Interview of the Bank of Greece Governor Yannis Stournaras with Bloomberg TV to Guy Johnson and Lizzy Burden
06/06/2025 - Articles & Interviews
Guy Johnson: We welcome Greece's long serving central bank Governor, Yannis Stournaras. Very nice to see you.
Yannis Stournaras: Good morning, very nice to see you, too.
Guy Johnson: You and I first met during the Greek financial crisis, which seems like such a long time ago. And the country has come such a long way since then. We'll come back to that in just a moment. But I want to get your take on what happened yesterday.
Yannis Stournaras: It was an expected decision I think.
Guy Johnson: Okay.
Yannis Stournaras: I think we have achieved what we can call a soft landing in a difficult world situation. So, inflation now is 1.9%. Our medium-term forecast is close to 2%. So, we have cut interest rates at 2%. We have cut eight times in the last year.
Guy Johnson: The question is, now what?
Yannis Stournaras: I think now, the best thing is wait and see. As you know, we are now data dependent.
Guy Johnson: So, you are not necessarily done. Because the question is going around.
Yannis Stournaras: It is nearly done but with such uncertainty worldwide, you can never say that it is done, because we have tariffs, we have geopolitical tensions. So, we are very, very careful.
Lizzy Burden: So, maybe another cut. What kind of data would you need to see to trigger another cut?
Yannis Stournaras: Well, if the economy weakens more, if inflation falls in the medium term sustainably below 2%, then we might cut, but this is not expected. I mean, we have our new forecast. We are confident. But of course we are data dependent.
Lizzy Burden: I mean, a lot of people were thinking about July. Now people are more thinking about September for the next cut. Do you think that there's inherently a problem for the market getting confused if it's a long pause between (..).?
Yannis Stournaras: No, if you remember, I have talked about the pause for a long time now. It is not something unexpected. Our forecast is that there are risks, there are downside risks to growth. On inflation we are more balanced. So, we are quite confident about our forecast now. So, wait and see! We are keeping options open, meeting my meeting, data dependent.
Guy Johnson: There seems to be some surprise at the statement yesterday which kind of appeared quite dovish and Christine Lagarde’s press conference, which seemed to be a little bit more hawkish. Is there a difference between the two, were you surprised by how hawkish Christine was yesterday?
Yannis Stournaras: No, because perhaps this time, the difference between what we call dovish and hawkish is not that big. I think we have converged. There was almost unanimous decision yesterday. It was not surprising that the President said that we are nearly there. And if we are nearly there, the best thing is, “wait and see”. She did not exclude anything, in my view.
Guy Johnson: Okay. Fair enough.
There's a lot about to happen. We don't know what's going to happen with tariffs.
Yannis Stournaras: Absolutely.
Guy Johnson: We don't know what's going to happen with economic data. We still haven't seen evidence of a tariff impact, particularly into the US economy. We haven't certainly seen it in some of the data in the European economy. What's your degree of certainty right now? You talk about that there are lots of different options. But how can you quantify? Is it possible to quantify the degree of uncertainty?
Yannis Stournaras: We tried in our three scenarios yesterday the baseline, the mild and the severe. The differences are not that big. That's why we are quite confident about our forecast and about our stance.
Guy Johnson: The degree of certainty is quite high.
Yannis Stournaras: Yes, it is quite high. And it is not only tariffs. It's the bond market worldwide. There are mismatches of demand and supply. So, the bond market worldwide is also something that we should look at. But you're absolutely right. With the introduction of a tariff war things have changed dramatically in the world economy and in the euroarea economy. The big picture is that, at least for Europe, the effect of tariffs is deflationary. For the United States, if I can say, it's stagflationary. So, there is a difference here, which complicates monetary policy.
Lizzy Burden: In these scenarios yesterday, even in the most severe scenario, you didn't see US tariffs on the EU going up to 50% back to 50%. What if that happens?
Yannis Stournaras: No, this scenario is not 50%. It's a bit less. It's less.
Lizzy Burden: Let's say very severe. And it's 50%. The EU retaliates.
