piraeus bank group


Contradiction In Terms

The policy objectives of internal devaluation -which is necessary to restore competitiveness – and of fiscal consolidation are incompatible. An additional, but less well publicized, policy objective of private sector deleveraging will also have a detrimental impact on the Greek economy. All this Greece will have to achieve with virtually no policy tools at its disposal. On one hand fiscal policy remains extremely restrictive with new measures of 1.5% of GDP being introduced in 2012 alone and further measures of 5.5% of GDP being planned for 2013 and 2014. On the other hand monetary conditions are suffocating the economy. In an economy that is entering its 5th year of recession real interest rates are already sky-high and will continue to increase, while credit is expected to contract for a second consecutive year.