BANK OF GREECE GOVERNOR - Economy could recover sooner than predicted

George Provopoulos, Governor of the Bank of Greece (Photo credit: Wikipedia)

Will the Greek economy be able to recover sooner than predicted? No one knows, but the Governor of the Bank of Greece says that the materialization of the "prior actions" of the loan agreement, the disbursement of the loan tranche and the lightening of the debt are positive developments that create grounded expectations that it will be able to recover, and "perhaps even sooner that predicted."

Central Bank of Greece (BoG) governor George Provopoulos told parliament's standing committee on the economy on Wednesday that a return to growth and a recovery were now "a national priority", setting out as conditions the abolition of the uncertainty over Greece's place in the Euro zone, the completion of a national plan for the transition to a new developmental model, given that the Memorandum contains on the minimum conditions that ensure continuation of the financial support and the advancement of structural reforms that will eliminate the causes of the twin deficits.

The state news agency quoted him as saying that the chief targets of the effort to hasten recovery should be the immediate implementation of measures conducive to a re-start of the economy (acceleration of absorption of NSRF programmes, utilization of the European Investment Bank's financing tools and the re-start of construction of major road arteries), restoration of smooth liquidity conditions with the recapitalization of the banks, immediate improvement of the efficiency of public administration through simplification of the legislative and regulatory framework, a steady tax regime with reduction of the tax burden, and acceleration of the denationalizations.

Particularly regarding the banking sector, Provopoulos noted that the sector continues face unprecedented challenges in liquidity and capital adequacy due to the crisis that has hit the country. In that context, completion of the recapitalization and reorganization of the banking system are crucial reforms, as an increase in the banks' own capital will boost the domestic depositors' and international money markets' confidence in the banks.

On the recession, Provopoulos described is "historically unprecedented for the Greek economy in times of peace, with substantial repercussions not only on incomes but also the production dynamic and social cohesion". However, the fiscal adjustment has resulted to date in a major reduction of the deficits and recovery of 72 percent of the international competitiveness lost during the period 2001-2009, he continued, opining that the progress in structural reforms over the past two-and-a-half years are not negligible, given indications that exist of a correctional adjustment of basic indicators, which he said is the beginning for balancing and restructuring the economy (reduction of the current accounts deficit, reduction of the labor cost per unit of production, reduction of inflation, etc.).

"Despite the delays, the progress that has been made in important sectors is tangible and measurable. Despite the dangers and the continuing recession, the economy is changing. With the first clear indications that we are distancing ourselves from practices of the past and a new strategy is being forged for the future, the climate can be reversed quickly and the conviction can be consolidated that the end of the recession is on the horizon. This will be the first substantial step for a new course of growth," AMNA noted Provopoulos as saying.