Fiscal policies, reforms need social support, BoG head says

"The current crisis has proven that economic convergence in Europe was not an automatic procedure," Bank of Greece governor George Provopoulos said on Friday, inaugurating a conference organized by the central bank with the Oxford University.

The Greek central banker noted that consolidation policies and reforms needed the support of the society to move forward. Commenting on developments in Southeastern Europe, he underlined that because the region was going through a period of falling incomes and higher unemployment, changes promoted should be considered fair and effective, establishing a feeling that "short-term sacrifices were bearing fruit".

Provopoulos sounded optimistic over developments in Southeastern Europe, saying economies have stabilized and signs of recovery were visible in several countries. These countries suffered a heavy blow from an international crisis, with economic activity falling sharply and unemployment rising significantly. However, the inflow of foreign direct investments in the area could fall as investors remain cautious. This development could lead to lower economic growth compared with pre-crisis levels and noted that it was necessary to adopt a new growth plan based on exports.

Fiscal consolidation was a determining factor for sustainable growth in the region, the central banker said, although he stressed that fiscal consolidation should be accompanied by a more effective operation of the tax collect mechanism and a more efficient management of public spending.

Addressing the conference, Bob Traa, the head of IMF's mission in Greece, said the Greek government should first deal with the corruption problem in order to put the economy back on a growth track. He said the country should combat tax evasion and characterised as an achievement refoms already made in the pension system. He also urged for a reform of public sector enterprises.

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