The negative impact on businesses and households from the increase in interest rates will be partially mitigated when Greece attains investment grade, Bank of Greece Governor Giannis Stournaras estimates.

In an interview he gave to Econostream, he argued that regaining investment grade is a big challenge for the country, predicting that this will happen within the year. He emphasized that the Government appears determined to proceed with the necessary reforms.

Referring to the positive consequences of the upgrading of the economy, the governor of the Bank of Greece argued that while it is already reflected in the yields of Greek bonds, it has not yet been discounted in terms of Foreign Direct Investment flows.

As he characteristically stated “only 10% of funds – private investment funds, etc. – they can invest in a territory without an investment tier. Consequently, there is a lot of room for new foreign direct investment or financial investment once the country achieves investment grade. Many more funds will be willing to invest in the Greek economy”.

Speaking about the Greek economy, he argued that it is entering a phase of higher growth than the European average. At the same time, the ratio of public debt to GDP is falling rapidly. Mr. Stournaras underlined that “The new government is determined to promote a series of reforms that the economy needs. It has a clear political horizon of at least four years.”

Referring to the course of interest rates, the governor of the Bank of Greece repeated his recent statement according to which it is not likely that another increase will occur in September by the ECB, while he almost considers, as he explained, “there are signs that the economy is weakening. The ECB’s baseline macroeconomic scenario predicts positive growth, but it appears that this may not be the case.” Referring, in fact, to the increase in interest rates in July, he said that “We rely on the data, we have to look very carefully at the data in July, especially the weakening of economic activity”, while at another point of his interview he adds “Given that it now appears that the data points to a weaker economy than our baseline forecast, yes, we have to be very, very cautious, even in July.”

With regard to the consequences of the increase in interest rates on public finances, he said that due to the favorable agreements on public debt with our borrowers in the past (especially with the ESM) and due to the swaps made by ODDIX, the real interest rates on public debt they will remain almost constant at low levels for a long time. Consequently, the country does not face the phenomenon of the direct transfer of higher interest rates to the real interest rate of the public debt.