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Greece Central Bank Chief Pushes for Bailout Overhaul

stournarasAccording to the Financial Times, Yannis Stournaras, the bank governor of Greece’s central bank has called for “a new deal” to help the country cope with the enormous task of reducing fiscal surplus before debt payments which Athens must achieve beginning in 2018. The goal is to reach from 3.5 percent to 2 percent of national input.
Mr. Stournaras said that the budget surplus targets imposed by the leftwing Syriza government are “unrealistic and socially unattainable.”
The reasoning behind his stance is that the lower target would allow “for a more balanced economic policy mix with emphasis on the reduction of taxation, encouraging private investment and contributing to sustainable growth rates,” Mr. Stournaras wrote in the article published in the Financial Times.
His position on this subject aligns him with the International Monetary Fund, which holds the same ideas and has stated for months that the ambitious surplus targets put forth by Syriza are unrealistic. However, M.r Stournaras’ article and his suggestions put him at odds against both the German government and Alexis Tsipras, the Greek prime minister.
Further weighing in on the issue, the Financial Times published an article where Mujtaba Rahman of Eurasia Group, a risk consultancy, said that he believes the current 3.5 percent target “probably isn’t attainable” over the discourse of time. Rahman commented that he felt the political systems and parties would make it even more difficult to come to a consensus to revise the target by Greece’s lenders before next year’s German elections.
“If these targets are missed it means more austerity and more political instability. The Bank of Greece is trying to draw attention to this,” he said.
Bank of Greece monetary policy report is expected to be published on Wednesday, a central bank official said. The report projects that the Greek economy is expected to shrink another 0.3 percent this year before any signs of bouncing back and show a growth of 2.7 percent forecast in both 2017 and 2018.
After last month’s latest €5.4 bln fiscal package of pension cuts and tax increases by the Syria-led government, the people of Greece saw their taxes on common goods increase to 24 percent, a steep price to pay for citizens who have already had their salaries slashed and can barely afford to live.
“The willingness and ability of Greeks to pay these additional taxes will be limited. Austerity is reaching breaking point in Greece,” Mr. Rahman concluded.

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