BoG: Clear risk to the economy from the endless negotiations


Central banker Yannis Stournaras warned on Monday of the risk of a full reversal of the economy’s course as the delays in the completion of the bailout review may “put in doubt all the targets for this year, the fiscal targets, the growth targets and the credit sector targets without exception.”

Addressing an event of the Parliamentary Budget Office, the governor of the Bank of Greece stressed that “the immediate completion of the second review is necessary as it has been delayed by more than a year. This delay generates an uncertainty that for months has been starting to have an adverse impact on all economic indices.”

Stournaras added that the problems Greece is currently facing are due to the poor implementation of reforms and growth models: “Growth, which in the past has been introvert [consumption-driven], relied on excessive borrowing and not on reforms,” he commented.

He also said that after the review, emphasis must be placed on promoting privatizations, tackling nonperforming loans and high state debts with a revision of fiscal targets, changing the fiscal policy mix and containing long-term unemployment.

The head of the Parliamentary Budget Office, Professor Panayiotis Liargovas, referred to the five reasons Greece remains in a bailout program, unlike other eurozone state. He attributed this to the original economic conditions, which were much worse that in other countries, the fiscal policy mix pursued, the non-implementation of structural measures, the underestimated effects of political uncertainty on the economy, and the unfair distribution of the fiscal adjustment’s load.

In the meantime, US bank Citi noted that the lack of confidence and pressure on liquidity have been aggravated by the delays in the bailout review, diminishing the chances of a successful conclusion to the third bailout program in the summer of 2018 and creating the need for a fourth.