The monetary report of the Bank of Greece is out and forecasts the recession will continue parallel to the rise of unemployment. The governor of BoG says in a sybillic style that “unemployment will exceed 19%” but he refrains from telling where it would stop – i.e. 25%? 40%? Provopoulos foresse growth to come come in 2014. Further er, he underlined the lack of governmental determination of the years 2010-2011 and he stresses “the historic responsibility that the new government that will merge after the elections, a responsibility to implement the new programme (loan agreement) with political and social consensus” (*sigh*)
Provopoulos Calls for Awareness and Political Consensus
Greece has an historic responsibility to implement promises made to international creditors in exchange for further aid once the new government takes power following elections, the central bank said Monday, predicting another year of recession for the economy, according to Dow Jones Newswires.
In its monetary report, the Bank of Greece said that doubts remain as to the determination of the government and society to decisively push through reforms needed to help boost competitiveness.
“This distrust is justified. In order for sentiment to improve and for confidence to be restored in the Greek economy, there needs to be an adjustment to the new reality, strict implementation of what has been agreed upon and a correction of imbalances of the past,” it said.
In a legislative sprint that took place in recent weeks, Greece΄s interim government has passed a slew of reforms bills needed to clinch a EUR130 billion loan deal from its European partners and the International Monetary Fund. The reforms, which include more than EUR3 billion of spending cuts and the opening up of heavily protected service industries, were passed by a two-thirds majority in the 300-member parliament, but doubts linger as to how effective the next government will be in implementing the measures. The country is expected to go to elections at the end of April or the start of May.
Despite revenue-raising measures adopted by the government in the middle of year, the central bank predicts that Greece΄s budget deficit is seen widening to 10.6% of output in 2011–well above the 9% shortfall estimated in the government΄s latest budget.
The report follows a warning from the International Monetary Fund last week that Greece΄s loan program faces “exceptionally high” risks and that it could take more than a decade for the country to fix problems with competitiveness.
The central bank sees the economy contracting 4.5% this year, before easing in 2013, but not enough to put the economy back on a growth path. The economy is tipped to contract an annual pace of 0.5% in 2013, which would make it the country΄s sixth year of recession. In 2012, the average jobless rate is seen in excess of 19%.
Turning to the country΄s lenders, the central bank said that a restructuring of the sector is needed, in a comment widely interpreted as a call for consolidation in Greece΄s fragmented banking landscape.
“Banks will be called upon to move ahead with a complete review of their business plans in order to be in a position to meet rising challenges created by the recession and to complete a significant boost to their capital base by the end of the third quarter,” it said.
In the latest Greek bank merger to go sour, Alpha Bank AE, Greece΄s third-largest lender by assets, said last week it will scrap plans to merge with cross-town rival EFG Eurobank Ergasias SA, saying the country΄s debt-restructuring plan torpedoed the deal.
Greek banks are facing losses of around EUR32 billion after Athens implemented a massive EUR100 billion debt writedown aimed at easing the country΄s public-sector debt burden. Also faced with soaring non-performing loans, lenders will have to give weight to raising capital from private investors before turning to the state for aid, the central bank report added.