BoG Gov: Monetary tightening leaves no room for complacency in fiscal policy

“As the monetary tightening has caused a general increase in interest rates and weaker growth, there is no room for complacency in fiscal policy”, stressed Yannis Stournaras speaking at the EUROFI 2023 High Level Seminar. The governor of the Bank of Greece pointed out that “it is imperative that the fiscal orientation to remain restrictive and the new fiscal rules (which are more flexible and avoid the pro-cyclicality of the previous ones) to apply in the eurozone from the beginning of 2024”.

Referring to the effect of the key ECB interest rates on commercial banks, he noted:

“The ECB’s increase in key interest rates and the shrinking of its balance sheet (through the gradual repayment of targeted longer-term refinancing operations and the cessation of repurchases under the asset purchase program) have so far positively affected the profitability of commercial banks”