Yannis Stournaras: 2023 - a year of continued uncertainty in the
global economy, but also of hope
Speech by Mr Yannis Stournaras, Governor of the Bank of Greece, to the staff of the
Bank of Greece at the New Year ceremony, Athens, 12 January 2023.
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Dear colleagues,
I am delighted that we are all here today to welcome the New Year.
The past year was marked by Russia's savage invasion of Ukraine, which revived the
nightmare of a great war in Europe. For the global economy, it was a period of great
challenges, during which the focus of global attention was on central banks' key
mandate: the maintenance of price stability.
After remaining very low for a long period, inflation picked up suddenly and escalated
sharply, mainly as a result of two unpredictable supply-side shocks that hit the economy
in successive waves: the pandemic and the war in Ukraine, leading to rising fuel and
other commodity prices. These two shocks are what we call "unknown unknowns", i.e.
they cannot be modelled with probability distributions and thus could not have been
predicted by central banks, economic and financial organisations, academics or
governments. As long as the war in Ukraine continues and keeps shaking the world,
along with other geopolitical tensions, uncertainty about economic developments
remains heightened.
High inflation affects all citizens, but especially the most vulnerable, and can trigger a
vicious circle of price increases. As a result, consumption and investment planning
becomes difficult for households and businesses alike. Also, trust in the currency
weakens, as money gradually loses its value.
In such circumstances, as has happened in the past, citizens turn their eyes to central
banks, from which they expect effective action to restore the stability of the purchasing
value of the currency.
In the euro area, businesses, investors, workers and consumers should feel confident
that, we, not only at the Governing Council of the ECB but also everyone working in the
Eurosystem, will do whatever it takes, within our mandate, to ensure a timely return of
inflation to the 2% target in the medium term. Our primary monetary policy instruments
remain the policy rates of the European Central Bank, which are expected to rise further
until the recent tentative signs of an abatement of inflationary pressures turn into
certainty that inflation will fall back to the 2% target over the medium term.
It is important, however, to know that a central bank cannot control several factors that
drive inflation, as has been the case recently. It cannot correct the pandemic-related
supply chain disruptions or reduce the high energy and food prices stemming from the
war in Ukraine. In the fight against inflation, sound fiscal and energy policies of
governments have also a significant part to play, and so has a responsible wage
negotiating behaviour of social partners, which should prevent an exogenous energy
shock that has worsened the terms of trade for a large net energy importer, like Europe,
from turning into an upward wage-price spiral bringing us back to the stagflation of the
1970s and early 1980s. It is encouraging and promising that, for the time being, there is
no such wage-price spiral that would knock us off the 2% target, nor is there any
deanchoring of medium-to-long-term inflation expectations from that target. This gives us
hope and courage to continue the anti-inflationary policy without raising interest rates so
much as to cause a deep recession. And of course we keep hoping and working for a
definitive end to this continuing uncertainty with the most effective means available: the
end of this devastating war.
Central banks certainly recognise that fiscal policy should bear the brunt of supporting
vulnerable citizens, with measures that need to be appropriately targeted and
temporary, rather than permanent, and to provide incentives for energy saving. In this
context, and given that 2023 is a national election year, the Bank of Greece, in its latest
Monetary Policy Report, called for an alignment and an understanding among the
political forces, in order to implement the key economic policy commitments - most
notably a return to sizeable primary surpluses that can ensure long-term public debt
sustainability - and to preserve the remarkable achievements of the Greek economy in
the past ten years, pursuing as a key -national, I would say - goal an upgrade of Greek
government bonds to investment grade this year.
In 2022, the Bank of Greece hosted the meeting of the SSM Supervisory Board; in
2023, we will be welcoming the members of the ECB Governing Council in Athens.
Hosting the two top meetings of the decision-making bodies of the ECB and the Single
Supervisory Mechanism, respectively, is a challenge for the organisational alertness of
the Bank of Greece and its staff. I am sure that, this year too, we will all do our best to
ensure impeccable organisation and offer our colleagues the hospitality that our country
is famous for.
In recent years, the Bank of Greece has gradually evolved into an institution that is
inspired by what Organisational Psychology defines as "psychological safety", i.e.
ensuring a workplace which promotes innovation, coordination and cooperation, while
encouraging a creative exchange of views and ideas between employees. It is also
worth noting that, in July 2022, the Bank of Greece co-signed the ESCB & SSM
Equality, Diversity and Inclusion Charter.
The past months saw the completion of the Bank's internal reorganisation project
entitled "Mellon" (meaning "future"), aimed to improve the way the Bank is structured
and operates in order to effectively respond to the challenges of the new era and of
technological developments. The project has produced invaluable tools, which we are
now called upon to use in the best possible manner.
In addition to its external activities on climate and sustainability, the Bank also
implements an internal wide-ranging programme of environmental actions, called
"BoGreen". These actions focus on a more efficient use of the natural resources
consumed in all its buildings and the optimal management of the waste generated in its
facilities, along with environmental awareness activities addressed to all its staff. In the
past year, the Bank's Environmental Management System obtained ISO certification.
2022 marked an important milestone: 50 years since the official inauguration of the coin
minting section of the National Mint. On this occasion, a commemorative medal was
designed and produced, which will be distributed to all colleagues working at the Bank,
as a symbolic gesture of gratitude for the services they have offered over time.
I would like to thank you, once again, for your diligence and commitment with which you
performed your duties in 2022, and I invite you to keep up the very good work this year.
I wish you all a happy, healthy and prosperous new year!