The European Central Bank has allowed the Greek Central Bank to integrate Greek bonds into the quantitative easing program and continue to accept Greek bonds as a guarantee for the financing of Greek banks after the expiration of the program in August, according to the Governor of the Bank of Greece, Giannis Stournaras .
The central banker warned that surpluses foreseen by the greement with the Eurozone are non-sustainable over such a long run (until 2060) and have never been echieved by any country for so long. He doubted whether large oil exporters lie Saudi Arabia, ever managed it.
At the same time, he says the economy is still extremely vulnerable to market shocks, while budget loosening for borrowing needs - a loophole for high surpluses - is prohibitive.
In the Monetary Policy Report, which he spoke about before the Speaker of Parliament, Mr Stournaras believes that since Eurogroup decisions are linked to enhanced supervision and conditionality (which are basically the prerequisites for establishing a preventive line), while at the same time ensuring the sustainability of public debt, give the ECB the discretion to consider maintaining the "waiver" for the acceptance of Greek bonds as collateral in its monetary policy operations Eurosystem.
At the same time, they provide the ECB with the discretion to examine the acceptance of Greek government bonds in the securities purchase program (in the normal period and in the re-investment period).
The Bank of Greece revised downwards its forecasts for the Greek economy, estimating that in 2018 the growth rate of GDP will be 2% (from 2.4% of the previous forecast) and 2.3 % (from 2.5%) in 2019.
At the same time, the Bank of Greece estimates that the adoption of a more growth-friendly fiscal policy mix is needed. Excessive dependence of fiscal adjustment on high tax rates is a disincentive for both labor and investment, while encouraging the shift of activities towards the shadow economy and providing incentives for tax evasion.
For Banks, Mr. Stournaras argues that they should speed up the red debt reduction procedures to overcome the targets set.
It is recalled that the banks submitted revised targets for the reduction of red loans at the end of September 2017. The target for the amount of non-performing exposures at the end of 2019 is set at EUR 64.6 billion (from EUR 66.4 billion initially).
However, despite the expected decrease in the outstanding balance of non-performing loans, the ratio of non-performing exposures is estimated to be 35.2% at the end of 2019 (from 33.9% of the original target), due to the lower revision ofe estimates for the credit expansion rate from the Greek banking system and the increased write-offs and sales of loans.
Finally, the Bank underlines the need to ensure that even after the end of the program, economic policy will remain committed to reforms and will avoid slipping into past practices that brought on the crisis. This, according to the Central Bank, requires lasting political will, and secondly, a drastic improvement in the functioning of the mechanisms required to implement the reforms, ie reforming the public sector.
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