Bank of Greece governor George Provopoulos on Wednesday recommended a package of three measures aimed at counterbalancing the dynamic of the country’s public debt, ahead of a forthcoming upward revision of the country’s fiscal statistics by Eurostat.

 

The central bank, taking in mind an anticipated upward revision of the country’s fiscal deficit and public debt data, estimates that a fiscal adjustment program should be accelerated, presenting a larger decline of primary deficits and achieving higher primary surpluses earlier, accelerating a privatization program (beginning with the restructuring of Hellenic Railways) and improving management of the state’s real estate property, in an effort to take structural development measures to speed up economic recovery and creating preconditions for satisfactory and sustainable GDP growth rates.

The central bank reiterated its position that any restructuring of the country’s debt would be hazardous to the Greek economy and noted that this could be avoided by implementing the necessary policy mixture. History shows that in the past any developed country which achieved zero or negative primary result did not declare bankruptcy but continued fiscal adjustment efforts. This is the clear commitment of the Greek government. In any case, the Bank of Greece’s management believes that the political and economic cost of a bankruptcy would be much larger than any short-term cost related with a strategy of fiscal consolidation.

A bankruptcy combined with a restructuring of debt would have direct and significant negative consequences not only for the assets of foreign investors but for Greek banks, Greek pension funds and Greek private investors holding a significant part of the public debt, along with foreign pension funds and EU banks, also holders of a significant part of Greek public debt.