Athens Digest 12.06.2019

• Stournaras: Greece straying further off-road

• Capital controls set to end by 2020

• New ELSTAT data: Economy showing signs of strain

• Mitsotakis says red tape blocking Hellenikon project will be axed in a week

• Reuters: Greece eyed for F-35 sale

# Bank of Greece Governor Yannis Stournaras has issued a stern note of caution to political parties ahead of the July 7 general election, warning that Greece is straying further from the fiscal targets it set with creditors. Greece, he warned, was now expected to reach a primary surplus of just 2.9 percent of GDP this year _ well short of the 3.5 percent target. “To consolidate investor confidence in the prospects of the Greek economy and ensure faster growth rates, it is necessary to boost rather than suspend or abolish reforms that the country needs,” he told, speaking at the one-day 2nd InvestGR Forum on foreign investment in Greece. An adjustment, he argued, of Greece’s high budget targets should only be sought over the medium term and through negotiation with lenders. The former finance minister has been outspoken in his criticism of social spending hikes introduced ahead of the last month’s European and local government elections. In its spring forecast, the European Commission had said that Greece would just meet its target with a 3.6 percent primary balance _ a figure that did not factor in the recent social spending measures, estimated by the institutions up to 1.1-1.4 percent of the GDP.

# The central bank governor did note that Greece was on track to ending capital controls by the end of the year. Yannis Stournaras, speaking in the sidelines of the conference, told Reuters that the country was “on a good path” to ending the restrictions imposed four years ago when Greece risked crashing out of the eurozone during a confrontation between bailout creditors and the newly-elected government of Prime Minister Alexis Tsipras.

# Despite a buoyant stock market and borrowing rates falling to a modern-era low _ at a 2.81 percent yield on Greece’s 10-year government bond _ the country’s economy is also showing signs of stress. New figures announced by the independent statistics authority Elstat showed that the consumer price index in May fell to 0.2 percent on an annual inflation basis from 0.5 percent a month earlier. The industrial production index in April was also down 0.8 percent on the year. And provisional data for commercial transactions showed that the deficit of the trade balance in April excluding oil products recorded an increase of EUR 111.1 million euros or 8.4 percent on the year.

# Opposition leader Kyriakos Mitsotakis has vowed to fast-track a licensing process needed to launch the Hellenikon coastal development project near Athens. The New Democracy leader, addressing supporters in the western city of Patras last night, said executive orders would be signed “within the first week” of a conservative government if his party prevails in the July election. Mitsotakis has focused his campaign on making Greece more business-friendly. On a visit to the old Athens airport at Hellenikon earlier this year, he described delays plaguing the EUR 8 billion project as a “symbol of the total failure” of the Tsipras government to produce a convincing development and investment strategy.

# Washington is reportedly looking for new buyers for its F-35 fighter jets _ with a list that includes Greece. Reuters reported that the head of the Pentagon’s F-35 office, Vice Adm. Mathias Winter, wrote to U.S. lawmakers identifying potential customers as Greece, Romania, Spain, Poland, and Singapore.

On our Radar: Car-and-Bike Boom 
There’s been a visible increase in traffic _ and traffic jams _ in the streets of Athens and other Greek cities, and the official figures have confirmed the continuing surge of post-crisis car sales. Greece’s Statistical Authority reported a 15.2 percent increase in the number of vehicles going into circulation in May (23,010 vehicles)  from a year earlier. The annual increase in May 2018 was 18.7 percent. New motorcycles (over 50cc) saw an annual increase of 8.5 percent last month.