In an article published in Sunday's To Vima newspaper, the governor of the BoG notes that adjustment processes have not been completed, adding that fiscal policy should remain on targets set.
“The main efforts of economic policy should be to secure viable and growing primary surpluses, the rationalization of the public sector and a speed up of structural reforms in service and goods markets,” noted governor of the Bank of Greece Giorgos Provopoulos.
As concerns the banking union he stated that “it will contribute to breaking the vicious cycle of fiscal and banking crises.” For Mr Provopoulos it was this cycle that intensified European problems since the support of banks by governments fed the public debt crisis. This in turn caused further damage to banks through the loss in value of government bonds they held.
He also noted that the banking union is expected to normalize bank issues and bolster public trust in Eurozone banks that will be placed under ECB tutelage.
This is especially important for smaller countries like Greece that have been facing the results of the crisis and the problems of lending markets, like the difficulties banks have in securing funding and the lack of credit.
Therefore, the banking union is expected to reinforce trust in the Greek banking system, to contribute in improving lending capabilities of local banks and, in the long run, to decrease the cost of funding homes and businesses.