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Greek Bank Leader Says Crisis Ending

Bank of Greece Governor George Provopoulos
Bank of Greece Governor George Provopoulos

Despite tax revenues falling far short of expectations as austerity measures have cut deep into the disposable income of Greeks who have responded by curtailing spending drastically – and with a record 27 percent unemployment – Bank of Greece (BOG) Governor George Provopoulos said the economy will begin to recover next year.
Despite $325 billion in two bailouts from international lenders, Greece’s economy has shrunk 20 percent since it went into recession in 2008, and BOG analysts said it will contract another 4.5 percent this year before turning the corner in 2014 as Finance Minister Yiannis Stournaras has also predicted.
Provopoulos, who is also a member of the European Central Bank’s governing council, one of Greece’s international lenders, said that said unemployment will also increase this year after averaging 24.5 percent last year. Some analysts expect it to easily hit 30 percent if the government proceeds with plans to fire 150,000 public workers over the next three years.
“There is no doubt that 2013 will be a difficult year, chiefly because of the continuing recession and high unemployment,” Provopoulos said in an e-mailed transcript of his speech at the bank’s annual shareholders meeting on Feb. 25, the newspaper Kathimerini reported. “The continued implementation of Greece’s program is a precondition for the country’s recovery.”
But Greece can’t rely only on austerity and needs to broaden the tax base by cracking down on tax avoidance and lighten the burden on those who do pay tax, Provopoulos said. It also needs to achieve a new export-oriented growth model for its economy, he added.
“The danger of a collapse has been avoided, the prospect of a euro exit distanced and confidence gradually restored,” Provopoulos said. “These encouraging developments don’t leave any room for complacency though.” He warned that that Greek taxpayers cannot bear any more tax hikes and that revenues will continue to fall this year.
He said the government must change the tax system to make it fairer instead of constantly hitting workers, pensioners and the poor to pay the cost while letting tax cheats who owe $70 billion escape.
Troika officials have warned, however, that if Greece fails to hit fiscal targets that Prime Minister Antonis Samaras will have to break his vow not to implement more austerity and that more wage cuts and tax hikes will be needed, although workers and pensioners have seen those take away nearly 50 percent of their pay and benefits already while banks are demanding they repay their loans and credit cards in full.
After a first bailout of $152 billion from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) failed to slow Greece’s slide toward default, the lenders have begun a second of $173 billion with an initial infusion of some $69 billion over the next few months.
The government also imposed losses of 74 percent on investors last year, nearly wiping out the savings of many Greeks of the Diaspora who put their faith in their homeland and bought Greek bonds. The move also brought Cypriot banks to the edge of bankruptcy and forced that island’s government to see Troika bailouts to keep the economy from collapsing.
In an earlier interview with Agence-France-Presse, Provopoulos called for a “more aggressive” implementation of structural reforms demanded by the country’s foreign creditors in exchange for rescue aid.
“We have quite a long agenda of things to do, regarding privatizations, reform in the product and services market, improving the tax collecting mechanism which has a number of weaknesses and so on,” Provopoulos told the agency.
 

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