Greece still not out of the woods

There is no room to slacken the country’s economic policy, as the road ahead is long and difficult. This is one of the conclusions in the Bank of Greece’s interim report on monetary policy scheduled for release in the coming week and which describes the memorandum Greece signed with the International Monetary Fund and the European Union as a useful tool for helping the country to get through the crisis. According to sources, the central bank report notes the steps that Greece has made so far but also sends a clear message that more still needs to be accomplished, placing great emphasis on growth and attracting investment. At the same time, the central bank calls on lenders to boost their capital by working together or merging. As regards Greece’s budgetary course, Bank of Greece Governor Giorgos Provopoulos points out that most of the hard work needed to reduce the deficit must be done by cutting costs and, to a lesser extent, by boosting revenues. He added that further tax hikes should be avoided, stressing that the focus should be on catching tax cheats and in spreading the tax burden fairly among taxpayers. Regarding the continuing recession, the central bank estimated that gross domestic product will contract by about 4 percent this year. The country’s growth can no longer be supported by domestic funds, as savings are being whittled away and the financial system no longer has the required liquidity, the report says. Therefore, the country’s recovery needs to be supported by an economy that is more exposed to the international trade environment. The government needs to draw up and implement a policy in this direction by either by attracting more foreign investment or boosting exports, the report says. Larger inflows of capital and rebounding growth rates could help to contain rising unemployment, which is seen as exceeding the 12 percent mark this year. It is also noteworthy that the report will include a chapter dedicated to how the government can make use of its real estate assets, as this is considered an important means to returning the country to growth and reducing public debt.

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