BoG: ‘Halfway through the storm’

Bank of Greece (BoG) Governor Giorgos Provopoulos said yesterday he believes the global financial crisis is at the halfway mark and that the government’s bank rescue plan will help to restore lending conditions. While speaking with Prime Minister Costas Karamanlis in front of television cameras, Provopoulos said, «We are halfway through the storm and we hope that things will return to normal.» «If there is something, there is the liquidity problem. Regarding the Greek plan, I believe things will proceed as normal,» he said. Greece’s major banks have said they will take part in the government’s 28-billion-euro liquidity injection plan aimed at ensuring the uninterrupted flow of credit to the economy. The government scheme provides capital injections via the sale of preferred shares to the state, guarantees on debt issuance and liquidity support. Meanwhile, National Economy and Finance Minister Giorgos Alogoskoufis warned yesterday the government has little room to use fiscal relief to shield the economy from the impact of the global financial crisis. «The (budget) margins are very small. Each country will use the margins it has and we, due to the high public debt, have a very limited margin,» Alogoskoufis told reporters on the sidelines of yesterday’s Eurogroup meeting in Brussels. European Union finance ministers endorsed a public spending plan that will pump in 200 billion euros over two years to boost an economy that has fallen into recession. The ministers called a recovery plan drafted by the European Commission a good basis from which to stimulate the economy of the 27 country EU, which shrank 0.2 percent in the second and third quarters this year. A final decision on the spending package lies with the EU leaders who will meet in Brussels on December 11. The plan foresees public spending in the magnitude of 1.5 percent of the European Union’s total gross domestic product.

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