Greece’s central bank governor, George Provopoulos, warned that political and social instability threaten to derail the country’s projected economic recovery this year.
While indicators suggest that 2013 was the last year of recession, risks related to “growing confrontation in the run- up” to Greek local elections and to May’s elections to the European Parliament could yet undermine the progress made, Provopoulos said in a speech in Athens Thursday.
Presenting his annual report on the state of the Greek economy, Provopoulos cited a need for “the elimination or minimization of the risks and uncertainties that might be triggered by a deterioration in the social and political climate.”
Provopoulos, who is also a member of the European Central Bank’s Governing Council, asked for “resolve and consistency” in the implementation of Greece’s economic adjustment program, which is tied to 240 billion euros ($328 billion) of international assistance from the International Monetary Fund and the euro area. Disbursement of the last two tranches of loans has been delayed as the country’s creditors say Athens has not fully implemented the required conditions.
A review by the so-called troika that oversees Greece’s bailouts — the European Commission, the ECB and IMF — is taking place in Athens this week, aiming to strike an agreement with the Greek government to allow the payments to continue. The review started in September and has since been interrupted several times.
The troika has demanded that Athens implement hundreds of changes in its service and product markets, as prescribed by a “tool kit” published by the Organization of Economic Cooperation and Development. Also, Athens and its lenders still have to agree on the additional capital requirements of the country’s four largest banks: the National Bank of Greece, Piraeus Bank, Alpha Bank, and Eurobank Ergasias SA.
Provopoulos said that there are 8 billion euros left in the country’s bank recapitalization fund, which he said is enough to cover any further needs. Under EU regulations, banks have to try to raise capital from private sources and sell subsidiaries before tapping the reserves of the fund.
The Bank of Greece and the troika disagree on the size of the hole which needs to be plugged, according to a Greek official who asked not to be named because the talks are still ongoing. A meeting between Provopoulos and the troika ended Wednesday without agreement on how much additional capital the country’s lenders will need, the official said. Talks will continue next week.
The Bank of Greece announced earlier Thursday that it will publish the result of a stress test conducted by BlackRock Inc next week. “In conducting this exercise, the Bank of Greece adopted a conservative approach to ensure the credibility of the exercise,” Provopoulos said. [Bloomberg]