ECB favors gradual adjustment

The European Central Bank is in favor of a rather gradual reduction of Greece’s national debt, at a slower pace than the current one (at one-20th of 60% of gross domestic product per annum), and of the implementation of a new expenditures rule so that their growth rate does not exceed GDP growth within a decade, according to ECB Chief Economist Philip Lane.

Speaking at the 7th Delphi Economic Forum, which opened on Wednesday, the Irish economist said member-states should avoid procyclical policies, and cited the low interest rates that currently apply as they allow for the easier servicing of the debt.

Alex Patelis, the prime minister’s chief economic adviser, pointed out that the government is currently placing emphasis on protecting the most vulnerable, and in this context a second increase in the minimum wage is about to be announced.

Lane intervened at that point, observing that the ECB is not reacting to the current level of inflation, but has a medium-term horizon to look to instead. Should there be any secondary effects on salaries and expectations, he argued, we would then have to react; there is no sense in reacting excessively, or passively for that matter either, argued Lane at Delphi.