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Article about the Bank of Greece Governor Yannis Stournaras in the German newspaper Frankfurter Allgemeine Zeitung

02/06/2023 - Articles & Interviews

Central banker in high spirits

Bank of Greece Governor Yannis Stournaras has more reasons to celebrate than his counterparts. Why the convinced European now feels at ease in Frankfurt.


By Christian Schubert

At least two members of the Governing Council of the European Central Bank are in for a dive: the best-known is Christine Lagarde, a former synchronised swimmer, but the Greek central bank governor Yannis Stournaras is a passionate swimmer too. “I like long-distance swimming, but in the sea, not in the pool,”. As a child, he trained to become a swimming champion. However, his father found that his sporting ambitions were not compatible with the expected school performance. “I quit with a lot of regret, I have continued as an amateur”, Stournaras told the F.A.Z. His favourite swimming locations are off Cape Sounion, south of Athens, and the Cyclades island of Syros.

At the age of 66, Stournaras is fit as a fiddle; his current mandate runs for another three years. In a year from now, he will have been a decade-long member of the ECB’s supreme body, the Governing Council, made up mostly of central bank governors. Only three governors, Klaas Knot (Netherlands), Ignazio Visco (Italy) and Gaston Reinesch (Luxembourg), are there longer. No one, however, should feel as much satisfaction and appreciation within this decision-making body as Stournaras. Despite the pandemic and the war in Ukraine, Greece is on a solid path of recovery. After the recent election success of the government of Prime Minister Kyriakos Mitsotakis, the country has good chances to enjoy continued political stability in the coming years, enabling to press ahead with new reforms. A new election will be held on 25 June, but Mitsotakis is the odds-on to win the race.

“Back then, around 2012-2014, many thought that Greece had to leave the euro in its own interest. The opposite was true. That would have severely damaged not only Greece, but the entire eurozone. 80 percent of the analysts were wrong at the time”, says Stournaras in retrospect. He himself had not considered Grexit for a second. In those dramatic months of 2015, when left-wing premier Alexis Tsipras and his finance minister Yanis Varoufakis had embarked on a dangerous confrontation with European governments, Stournaras had to endure a lot. Leading members of the Syriza party such as Minister Panagiotis Lafazanis and Parliament Speaker Zoe Konstantopoulou even fantasised in the media about the idea of arresting Stournaras, breaking into the central bank and securing the last cash reserves to supply the country.

“Economics is an art”

However, Prime Minister Tsipras soon made a U-turn and gave in. Stournaras survived this storm as well. “Today I feel much better on the Governing Council because Greece is no longer the subject of debates. I can contribute to the discussion in a broader sense”. And he is happy to answer colleagues’ frequently asked questions about his country’s comeback. “Greece is a good example of a strong will to survive within the euro and also of the great help from its European partners”. Although the loans have significantly increased the country’s debt level, the financing terms are such that Greece has hardly been burdened by the rising interest rates over the last few years. Due to tough austerity measures, reforms, foreign investment and the support from of the European Recovery and Resilience Facility, the country is currently experiencing above-average growth rates with falling unemployment.

Not to forget growth while paying attention to price stability – Stournaras in Frankfurt is known for this plea. He can easily be counted on the camp of monetary policy doves. He does not agree that the ECB reacted too late to rising inflation. “We announced the tightening of monetary policy in December 2021”, he recalls. Any comparison with the Federal Reserve, which reacted earlier, would be wrong. “The euro area is a net energy importer and unlike the US does not have a large supra-state fiscal budget”. Unlike America, Europe did not experience a strong increase in demand, which could have been more easily addressed by monetary policy, but was confronted with an abrupt contraction on the supply side due to the war in Ukraine and the energy crisis. “Nobody foresaw the supply shocks like the pandemic and the invasion of Ukraine with the energy crisis”. Now the ECB is raising interest rates and has reduced its balance sheet by 12% with a similar effect. The pace of its balance sheet reduction, e.g.  by selling government bonds, would be faster than in the Fed or the Bank of England. Stournaras emphasises that the Governing Council is more united than many media portray; he admits, however: “Economics is not a precise science, but rather an art and a social science. So there can be disagreements.”

Stournaras is a committed European through and through. As one of the leading economists of his country, educated in Oxford among other institutions, he was actively involved in the negotiations for Greece’s euro area entry more than two decades ago. Between 2012 and 2014, he served Greece - in the same cabinet as Mitsotakis - as finance minister and led the difficult debt negotiations with Europe and the IMF.

Tax evasion rate still the highest in Europe

No grudge has remained from that time, not even in connection with his family history. His father fought in the World War II in a leading position in the resistance against the German occupiers. “History is not forgotten, but is in the past. We have created a Europe where old enemies are now friends. The euro is also part of our political identity today”, he says.

Stournaras does not want to neglect his role as an internal reminder. The rating agencies have again given Greece the prospect of an “investment grade” credit rating, which would mean that the government would no longer issue bonds with “junk” status. Stournaras calls on  the new government to create the conditions for this, through a disciplined spending policy and decisive reforms, to name a few: combatting the  tax evasion rate that is still the highest in Europe, increasing  competition in goods and service markets, and implementing evaluation in  schools in Greece. If that is the case in the future, the married father of two adult daughters will be able to swim off the Greek coasts with even more peace of mind.

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