‘Re­duce debt or face 4th bailout’

BoG re­vises out­look for 2017 and warns more fund­ing will be needed without the medium-term mea­sures

Kathimerini English - - Focus -

The an­nual Bank of Greece re­port pub­lished yes­ter­day stresses the im­me­di­ate need for a change in the fis­cal pol­icy mix to make it more growth-friendly, while bring­ing down its growth ex­pec­ta­tions for 2017 from 2.5 per­cent to 1.6 per­cent. Cru­cially it warns that a fourth bailout might be nec­es­sary if the coun­try’s debt is not suf­fi­ciently re­duced.

The re­port signed by cen­tral bank chief Yan­nis Stournaras at­tributes the down­ward re­vi­sion of eco­nomic per­for­mance to the “great de­lay in the com­ple­tion of the sec­ond bailout re­view and the en­su­ing surge of un­cer­tainty that has cre­ated a con­sid­er­able de­cline in in­vest­ments. This, com­bined with the great in­crease in the tax bur­den, has weak­ened the orig­i­nal fore­cast.”

De­spite the de­te­ri­o­ra­tion in fore­casts for 2017 the midterm prospects for growth re­main posi- tive, but only pro­vided that the im­ple­men­ta­tion of re­forms is un­hin­dered, the BoG re­port notes.

It high­lights the progress that the com­ple­tion of the sec­ond re­view con­sti­tutes, and ar­gues that the midterm fis­cal plan will con­trib­ute to­ward im­prov­ing growth prospects, strength­en­ing con­fi­dence and bol­ster­ing in­vest­ment ac­tiv­ity if im­ple­mented without any fur­ther de­lays and with strong de­ter­mi­na­tion.

The re­port fur­ther records the three ma­jor prob­lems that the ma­jor ex­tended re­ces­sion of the last few years and the re­duc­tion of in­vest­ments have led to: They are high un­em­ploy­ment, the great vol­ume of non­per­form­ing loans and the high pub­lic debt.

The debt is the most press­ing is­sue on the fis­cal side, and BoG warns that Greece will need a new fund­ing boost un­less it is dealt with. The re­port notes it was ac­knowl- 1.1412 edged in the June 15 Eurogroup that Athens has met the obli­ga­tions of the agree­ment and a clearer di­rec­tion was given for the re­struc­tur­ing of the debt after the pro­gram ends. How­ever, it stresses that the medium-term mea­sures for ren­der­ing the debt sus­tain­able will have to be more spe­cific, to ease Greece back into the money mar­ket up to sum­mer 2018, while any ex­ten­sion of un­cer­tainty after that date will au­gur a new bailout process.

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