Bank of Greece chief warns of tough 2013 before recovery next year

Greece faces another difficult year in 2013 but is gradually exiting from its crisis, with confidence building and deposits returning, Bank of Greece Governor George Provopoulos said.

In a speech at the central bank’s annual shareholder meeting on Monday, Provopoulos warned that Greece will be tested by another year of recession in 2013, after seeing the economy shrink by 20 percent since 2008, and by rising unemployment, which averaged at 24.5 percent last year. The central bank chief also noted the number of Greeks living in poverty had risen by 43.1 percent last year. The proportion of Greek children under 15 living in poverty is up to 23.3 percent from 19.3 percent in 2005.

However, he said that the recovery should begin in 2014.

“There is no doubt that 2013 will be a difficult year, chiefly because of the continuing recession and high unemployment,” Provopoulos said, while insisting that Greece had to continue implementing its fiscal adjustment program “without deviations or delays.”

“The continued implementation of Greece’s program is a precondition for the country’s recovery.”

The country needs to broaden the tax base by cracking down on tax avoidance and lighten the burden on those who do pay tax, Provopoulos said. It also needs to achieve a new export-oriented growth model for its economy.

“The danger of a collapse has been avoided, the prospect of a euro exit distanced and confidence gradually restored,” Provopoulos said. “These encouraging developments don’t leave any room for complacency though.”

The Bank of Greece chief said the crisis presented Greece with two key opportunities: to shift economic production towards high value-added sectors and to overhauld the country’s public administration.

Provopolous said “social consensus” for the policies that would bring this transformation about had to be strengthened.

“We have already come most of the way on a long and difficult road at tremendous cost to Greek citizens and businesses,” he said. “Now that the end of this difficult road is finally in sight, we need to intensify our efforts and quicken our pace in order to cover whatever distance remains and ensure that the citizens’ sacrifices will not be in vain and that, better yet, a promising future lies ahead.”

The Bank of Greece forecasts that Greeks’ gross nominal wages will fall by an average of 7.7 percent this year, with unit labor costs falling by 7.3 percent. Between 2010 and 2012, unit labor costs in Greece fell by 10.3 percent, according to the central bank.

Greece has received two bailouts from the euro area and International Monetary Fund worth 240 billion euros and conducted the world’s biggest sovereign debt restructuring since it triggered the region’s debt crisis in 2009. The aid has been tied to measures to cut the country’s deficit and reform its economy.

[Kathimerini & Bloomberg]

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