Greece needs larger adjustments to convince markets, BoG

Greece will have to make adjustments larger than the ones envisaged in the memorandum signed with the EU and the IMF in order to convince markets over its determination to cut its public debt, Bank of Greece’s governor George Provopoulos said on Tuesday.

Speaking in Parliament, presenting the bank’s annual report on monetary policy for the period 2010-2011 to a parliamentary commission, the central banker said the return of the country (and of the banking system) to international credit markets was facing hurdles because of the country’s upward dynamism of its public debt, a problem that cannot be resolved with the memorandum or a restructuring of the debt -with the latter being a “catastrophic option”.

“We have to bite the bullet, and solve the problem on our own,” Provopoulos said and recommended the urgent beginning of an effort to record all public real estate property and its exploitation. He stressed that a government-set goal of raising 50 billion euros was a difficult but feasible target, adding he would raise this figure further. He also recommended focusing on the country’s growth potential, further cutting wage costs but not through horizontal cuts.

Provopoulos said he supported mergers between Greek banks, saying they would present losses this year as the European Central Bank was gradually lifting its liquidity support measures. “It is certain that we will have to look towards attracting foreign capital,” the central banker said.

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