Noting that Greece has significant potential to increase its production, Stournaras said he believed the recent stabilization of the economy would allow the first signs of recovery to appear as early as October. “The gap between what we could be producing and what we are producing is higher than 25 percent,” he said, adding that he expected “a significant recovery in 2014.”
Greece is on track to produce a primary surplus this year, he added, noting that the government aims to give concessions to low-income groups. “We have agreed that 70 percent of the excess will go to social benefits or to tax cuts,” he said.
He also directed strong criticism against former Prime Minister Papandreou, who led Greece to its first international bailout, and the latter’s predecessor, Karamanlis, whom Stournaras accused of overseeing a massive increase in public spending. “That period after 2006 can only be described as a derailment,” Stournaras said, noting that state spending as a percentage of gross domestic product skyrocketed to 53.8 percent in 2009. Stournaras slammed Papandreou for ignoring Karamanlis’s belated appeal for cutbacks to state spending and for seeking to honor his pre-election promises despite the dire economic situation. “If he had taken measures immediately, we would certainly have had better terms,” Stournaras said, referring to the conditions attached to the first bailout. “We might have entered the memorandum with the terms of Portugal or Ireland.”
Questioned about the insistence of opposition SYRIZA leader Alexis Tsipras that the government’s austerity policy has failed, Stournaras challenged the leftist to reveal the reaction of German Finance Minister Wolfgang Schaeuble and of the International Monetary Fund to SYRIZA’s alternative proposal. “There can be no stabilization program without reducing incomes for a period of time,” Stournaras said. “There were never any magical solutions.”