Greece’s economy could be knocked back if the country enters a period of protracted political uncertainty and breaks with its international creditors, Finance Minister Gikas Hardouvelis told Wall Street Journal in an interview. He noted the probability of a bank run is very small and that a Greek exit from the euro is unlikely.
Since early December, the report said, Greece has been thrust into political turmoil by an inconclusive parliamentary vote for president, businesses have frozen investments, privatizations have stalled, and tax collections have slumped. If this uncertainty isn΄t resolved soon, said Hardouvelis, months of economic growth could be lost.
“If you lose the first quarter of the year, where the economy could have taken off, and then perhaps the second quarter, that gives you half the growth that you would have otherwise had,” he said.
Greece’s 2014 official GDP data, to be released in mid-February, are expected to show the economy grew about 0.6 percent last year, according to the official government forecast. This year, the government sees the growth rate perking up to a 2.9 percent rate. But, Hardouvelis said, growth could fall to roughly half that rate in a “worst-case scenario”.
If SYRIZA is elected as government and implements its policies, “these… promise to complicate Greece’s efforts to negotiate a new credit line with its creditors; the country’s current bailout program runs out at the end of February,” the report said.
“A new deal would, among other things, unlock some 7 billion euros worth of promised aid—without which the government will begin facing a cash crunch by end March—and guarantee Greek banks continued access to cheap European Central Bank loans,” it added.
No deal could further undermine the economy, Hardouvelis said. “You don’t just need a stable government to be formed quickly; you need a government with a clear policy forward,” he said.
He also added that a Greek exit from the euro is unlikely. “Politics in a country follows the deep wishes of the population and the population has a deep wish to stay with the West; that is associated with staying in the euro area.”