Greece: Greece’s economy has turned corner, says central bank chief

“Growth turned positive for the year [2016] as a whole, contrary to initial forecasts,” he told the Delphi Forum, an annual gathering of Greek economists, businesspeople and politicians, on Saturday. “A rapid closure of the review will help the economy build on the 2016 outperformance and move quickly to a faster growth path.”

Sounding an upbeat note for the first time this year, Mr Stournaras endorsed the EU’s latest growth forecast for Greece of 2.7 per cent this year rising to 3.1 per cent in 2018. The economy expanded by 0.3 per cent last year, despite falling back into negative territory in the fourth quarter

“Some recent softening of economic indicators can be put down to uncertainty in the face of delays in closing the second review of the programme. Hopefully this is now
 

He was referring to renewed foot-dragging by Syriza over implementing further bailout reforms, and a spat between the EU and the International Monetary Fund over whether the fund would participate fully in the Greek programme.

Mr Stournaras called the fiscal outlook “promising” with Greece set to outperform revenue targets again this year, after achieving a primary budget surplus before debt servicing costs of 2.0 per cent in 2016 against a target of 0.5 per cent.

But he called for changes in the fiscal mix, warning that last year’s revenue outperformance was mostly because of sharp increases in tax rates, including corporation tax, value added tax and social security contributions.

“This emphasis on taxation needs to be reduced since it stifles growth, increases unpaid debts of the private sector towards the public sector and encourages tax evasion and undeclared employment.”

Bailout monitors from the EU and IMF returned to Athens last week for talks on €2bn of additional fiscal measures that the fund believes are needed to ensure Athens hits a target set by the euro area of a 3.5 per cent primary budget surplus after 2018.

Alexis Tsipras, prime minister, has said his government is committed to reaching a deal with creditors by March 20, when euro area finance ministers are next expected to meet.

Mr Tsipras held an unscheduled meeting of the government’s economic team on Sunday aimed at resolving differences with bailout monitors over details of tax and pension reforms and contentious labour reforms opposed by hard-left Syriza MPs.

The new measures would need approval by parliament where Syriza and its rightwing coalition partner Independent Greeks hold a slim three-seat majority.

In an interview with Documento, a Greek newspaper, on Sunday, Mr Tsipras said: “[The bailout talks] have moved into a positive phase.”

“Everyone now understands that this positive course of the Greek economy must not be cut short by further delays. Nobody wants these negotiations to get blocked,” the premier added.