ISSN: 2560-1601

Vol. 29, No. 2 (GR)

May 2020

Greece economy briefing: The Governor of the Bank of George N. Tzogopoulos

1052 Budapest Petőfi Sándor utca 11.

+36 1 5858 690 Kiadó: Kína-KKE Intézet Nonprofit Kft. [email protected] Szerkesztésért felelős személy: Chen Xin

Kiadásért felelős személy: Huang Ping china-cee.eu 2017/01

The Governor of the

Governor of the Bank of Greece will remain in his position for six more years. This has been the decision of the Greek New Democracy government as announced in May 2020. The renewal of Stournaras’ tenure constitutes good news for Greece as he is a respectable banker with international reputation at the and beyond. Despite his serious disagreements with the SYRIZA party – which have lasted for years and are still continuing – Stournaras is a technocrat who can coordinate delicate financial work in the post-bailout era. He is also a realist and welcomes foreign investment, including from China.

On 12 May 2020, the Greek government proposed the re-appointment of Yannis Stournaras as governor of the Bank of Greece. In a statement, governmental spokesman Stelios Petsas announced the proposal for the renewal on the grounds of the Bank of Greece autonomy and charter. The tenure lasts six years and Stournaras had been first appointed in 2014 under the government of New Democracy and PASOK, less than a year before SYRIZA came to power. Stournaras served as Finance Minister of Greece from June 2012 until his replacement by Gikas Hardouvelis in 2014. Although he entered Greek politics in 2012, he had taken important positions such as the Chairman and CEO of Emporiki Bank from 2000 until 2004. With a PhD from the University of Oxford he had also pursued a successful career as professor of economics at the University of Athens and Director General of the Foundation for Economic and Industrial Research (IOBE). Under Stournaras’ chairmanship IOBE became Greece’s best economic think tank. Its periodic reports on the national economy remain today largely influential.

The continuation of Stournaras’ tenure is good news for Greece. He is widely considered a technocrat and can be considered an asset for the country and its representation at the international level, at the European Central Bank (ECB) and beyond. In September 2018, the ECB appointed him Chairman of its audit committee. In his new capacity, Stournaras replaced Ewald Nowotny, former governor of Oesterreichische Nationalbank. And in February 2020 he succeed Ewald Nowotny as head of this committee that provides assistance to the Governing Council regarding its responsibilities in respect of the integrity of financial information, compliance with applicable laws, regulations and codes of conduct, the oversight of internal controls and the performance of audit functions.

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Stournaras’ international reputation was initially gained while he served as Greece’s Finance Minister. Although the first choice of the then Prime Minister and vice-President of the government was another banker, Vassilis Rapanos, the inability of the latter to undertake the portfolio due to health reasons brought Stournaras to the political forefront. Stournaras vindicated Samaras and Venizelos. He established a good personal relationship with German Finance Minister Wolfgang Schaueble in a period during which Greek-German relations were delicate. Playing an important role for the conclusion of all reviews of the national economy by Greece’s international creditors during his term, he managed to open the door for the country’s return to growth after years of recession.

A typical feature of the Greek crisis is its multidimensional character. Although it seems an economic problem at first, it is interwoven into politics. This became evident during the six months of the SYRIZA-Independent Greeks administration and impacted on the role of Stournaras, who had already become Governor of the Bank of Greece. The SYRIZA leader and the Prime Minister Alexis Tsipras did not trust Stournaras considering him part of the so-called establishment that he sought to challenge. The Governor of the Bank of Greece did not agree with the tactics of Tsipras and former Finance Minister which jeopardized Greece’s stay in the Eurozone. His position was particularly difficult in navigating between political illusions of the Greek government and the necessary coordination with the ECB to guarantee liquidity for banks. Stournaras could not prevent the closure of banks in July 2015 – that was signed by Varoufakis who imposed capital controls following the decision of Tsipras for a referendum – but contributed to Greece’s stay in the Eurozone by preserving an independent stance and a good contact between Athens and Frankfurt (the ECB headquarters).

After Tsipras decided to sign the third bailout in July 2015, the Greek economy avoided the nightmare and entered a phase of painful readjustment. The relationship between the SYRIZA-Independent Greeks government and Stournaras remained problematic. Stournaras remained critical of the stance of the government in the first six months of that year whereas the latter suspiciously saw his stance. In September 2016, anti-graft prosecutors raided the offices of a Greek advertising company run by Stournaras wife, Lina Nikolakopoulou who denied wrong-doing. Additionally, in 2019 Alternate Health Minister Pavlos Polakis accused Stournaras of leaking to the press details about a loan he received by Attica Bank worth of €100,000-euro and handed over to a newspaper the transcript of a personal discussion they had. In a statement, the Governor of the Bank of Greece commented that there was no precedent in any European country for a government minister to mechanically record a telephone conversation that was not conducted in public and to selectively give altered excerpts to a pro-

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Another aspect in the clash between the previous leftist Greek government and the Governor of the Bank of Greece was the preference of the latter for a credit line instead of ‘clean exit’ from the memorandum. SYRIZA counted on this ‘clean exit’ to increase its chances for a re-election and thought that Stournaras had sought to pose hurdles to this effort. Having said this, it is not surprising that SYRIZA – now as the main opposition party – did not welcome his re-appointment in May 2020. Although it wished him success, it ironically commented that ‘at least now that [the party was] not in government he could hit the target with some of his forecasts, starting with that of a 4 percent recession due to the coronavirus crisis’. SYRIZA also reminded Greek citizens about Stournaras’ alleged insistence on pension cuts and the reduction of the tax-free income allowance. In other words, SYRIZA believes that the Governor of the Bank of Greece is biased and his stance is completely linked to his approval or not of the political party governing Greece. The Governor of the Bank of Greece only attributes his stance to the independence of the institution he leads.

Last but not least, Stournaras positively views foreign investments in Greece, including from China. In February 2017, for example, he held a meeting with President of China Development Bank, Hu Huaibang, and a delegation from the Chinese Bank. The meeting took place following the signing of a provisionary agreement between the two sides in July 2016 that stipulates for the promotion of the Sino-Greek relationship and the bilateral trade cooperation. Stournaras welcomed the intention expressed by China Development Bank to expand its presence in Greece by financing infrastructure projects and said that the promotion of entrepreneurship and foreign direct investments constitute the most important tools in the country’s recovery effort. On the sidelines of the visit of President Xi Jinping in November 2019, the Governor of the Bank of Greece met representatives from the Bank of China and the Industrial and Commercial Bank of China after having facilitated the launch of their branches in Athens.

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Conclusion

The continuation of Yannis Stournaras tenure in the Bank of Greece constitutes good news. Stournaras – either as Finance Minister of Governor of the Bank of Greece – led the Greek economy in particularly turbulent times with success. His contribution to Greece’s stay in the Eurozone in the dramatic summer of 2015 is indicative. The mission of the Bank of Greece is to remain independent and not to become involved in political differences. The leftist SYRIZA party does not agree that Stournaras has acted in such a way and accuses him of cooperating with mainstream politicians and undermining its work. The prediction of Stournaras for a 4 percent recession because of the novel coronavirus has been largely scrutinized by the main opposition as a sign of his support for New Democracy. In spite of these serious disagreements, Stournaras is a technocrat, a supporter of foreign investments and an expert in supervising difficult financial tasks. It would have been hard for Prime Minister Kyriakos Mitsotakis to resist his reappointment.

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