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Greek BoG dramatic annual report warns of ‘uncontrollable crisis’, GREXIT & GREUXIT if no deal

The governor of Central Bank of Greece, Yiannis Stournaras wrote his annual report and forwarded it to the Greek Parliament and Tsipras’ cabinet. In his 141-page report Monetary Policy 2014-2015, the former Finance Minister of Samaras-Venizelos government warned that Greece faces an “uncontrollable crisis”, if a deal cannot be reached in the coming days to release €7.2billion in bailout funds and prevent Athens defaulting on its debts.

The governor of BoG wrote among others:

“If a deal can be done in the coming days, it would fend off the immediate risks to the economy, reduce uncertainty and ensure a sustainable growth outlook for Greece.

Failure to reach an agreement would, on the contrary, mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and – most likely – from the European Union,

A manageable debt crisis, as the one that we are currently addressing with the help of our partners, would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability. An exit from the euro would only compound the already adverse environment, as the ensuing acute exchange rate crisis would send inflation soaring.

All this would imply deep recession, a dramatic decline in income levels, an exponential rise in unemployment and a collapse of all that the Greek economy has achieved over the years of its EU, and especially its euro area, membership. From its position as a core member of Europe, Greece would see itself relegated to the rank of a poor country in the European South.”

Stournaras sent the report to the Parliament Speaker and the Greek cabinet. however, Parliament Speaker Zoi Konstantopoulou immediately return the report back with the remark of “never received.”

Konstantopoulou described the report of Bank of Greece as “unacceptable” and criticized Stournaras for “blatant intervention” in the works of the Truth Committee for the Public Debt investigating  the legality of the debt. The Committee was to present its preliminary result when the BoG arrived. According to the Parliament Speaker, releasing the BoG report at this specific time was undermining the Government’s efforts to legally ask for a debt relief.

In his report Yannis Stournaras also called on Greece’s creditors to honour their promise to offer debt relief, as part of the second bailout of the country in November 2012. Any new deal must be “based among other things on our European partners’ delivery on their commitments in November 2012 to Greek debt relief, which now need to be specified in greater detail”, he argued.

Full report Bank of Greece in Greek here

Report Summary in English here

PS The governor of BoG who as FinMin imposed non-stop austerity for the low and medium incomes writes “no deal would lead initially to a Greek default and ultimately to the country’s exit from the euro area and – most likely – from the European Union”? I have the feeling there is the fear-mongering creditors speaking here.

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17 comments

  1. This guy was Greece ex-finance minister on the ND governments, he was one of the “architects” getting Greece into the euro. He is a traitor and an IMF minion.
    How can this saboteur be the head of the GCB? The greek people and government have to replace this guy and take control of their own Central Bank. This is a key task that has to be done!

  2. So every arguments for fulfilling the contract is a hidden influence of the foreign forces of evil.

    But everything the Parliament does is of course the will of the people of Greece.

    That is pretty much how Nazi Germany has worked and the Iran still does. But it is ok, because the Greek Government is left and so they are the good guys. They do not need to read reports.

    • Giaourti Giaourtaki

      What contracts? The one the former Greek finance minister sent to Troika end of Nov in his famous 48-pages e-mail when already everybody knew that there will be a new government?
      That’s not contracts but Coup d’etat by Dieselboom’s shell gamers.
      Also Coup d’etat is necessary to get kicked out from EU, this or serious penetration of human rights but as there are member states tolerated that hunt their Roma people this won’t happen

    • Right….
      Only the small difference that greek government was elected in free and fair election, no such thing in either iran or nazi germany.

  3. looks to me this looks like “When making a Fear sandwich, spread it thick” LOL

  4. I had a good laugh about Parliament Speaker’s resolution on the report that it was “never received”. It is one of these self-contradicting statements along the lines of: “This statement is false”.

  5. Stournaras is clearly not an impartial observer of Greek politics. However, this does not necessarily make him wrong on the potential impact of the failure to get to an agreement. Let’s hope we never get to verify his predictions. Unfortunately, as it stands now we are moving towards that 🙁

    • keeptalkinggreece

      that’s Stournaras’ problem: he is not impartial while he should b impartial.

      • I respectfully disagree with you on this. There is a fine line between not being impartial observer and not giving one’s best non-partisan opinion to the lawmakers. As head of the Greek central bank he should be providing his best professional opinion not clouded by his views on Greek politics. So far I have not seen evidence to the contrary. Stournaras is in a very good position to understand the risk to the Greek banking system (and through it — the Greek economy) if the ECB support was to be withdrawn. That will have to happen inevitably if there is no agreement between the Greek government and the creditors.

        • Given that Stournaras is part of the problem — both in promoting Greek eurozone entry and latterly in facilitating the Memoranda provisions — his track record is clear. His professional judgement is rather suspect, regardless of his political position.

          The President of the Vouli was quite right to reject his written submission: he was appointed by the previous government, and clearly opposes the political strategy followed by the current government.

          • I am not versed in the history of this issue. From what I can see, however, BoG is doing its best to keep the nation’s finances functioning. After getting an approval for an ELA increase of more than euro 1B earlier this week, they just requested another euro 3B increase today. Without the ELA support, I am afraid, the situation in Greece will deteriorate into chaos.

          • I can agree that they seem to be trying to do that. However, do not forget the history of the bank, under Papademos, who advised the 1990s government to join the euro — with no research and no warning about the dangers. Papademos was rewarded by the Germans with deputy governorship of the ECB — for his role in bringing Greece into the eurozone. Stournaras was part of the group of economists around at the time who issued no warning and did no research on Greece joining the euro. Varoufakis (and a few others) urged caution, that it was not obviously a good idea for Greece to join. I also asked many economic advisors to the government to explain why they thought it a good idea: none had a proper answer.

            So, the Bank of Greece as a protector of the Greek economy has a very poor record indeed. And the same incompetents who took Greece into hte euro have been running Greece since 2011.

  6. Gerrit Zeilemaker

    http://www.telegraph.co.uk/finance/comment/11679061/Greek-central-bank-is-playing-with-political-fire.html “Never before has such a “monetary policy” report been published by the central bank of a developed country, or indeed any country. It is a political assault on its own elected government. Yannis Stournaras, the central bank’s governor, is not a neutral figure. He was finance minister in the previous conservative government. His action tells us much about the institutional rot at the heart of the Greek state, and why a real revolution is in fact needed.”
    This is well said!

    • Giaourti Giaourtaki

      But these idiots are to uninformed to understand that if they don’t give in to Syriza trying to save their capitalist bullshit a real revolution will come.