Bank of Greece governor George Provopoulos on Tuesday will submit to Parliament the bank’s report on monetary policy which focuses on progress of fiscal consolidation efforts and structural reforms.

The central bank, according to sources, will stress that the biggest challenge for the Greek economy is competitiveness and that will be a determine factor for economic recovery.

However, the report will note that the country’s Gross Domestic Product will continue to shrink this year, although at a slower pace compared with last year. The GDP is projected to fall by at least 3.0 pct in 2011, without excluding a slightly bigger figure.

The central bank will recommend the continuation of efforts towards fiscal consolidation with more emphasis given on spending. The report will underline the need to boost efficiency of public spending and to abolish all unessecery public sector agencies, along with promoting a restructuring of public sector enterprises.

The bank will urge the government to emphasize more on growth by accelerating structural reforms. The central bank believes that the country can efficiently deal with rising public debt only through higher GDP growth, while it will recommend the implementation of a privatization program announced by the government along with a more efficient management of the state real estate property.

The Bank of Greece will underline that the banking system’s capital adequacy is at satisfactory levels, strengthened after the successful completion of share capital increase plans by major banks. The bank, however, will note that credit expansion will remain at very low levels this year also.