Yannis Stournaras, governor of the Bank of Greece: “The country cannot afford extravagant policies anymore”

At least in institutions, “left-wing economist” is something similar to an oxymoron, that beautiful word of Greek origin for the contradictions of life. Yannis Stournaras (Athens, 69 years old) was a young left-wing economist from Oxford when he joined as an advisor to the Greek Government back in 1986. He became a minister when the crisis broke out, and later became governor of the Bank of Greece: there was a time when being a minister and then a central banker was also an oxymoron; it is no longer. Stournaras receives EL PAÍS in his office. He is optimistic about his country. Leave messages for the troika. And yes, at some point he changed progressivism for orthodoxy: this is what usually happens with those archpriests of the monetary religion who are the central bankers. Question. Is Greece a success story as its Government maintains? Answer. We grow more than the rest of the EU. Per capita income is still far from pre-crisis levels, but this happens throughout Europe. And we start very low: there are not many countries that have experienced, without a war, GDP drops of 25%, with public deficits and current deficits of around 15% of GDP. The conditions of 2009 were not real: the economy was doped by those twin deficits. Now we are better. The proof is that a Greek minister presides over the Eurogroup. It is curious, because academics, analysts and even some politicians toyed with the idea that Greece would leave the euro. Q. Wasn’t a stronger recovery to be expected coming from so low? A. To go faster, productivity figures would have to be improved. For this we have to invest more. And the investment gap is one of the legacies of the crisis.P. What is the most visible scar of austerity? A. The suffering of the most vulnerable.P. The Government has fiscal room to improve its situation.R. We must remember the extravagant fiscal policies prior to the crisis, the salary policies that had nothing to do with productivity, the crazy pension increases. We must use the fiscal cushion wisely and continue reducing debt. The Government has just reestablished collective bargaining. That requires responsibility: Greece cannot afford extravagant policies anymore.Q. Trichet’s ECB sent letters to democratically elected governments. Draghi also politicked. Have central banks become politicized? A. Trichet could not make decisions about liquidity if he did not ensure the sustainability of the debt.P. He ordered labor reforms: he had no mandate for that.R. It was not wise for the ECB to enter the troika. We learned from those mistakes. We suffer more from the IMF’s obsession with austerity. Q. The whole troika was obsessive. A. The bailouts underestimated the snowball effect of austerity. Later, the IMF recognized its mistakes and changed its approach.Q. Brussels did the same, and now defends that the rescued countries are success stories and the frugal ones, which did not make reforms, are worse off. Do you share that story? R. Yes, Brussels and the IMF recognized that austerity went too far. That’s where the rise of populism comes from. But we learned something: we approved the Next Generation funds to get out of the pandemic.P. Where do you see weaknesses? A. The trade deficit, despite the improvement in exports, is a blot on Greece’s positive trajectory: the public accounts are in order, but we lack private savings. The worst thing that the crisis left us was the drop in investment and the brain drain. Having less capital and less qualified labor impoverishes us.P. Despite this drop in population, his Government applies very harsh immigration policies.R. Migration is one of the solutions to demographic problems. Wars and climate change are going to attract more people: if we are able to attract talent we will alleviate that problem.P. The eurozone is barely growing. The US is no longer reliable. Emmanuel Macron has just returned from China saying that we must invest more. What is happening to Europe? R. Countries with fiscal and structural problems must make difficult decisions to resolve them. And the EU must act once and for all. We should finish the banking union, complete the single market and approve eurobonds.Q. Germany opposes.R. The large funds do not invest in Europe because we lack a safe asset. Q. Inflation is going to drop below 2% in 2026. Shouldn’t rates be lowered? A. There are forces that act in opposite directions. With American tariffs, China tries to sell more in Europe, and that pulls prices down. At the same time, the climate agenda and defense require investments: that pushes prices up. We are in a precarious balance, with rates of 2% and inflation of 2%. My advice is to wait and see. Europe’s problem is not so much China as US tariffs and our own mistakes, with a single market that is still very fragmented.