Government needs to preserve fiscal firepower amid Covid19 uncertainty, says Fiscal Council


The state needs to preserve its fiscal buffers and must not spend all of its reserves early as no one can predict the extend of the coronavirus pandemic, Fiscal Council President Demetris Georgiades told CNA.

His comments come amid a discussion that the government should increase its spending to provide additional cash injections to companies and households hit by the COVID19 health crisis. The government has announced support measures with a direct fiscal impact amounting to €369 million while combined with deferred income to boost liquidity the measures rise to €813 million while the government is considering a guarantee scheme amounting to €2 billion.

“No one can predict how long this crisis may last and therefore we should preserve firepower,” Georgiades told CNA.

“We should take in account where we could end up in the day after when the crisis is over, where public and private debt may end up,” he added, noting that both these metrics must be contained on a sustainable level.

He also said that he believes that government guarantees are more proper, as the banks are better place to provide loans as opposed to the state.

It will take much more time for the state to lend as it does not have the mechanisms to evaluate credit risk and to provide loans, he explained.
Georgiades added that he state should set out rule on transparency and monitoring procedures to make sure these loans are provided correctly and to those hit by the crisis.
Source: CNA