Less austerity, more privatization proposed by the BoG

Less austerity, more privatization proposed by the BoG

Athens, May 16, 2016/Independent Balkan News Agency

By Spiros Sideris

Changing financial goals by drastically reducing the target for the primary surplus (to 2% from 3.5%) in order to allow the return of the greek economy to a high growth rate, asked the governor of the Bank of Greece (BoG) Giannis Stournaras. Speaking to the Association of Industries of Northern Greece, the governor of the Bank of Greece stressed the need for the implementation of reforms, so as not to lose, once again, the opportunities presented to us for the final exit from the crisis, while said that the entrapment of the country in the memoranda is due to the partisan competition, the lack of understanding between the parties, the anti-memorandum rhetoric and lack of ownership and commitment by part to the political world, the correction of past mistakes and the implementation of the necessary reforms.

Specifically, Stournaras noted that the successful completion of the first assessment should be accompanied by the start of substantive discussions with partners for action to alleviate the public debt. “In the BoG”, he said, “we believe that the return of the greek economy to sustainable and high economic growth will be helped by the reduction in the final fiscal target of a primary surplus of 3.5% of GDP from 2018 onwards, to 2% of GDP, without jeopardizing the prospect of the sustainability of the public debt”. He noted that experience shows that only one country, Ireland, was able to maintain a primary surplus of 3.5% of GDP for a relatively long time, as is required in the case of Greece from 2018 onwards.

Stournaras stressed that the greek authorities – after the completion of the deal – should immediately turn their attention to the implementation of reforms to address the problem of ‘red’ loans and to relaunch the privatization program. “These actions will have a positive impact on the assessment of the country’s prospects in international markets and will lead to a virtuous circle that will mark the final exit from the crisis”, he said.

As regards the banks, he noted that in 2015 there was an increase in the volume of non-performing loans. Non-performing exposures amounted to 44.2% at the end of 2015 from 39.9% in 2014. “The strengthening of the banking system and the release of resources for the financing of the economy require addressing the larger volume of non-performing loans over the next 2-3 years”.

He emphasized the need to rapidly complete the efforts on the secondary loan market configuration (performing or not), the reshaping of the frame-judicial debt settlement, the improvement of infrastructure and specialized expertise of the judicial framework and finally the resolution of issues related to the tax treatment of write-offs and provisions.

“The successful completion of the first evaluation of the program will certainly have a positive impact on confidence and economic recovery prospects in 2016”. Stournaras noted that the assessment is the key to the return of deposits in the greek banking system and further opens the way for the reintegration of greek state securities for the accepted by the Eurosystem collateral («waiver») and will enable participation in the ECB’s quantitative easing program. Also, the evaluation could lead to the implementation of the Eurosystem’s commitment for the distribution of profits from securities holdings of the Greek State (which did not participate in PSI), which approach EUR 10 billion in 2020, contributing substantially to the financing of economy and to the reduction of debt.