Yannis Stournaras: If it's very severe, that means the effect on demand will be even harder. So more deflationary. If it's a retaliation, I don't think that Europe will retaliate horizontally but in specific sectors. But I don't expect that to be honest. I think at the end of the day, things will normalize because I think first of all, it is in the US’s interest not to have tariffs.
If I can give my advice, zero for zero is the best, the best for the US and the best for the world.
Lizzy Burden: But what about China in this equation? Because I heard a few thinly veiled references from President Lagarde yesterday to essentially China dumping, if that happens, or what level of US tariffs would really need to concern you about the deflationary impact of China dumping on the euro area?
Yannis Stournaras: Well, you already know that the effect of tariffs, as I said in Europe, is deflationary, highly deflationary. The higher the tariffs that the US imposes, especially on China, the higher the risk that China would try to substitute the American market for other markets and especially Europe. Because European consumption is the second biggest in the world after the US. So, it's likely that China will try to sell its products to Europe. So it means more deflation in Europe.
Lizzy Burden: Are you worried about deflation? I mean, you know, the new 2026 inflation forecasts, 1.6%, which concerned that actually there's a persistent undershooting of the inflation target.
Yannis Stournaras: We think that it will come back to 2%. Energy prices will help here. The CO2 emission tax will help bring inflation back to 2%. So yes, for 2026 we have 1.6%. But for 2027 we have we have 2%. So in the target. But of course this is a forecast.
Guy Johnson: Are you surprised the euro has got stronger as you've been cutting, which seems slightly contradictory if you kind of think about it from a from an interest rate point of view. The US hasn't been cutting, it's cut a little bit and the ECB has cut more. In theory the euro should have gone down but it's gone up. What do you think? What do you think is going on here? Do you think we are seeing an end to the dollar's exceptionalism, its role as a world currency? Do you think the ECB, the euro has the potential to fill some of that gap left?
Yannis Stournaras: First of all, nobody is happy about what's going on in economic policy and trade policy in the United States. But if it continues, I'm afraid the dollar will lose some of its status. Not automatically, of course, not overnight. It will take time. So the euro will not become automatically a substitute for the dollar. It will take time. But also Europe needs to act. It needs to complete the banking union, to complete its capital union. To consolidate even more its public finances. But I think the prospect for the euro is better now.
Lizzy Burden: Do you worry about the impact of a strong euro on Greek exports. I’m thinking about tourism?
Yannis Stournaras: Well, we have to take into account everything. We talk about a general equilibrium situation. So okay, a strong euro is bad for exports, but also it's good for other things. The financing of our public debt, for instance. Because there is now a reversal of capital flows. Up to six months ago, it was money flowing out of Europe to the United States. Now it's coming back.
Guy Johnson: Final quick question on the financial sector. Greek banks are in focus at the moment and there is interest in Greek banks once again. I take us back to the beginning of our conversation.
Yannis Stournaras: Does it surprise you?
Guy Johnson: No it doesn't surprise me. But, in some ways, you could argue Greece has come a long way back.
Yannis Stournaras: It has actually.
Guy Johnson: And the fact that we are now increases people being interested. So UniCredit is now interested in taking stakes in Greek banks. Do you welcome, are you on the side of cross-border takeovers?
Yannis Stournaras: Yes, yes, strongly. And for many, many years now. When I was a governor of a commercial bank in Greece I had invited a cross-border transaction and Crédit Agricole became a shareholder. So I'm very happy that we are now continuing this policy of cross-border transactions. So both the government and the supervisor, the Bank of Greece we have welcomed UniCredit in Greece.
Guy Johnson: Others are taking a different view in different countries.
Yannis Stournaras: Yes, I'm sorry about that
Guy Johnson: That. Yeah. This is crazy. Thank you very much indeed for coming.
Yannis Stournaras: You're welcome.
Guy Johnson: Thank you. Appreciate it. Thank you. Gentlemen the Bank of Greece Governor Yannis Stournaras, joining us around the table this morning.