Bank of Greece (BoG) Governor and ECB governing council member Yannis Stournaras has again expressed optimism over the prospect of lower interest rates by the Eurozone’s central bank this year, saying even four cuts are feasible in 2024.
In an interview with the Athens weekly “Proto Thema”, which was widely reproduced in foreign media, the influential Greek central basis said a reduction of 100 basis points was possible by the end of the year.
“If inflation develops in line with our March forecast, and if this trend continues until the end of the year, I believe that this year we will have reductions in key ECB interest rates,” Stournaras was quoted as saying.
“Personally, I think a reduction of interest rates by four times this year, of 25 basis points each time, is possible,” the former Greek finance minister added.
“This is not yet a unified view, some colleagues are more cautious and believe that interest rate cuts should be more moderate,” Stournaras, who’s identified as among the “doves” on the ECB’s governing council, explained however.
“The differences of opinion on the ECB governing council are much less pronounced than the image portrayed in the media,” he said.
Turning to the domestic economic front, Stournaras repeated that high market prices plaguing Greek consumers in the past two and a half years are also related to competition.
“A large (market share) concentration leads to high prices. This is why we also see relatively higher prices in Greece than in the eurozone for many goods and services. This is also reflected in Eurostat’s recent findings, which show that while GDP per capita in Greece stands at 67% of the EU average, price levels (in the country) are at 88.2% of the corresponding average. This is the reason why Greece is more expensive than other countries relative to income. This is why high prices in Greece create a serious problem for many households. Of course, this isn’t a recent problem but hails from the past.”
Veering away from the government’s standing position, he said a reduction in Greece’s highest VAT rate, of 24%, is possible.
At the same time, he warned that the priority shouldn’t be a cut in the VAT rate but slashing social insurance contributions paid by wage-earners and employers.
