BoG says end of the road is in sight

The risk of a financial catastrophe has been averted but the Greek economy will rebound only if the fiscal adjustment program continues to be implemented, Bank of Greece Governor Giorgos Provopoulos warned on Monday. Speaking at the presentation of his annual report to the 80th general meeting of the central bank’s shareholders, he also stressed the need for a further restructuring of the banking sector.

Provopoulos asked for an end to excessive taxation and salary cuts, saying that focus should shift to tax evasion instead. “Now that the end of the road is finally in sight, we need to intensify efforts to accelerate the pace over that last part of the distance and ensure that the citizens’ sacrifices will not go to waste and a new, better future lies ahead,” the BoG chief said.

Provopoulos’s report forecasts a 4.5 percent contraction of the economy and a small rebound next year, fully in line with the government’s estimates. In the period from 2010 to the end of 2013 nominal salaries and pensions will decrease by an average of 23.7 percent, while total spending on salaries and social security contributions will decline by 34.8 percent, the report shows.

Provopoulos also qualified the restructuring of the credit sector as “key” to restoring normal conditions of liquidity in the market. According to the BoG report the share capital increases of the country’s systemic banks will have to be concluded by end-April – as the bailout agreement provides for and despite the banks’ demand for an extension. On smaller lenders, the report notes that they should be recapitalized through private funds, also by end-April. BoG data showed that non-performing loans reached 22.5 percent in end-September 2012, up from 16 percent in December 2011.

Meanwhile, technical experts from the country’s international creditors arrived on Monday in Athens to monitor the progress of the streamlining program, ahead of the arrival of their superiors in Athens on Thursday, to whom they are to present a report.

The focus at this stage is on applying pressure on the government to identify the 25,000 civil servants who will enter a labor mobility scheme within 2013.

The team began its inspections by visiting the General State Accounting Office on Monday.

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