Welcome address by Bank of Greece Governor Yannis Stournaras at the presentation of Professor Nikolaos Philippas’s book on financial literacy “Money doesn’t grow on trees!”
31/10/2019 - Speeches
I would like to welcome the book of my friend, Professor Nikolaos Philippas, not only because I consider it to be a valuable help for young children and their parents regarding the basic knowledge they should acquire about money and the economy, but also because, for the Bank of Greece and the European Central Bank, promoting financial literacy, e.g. among the youth or vulnerable social groups, is one of our most important missions; especially today that we celebrate the World Savings Day. Saving is key to the prosperity not only of individuals, businesses and states, but also of society as a whole. Saving, which leads to investment, and productivity are the two decisive drivers of overall prosperity.
I find this book so important that – I must admit – I wish it had been published by the Bank of Greece. Besides, as financial literacy is growing into an issue of major concern in our days, I would like to congratulate Nikolaos that he got ahead of us, and mainly on the excellent, simple and understandable way in which he teaches young schoolchildren basic financial concepts such as the uses of money, budgeting, saving and consumerism.
Greece went through a major economic crisis that affected the entire society. It became evident that we were living under a serious delusion, with a huge disconnect between our family finances and the finances of our country. In other words, the effort and realism that characterised, guided and shaped the economy of “our” household, our home, was disconnected from the absurdity and inconsistency that marked for quite a long period the management of public finances as well as, to a certain extent, several private firms’ finances.
Greece is traditionally a country of prudent households. Adults manage their household finances wisely and realistically, wishing to offer their kids all the necessary means for a better life. This is a hallmark of Greek parents! On the other hand, public finances, as we all know, were ailing for many decades. Besides, a large part of the business sector was not competitive. It was extremely state-dependent and operated with a great degree of risk and lack of transparency.
Unfortunately, we remained complacent for a long time. We did not demand on time and persistently from the political system to impose on the State and on this part of the business sector that I mentioned earlier an obligation to exhibit the prudence with which the average Greek citizen manages his home’s finances. The distortions were there, before our very eyes, as part of our daily lives; however, our society did not push forward the alternative of another, more prudent and less risky model; we accepted a State-driven model and we pushed the most creative forces of our country to its fringes. As a result, for many years, we lived beyond our means. This implies that, as a national economy, we were spending far beyond our national production capacity for a long time. This is the exact reason that led us to the large, soaring deficits of the State budget and of the current account balance, as well as to the accumulation of national debt on the domestic front, but mostly abroad.
The toll we had to pay for the choice we made was very heavy, as we all know by now. It is just now that we are starting to slowly recover and come out of the crisis, which has of course scarred deeply both the economy and society.
So, today that we celebrate the World Savings Day, it is absolutely normal to attach great importance to financial literacy, as a way to equip our children with the appropriate tools in order for them to make rational economic choices in their lives and, most importantly, choose their studies and professional career, later on in life, having in mind their long-term well-being. In order for them to learn that, after all, our home’s finances have to conform to certain rules. We should be concerned about how the State manages our money, i.e. taxpayers’ money, but also whether appropriate rules exist that govern the functioning of the business sector.
I welcome this book because it also helps parents and teachers to shield children from any misconceptions they might have. And you should be certain that this will happen, whichever economy they will belong to as active members, whether it is the Greek, European or other.
Besides, in the modern digital era, in which technology pervades the entire economy and society, citizens make important financial decisions from a very young age, running a higher risk of becoming victims of financial fraud. The changes that we are experiencing happen at an unbelievable speed, while at the same time citizens are called upon to continuously adapt themselves and handle new concepts, risks and threats.
The young generation is therefore faced with an increasing need to acquire financial specialisation, which will allow it to fully understand and reap the benefits from the application of financial technology. It has an entirely different approach even to simple, everyday activities; it does not go to banks or shops, and it mainly opts for electronic transactions. It is the generation that has familiarised itself with the new technologies and social networking, and it represents the majority of financial technology users in terms of both demand and supply.
However, the effective use of digital financial products and services, such as internet banking, to which banks are shifting nowadays, requires increased levels of digital financial literacy, and this crucially hinges on citizens’ familiarity with new technologies. The new digital age that the Greek economy and society have entered requires digitally smart persons.
The motto of Greek households reflected for decades the book’s title. That is to say, money is not easy to get. Or, as English speakers put it, it does not grow on trees.
Yet things changed and, some years before the crisis, many people thought that money had started to grow abundantly on trees. At this point, many of our fellow citizens got carried away and made the wrong choices. The conventional criteria of entrepreneurship ceased to apply. The necessary knowledge, the competitive environment, the required funds, all these were revised downwards, often with disastrous results. Also, during this period of abundant and easy money, many of our fellow citizens chose to make particularly risky investments.
In both cases, the Greek society experienced the consequences of financial illiteracy. Persons of every age, not just young people, acted totally oblivious of key market rules and the basics of money. It turned out that they were not adequately trained to distinguish the truth from a lie. Or, to put it mildly, they could not resist the temptations around them, possessed by their ignorance.
The crisis, however, brought to the fore another phenomenon against which we should shield our children: populism. When it comes to populism, the knowledge offered by Nikolaos Philippas’ book plays a crucial role and, in my opinion, it constitutes the cornerstone of the economic relationship between citizens and the State. A relationship that should be based on a sound, tacit social contract conferring rights and duties. Rights and duties which, in turn, are fundamentally realistic and the observance of which, by both sides, is sacred. It may seem like a bad dream by now, but it hasn’t been so long ago that some tried to entice us with a romantic non-conformism, which was ultimately nothing more than mere populism that proved to be disastrous for everyone.
This book should be read not only by us, but by our children as well. And our goal should be a society where financial literacy will be a fact, so that this society shields itself and, most importantly, claims a free, competitive economy with all the necessary rules and safety nets, as well as a sustainable welfare state, which, as a minimum, secures for each young person a good chance to succeed.
By now, ten years after the onset of the crisis, we can see around us the reasons why. As Governor of the Bank of Greece, as an economist and, naturally, as a Greek citizen, I see many examples of young people setting up excellent and competitive businesses. With incredible ideas, appetite for work, and business models that could work even in the most competitive economies.
We are surrounded by a lot of brilliant minds that often achieve the impossible. Relying on their own forces, in spite of adversities, with courage and tenacity. They are the ones that we should support with all our strength, alongside the next generations that are bound to achieve much more in the future.