came during France’s G20 presidency in November 2011, when there was talk of a possible referendum. That ultimately did not happen. Second, as the threat became more tangible and more worrying, That was in July 2015, so we had two Grexit threats, but the one in 2015 was the most concrete. And if it were not due to the decision of Few European leaders would emerge.
You had a front row seat to the Greek financial crisis from the beginning. Looking back, do you think any mistakes were made?
The original mistake was to put the country in that situation. If there is more fiscal discipline and adopt prudent principles in setting up a rainy day fund during an economic downturn. The crisis would not have happened. The fiscal policy adopted before and after the 2009 crisis was a mistake from the beginning. As I said before It would be beneficial for the IMF to have longer programs than it currently has in its arsenal. Programs aimed at rapid and deep fiscal transformation, reform and integration, at the time, they were not the best tool for countries in a monetary union without a monetary union or for Greece’s specific fiscal situation.
Have you learned any lessons or conclusions from this crisis?
One particularly relevant lesson is to ensure that we have the collective discipline to deal with the lack of fiscal union. I think this should be an urgent issue for all of us. When you have a monetary union without a monetary union. same as us You need to have clear fiscal fences and a domestic fiscal framework that countries can use. It can design and implement its own fiscal policy. and must be responsible to other members of the monetary union
Something else that stands out from the Greek situation is that the decision was made. But sometimes this is reversed by the political team that follows. And even though the decision has been made The implementation and follow-up required to move forward also doesn’t always happen. Another lesson is Although banks were not the cause of the crisis, But a strong, robust financial sector with well-capitalized banks is also vital.
Are you satisfied with the current state of the Greek banking system?
I think a lot of work has been done to consolidate and strengthen the Greek banking sector. Take non-performing loans as an example. In 2016, nearly 50% of loans were non-performing. Now it’s over 8%. That’s an important sign of improvement. This involves parking those non-performing loans outside the banks, so in a way the banking system has been sterilized. Capital adequacy ratios are much stronger. Non-performing loans decreased And the liquidity ratio is quite strong as well. Yes, a lot has been done to make Greek banks stronger and more attractive. I think the fact that large foreign banks are taking an interest in Greek banks is a clear indication that the sector is becoming more attractive.
Do you think 10 or 12 years ago it would have been possible for you and the Governor of the Bank of Greece, Yannis Stournaras, to take a walk around Syntagma Square, where all the protests were? What were you thinking when you actually did this?
I am very confused by this change. I have to tell you As you know I did not come to Greece during the crisis. But obviously I’m in frequent contact with the team. I followed the IMF mission’s visit closely – special security measures were taken. And that is a source of anxiety and anxiety. Now, walking down the street, greeting people and feeling the energy vitality And their optimism is amazing. It is a testament to the effort and determination of the Greek people to turn the tables and seize their destiny with the discipline and seriousness required in a union like the EU. I think it’s wonderful that Greece can set a standard and be an example of what needs to be done. Reforms to be implemented
Do you feel that economic events are being driven by geopolitics these days? How difficult is fiscal action and, more importantly, monetary policy?
You and I have been together for a while. And I think geopolitics is more important than any other development. That much is not new. What I think is a little different now is that Many geopolitical developments are taking place from different angles. of the world have a combined impact Sometimes they are a reflection of the great divide unfolding before us. When the world has a bipolar power structure When organized and agreed upon fairly By being able to predict things, you will be more confident about future developments. Now it’s more scattered. Crises are unfolding in different parts. of the world at the same time And it is still unclear who is on whose side and what the next development will be. Not to mention the final results of the current crisis in the Middle East. And if you add that to the crisis that we just went through with the epidemic. Add to that the serious challenge of climate change. This is a tragedy that is already being resolved. That’s a lot of geopolitical and climate developments co-occurring. That’s what makes it harder now. Which is why I think we are facing transformation and rupture that are not even imaginable. But it flies in the face of traditional ways of thinking or certainties that we used to have.
Do you think inflation will go down next year? Why?
This is definitely our prediction. And this is definitely our goal. We are committed to bringing inflation down to 2% in line with our forecast. We will get there in 2025.
It seems that rising food and housing prices are almost structural now. Are you worried about the political implications of all this? Is it about political pressure caused by rising living costs?
When we measure inflation We draw your attention to the general rate, which is what our compatriots in Europe are experiencing. How much more will it cost to put gas in the car, food on the table, or clothes, shelter, and everything else? But we are still trying to understand what lies beneath the most variable elements. One of those elements is food. Will food prices rise in the future? That might be possible if you look at the effects of climate change, for example droughts, floods, rising temperatures. and rising sea levels Often affects food prices in the future.. As for the political implications you ask me? I would say that our job is to maintain price stability. And this is the best contribution we can make to social and social peace. This is especially true of its most vulnerable members.
The last question I want to ask you is, What really keeps you up at night?
I try to sleep as much as I can and right now not much I have to say. when I go to bed I was very tired and fell asleep. But what bothered me before I went to sleep was the level of intensity. Hate and hubris are the worst things people can do. Bad for children And it’s terrible for civilians and, of course, in addition to human suffering. All of this will have an impact on our economy. on people’s confidence level And it might just make our job a little harder moving forward.
#Interview #Kathimerini
2023-11-04 20:51:04
