Greece’s foreign creditors need to clarify whether the country will benefit from a support program after its bailout expires next August, its central bank said on Thursday.
Greece has relied on financial handouts from international creditors since 2010 but has said it is aiming for a clean exit from the program when the current rescue package – its third – ends.
That would leave it to finance itself from the markets.
The central bank said a “precautionary support framework” would however help boost investor confidence and drive down borrowing costs, assisting an economy that is gradually returning to growth after losing about a third of its value over the last seven years.
“To consolidate confidence over the medium term, it is equally important to … clarify the form that post-program support to the Greek economy will take,” it said in a scheduled report on monetary policy.
Clarification would also help banks in the event that the country’s credit rating had not improved by the time the program ended, the central bank said.
Greek bonds would continue to be accepted as eligible collateral by the European Central Bank and would be included in the ECB’s quantitative easing program whether in its planned duration or during the reinvestment period.
In the meantime, it was “urgently necessary” that Greece continued to implement reforms mandated under its bailout, speed up privatizations and prepared for the timely conclusion of its final bailout review next year.
It added that the focus of economic policy should be on tackling the problem of banks’ non-performing loans, removing obstacles to investment and addressing a public debt overhang.
“These actions … would facilitate the return to financial normality, the full abolition of capital controls and the sustainable recovery of the economy after eight years of sacrifices.”
The bank reiterated its growth projection for this year. It said the economy is expected to grow by 1.6 percent in 2017, 2.4 percent in 2018 and 2.5 pct in 2019. [Reuters]