Long-term fiscal adjustment and a precautionary credit line from European partners were the recommendations made by Bank of Greece (BoG) governor Yannis Stournaras in his interim report on monetary policy tabled in Greek Parliament on Tuesday.
A day after his warning about reduced liquidity in the market, the central banker noted an increase in the deposit base and predicted that the economy will grow 0.7% this year and 2.5% in 2015. The report stressed that there were positive prospects for the economy in 2015 as investment demand was expected to grow, along with a further increase in export activity.
However, there were domestic and international risks and uncertainties, the report said, which could have an impact on the business climate in the next few months and delay or postpone economic growth, adding that economic policy should remain focused on preserving and enhancing the current trajectory with the aim to exit the crisis.
BoG recommended that emphasis should be given to four priorities: a) accelerating structural reforms in the product and services markets, b) restructuring of the state operation and speeding-up administrative reform, c) strengthening active policies in labor markets, with emphasis given to training and d) continuing a fiscal effort in the coming years with focus on combating tax evasion and safeguarding the sustainability of pension funds.
The Greek central bank said the domestic banking system needed to urgently address the problem of non-performing loans. Stournaras, commenting on the “next step” after the Memorandum, said that the country still needed support from a credible precautionary funding program from its European partners. “This is necessary until the country ensures a sustainable funding of its borrowing needs from international markets,” he noted.
(source: ana-mpa)
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