Greek finance minister vows to keep debt’s share of economy shrinking

Greek Finance Minister Kostis Hatzidakis told Reuters that the government will maintain fiscal prudence to safeguard its growth path and emergence from a debilitating debt crisis a decade ago, even amid higher wage demands by striking teachers and ferry workers.

Speaking on the sidelines of International Monetary Fund and World Bank annual meetings this week in Washington, Hatzidakis said any accommodation for wage increases must not put at risk the downward trajectory of the country’s debt-to-GDP ratio.

“We learned the lessons of the previous decade. Greece was living beyond its means,” Hatzidakis said. He added that it was important to maintain primary surpluses and a headline deficit, after debt service, “close to zero.”

“We have the surveillance of the markets and investors. So we know that fiscal prudence is a precondition for us to convince everybody – the markets, the investors – that we are a credible government and credible country,” he said.

Asked whether the government could accommodate demands for higher wages from public school teachers and ferry port workers who staged a strike on Wednesday, he said it would depend on how that would affect the broader economy.

“We always try to satisfy requests coming from various groups, to the extent that these requests do not put at risk the execution of the budget and the target set for the country and for the Greek economy as a whole,” Hatzidakis said.

Tourism-dependent Greece currently is experiencing one of the highest growth rates in Europe, with the government forecasting 2.2% growth for 2024 and the IMF forecasting 2.3%. This is well above the weak overall 0.8% IMF growth forecast for the euro zone, where industrial economies including Germany and Italy are struggling.

Greece’s finance ministry has committed to early repayment of some $8 billion in bilateral debt in 2026, 2027 and 2028, estimating that this would push down the country’s debt-to-GDP ratio – Europe’s highest – from 162% this year to 149% in 2025 and 133.4% by 2028.

If it stays on that path, Greece’s debt-to-GDP ratio in 2028 would be lower than Italy’s, which Rome has forecast at 135.8% this year, rising to 137.5% in 2027.

Athens’ medium-term fiscal plan calls for debt to decline further to 114.8% of GDP in 2038, a goal that Hatzidakis said requires “a combination of fiscal prudence with a business-friendly approach.”

Greece’s fiscal buffers would remain in place, and any changes to them must be done in consultations with creditors and EU partners, he said.

Hatzidakis added that being inside IMF headquarters, where tense negotiations took place more than a decade ago at the height of Greece’s debt crisis, is a reminder of the need to maintain fiscal discipline.

“Coming to this building, I always remember the previous decade, and I always remind myself that I shouldn’t allow Greece to come back to the previous decade but also to grow in a sustainable manner for the benefits of the Greeks,” he said. “This is our patriotic duty.” [Reuters]