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BoG governor: Debt relief alone not enough to save Greece

Yiannis Stournaras believes a timely adjustment of Greece’s debt is necessary, and in a statement today advocated lowering the target for a primary surplus of 2% in order to reduce the tax burden, explaining that doing so would enhance Greece’s growth prospects and facilitate its entrance into the financial markets.

In an exclusive statement to liberal.gr, the Bank of Greece governor stressed the need for other initiatives as well, such as the acceleration of privatization and the implementation of reforms, which, combined with debt relief, would return the country to financial stability and out of the crisis.

Yannis Stournaras said: “In its proposals, the Bank of Greece has included the timely adjustment of Greece’s debt with respect to the Eurogroup’s decisions; timely so that the borrower (in other words, Greece)  can benefit from the very low interest rates currently prevailing in the international market. In fact, in last June’s Interim Monetary Policy report, the Bank of Greece linked specific debt relief proposals with the need for lowering the financial target after 2018 from a primary surplus of  3,5% of the GDP to 2%, in order to:

a) Create the financial circumstances to reduce the tax burden of the country and strengthen its development prospects in the medium range and long term

b) To ensure long-term sustainability of public debt according to the new definition of its annual serviceability

c) To ensure that Greek bonds will be included in the ECB’s quantitative easing (QE) and thus facilitate Greece’s re-entrance into the financial markets

“This, combined with the acceleration of privatization, the exploitation of public property through the appropriate legislation concerning land use, the implementation of reforms that strengthen competition in all sectors of the Greek economy, the modernization of the public sector and a reduction of the volume of non-performing loans in accordance with the targets set, can create the conditions for high economic growth rates in terms of financial stability as well as a permanent exit from the crisis.”