Bank of Greece: Deal, or momentum is lost


The Bank of Greece is sticking to its forecast which sees the economy expanding 2.5 percent this year, according to its annual report presented yon Friday by Governor Yannis Stournaras, though he warned that the economy will face a series of uncertainties unless an agreement is reached swiftly by the government and the country’s creditors.

Addressing a general meeting of the central bank, Stournaras warned that those uncertainties could be exacerbated if Greek state bonds do not find their way into the European Central Bank’s quantitative easing (QE) program. If the uncertainty is extended, it will also serve as a deterrent for foreign investments that are a necessary condition for growth, he added.

“However we could have some [good] results in a very short period of time,” Stournaras said in his speech, noting that a solution to the impasse in the talks is possible if both sides show flexibility.

“Risks are emerging from the delays and the postponements in the implementation of reforms decided and by the anti-competitive market distortions that may damage crucial sectors of the economy,” the report reads.

The central banker reiterated Greece’s commitment to the eurozone and the European Union and made it clear that the bailout program is setting the country on a growth course.

“The 2016 performance reveals the prospects of the economy,” he said, stressing that the Bank of Greece’s forecast for 2.5 percent growth in the economy this year is conditional on the conclusion of the current bailout review, which resumes on Tuesday.

The report notes that the 2016 primary budget surplus will amount to 2 percent of gross domestic product and expects the target of 1.75 percent for 2017 to be attainable.

On the banking system, Stournaras warned that the bad-loan reduction target (by 40 billion euros up to end-2019) will be put at risk unless the review is rapidly sealed, and confirmed reports that January witnessed an acceleration in the creation of fresh nonperfoming loans along with a reduction in the response by debtors to the proposed settlement plans.