Stournaras Sees Major Boost to Greek Economy From EU Aid Deal

(Bloomberg) -- Greece’s economy will get a major boost over the coming years from the historic European Union rescue fund agreed this month, according to Bank of Greece Governor Yannis Stournaras.

Greece is going to get 32 billion euros ($37 billion) from the EU’s Next Generation plan, more than 17% of its gross domestic product. Initial estimates by the central bank are that the funds will lift growth by 2% on average over the period from 2021 to 2026.

“It was something unexpected,” Stournaras said in an Bloomberg Television interview. “This is going to have a very positive impact on the economy.”

The EU aid is of huge importance to southern European countries such as Greece, given the impact of the virus on tourism. The Greek government forecasts that the economy will shrink about 8% this year, while the European Commission sees an even deeper slump.

“We have made certain calculations in the Bank of Greece,” Stournaras said. “For the next 6 years, the GDP growth rate will be about 2% higher than the number we had up to now. So there’s going to be a revision of growth targets in the years to come.”

He said that key to reaping the benefits of the aid is how it’s spent.

The challenge now is to reform the state so that Greece can absorb the funds “in the right way, having the maximum impact on growth,” the governor said. “It’s not enough to spend the money. We need to accompany this investment with structural reforms.”

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