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Stournaras' Political Uncertainty Warnings

Yiannis Stournaras in his first comments on politics, since taking over as central bank governor last month, said there were still downside risks to the economic outlook. He notes that political uncertainty around a presidential election scheduled for 2015 is the main risk to the debt-laden country's economic recovery.

"The main risk is due to political uncertainty, related to the election of a new president in early 2015," Stournaras told investors at a Eurobank forum. Other challenges included a slowdown in the global economy and geopolitical risks in Russia and Ukraine, which could hurt exports, he said.

Yannis Stournaras, the former finance minister, reiterated that he expected moderate growth of about 0.5 percent of GDP this year, report Reuters' Renee Maltezou and Lefteris Papadimas.

 BoG governor said  that reforms must continue in order to ensure recovery but active labour market policies could mitigate the impact of unemployment and should be a priority, along with measures to strengthen the social safety net.

He also warned that the accumulation of non-performing loans was the top challenge faced by the banking sector, but added that a return to growth and falling unemployment should improve borrowers ability to pay back their debts.

Yiannis Stournaras stressed that dealing with the issue of bad loans falls under the following two requirements: Requirement number one is for the economy to recover and for unemployment to fall and requirement number two is to set in place a new "bad loans active management" practice on an individual bank framework, offering priority to the borrowers who are facing temporary financial problems. In Stournaras' view, this approach will help "unlock" funds for the financing of the Greek economy.

Nevertheless, he called on the banks to offer loans only to truly viable businesses and to encourage the development of business partnerships.