In the Bank of Greece’s intermediary Monetary Policy Report for 2015 handed to Parliament Speaker Nikos Voutsis on Friday, Central Bank Governor Yannis Stournaras issued a clear message to the government and the country’s pro-European political parties regarding the need for political stability and consensus.
Stournaras, a former finance minister, makes special reference in the report to the role of the Parliament, arguing that it should continue to support the effort to save the economy, which started in 2010. He also asks for the fiscal adjustment not to be based on tax and social security contribution hikes, and estimates that the economy could start recovering from the second half of 2016.
“The formation of a climate of political stability and consensus is the cornerstone for the return to economic and credit normality,” Stournaras writes in the report, adding, “Only the full restoration of trust, the acceleration of reforms and privatizations, the utilization of public real estate and the implementation of significant investments can lead to high growth rates.”
The report calls for an emphasis on “reducing the non-productive expenditure of the broader public sector,” referring to “hundreds of entities” that do not need to be under the state umbrella, “the abolition of tax and social security exemptions and the implementation of privatizations.”
The successful completion of the first formal review of the bailout program – early next year – will be the milestone for lifting the capital controls, the BoG states in the report.
The central bank further argues that the debt sustainability criterion of the annual servicing costs not exceeding 15 percent of gross domestic product – that the eurozone is said to be promoting – is unrealistic without having some sort of a debt restructuring first. Therefore the Bank of Greece is calling for a further lightening of the Greek debt.
As for the management of nonperforming loans, the central bank says that one of the initiatives that will be taken in the coming period will concern the involvement of specialized companies that will either hold or just manage bad loans.