BoG Gov.: Markets will shun Greece if reforms abandoned; 3rd bailout could have been avoided

20 August 2018
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Influential Greek central banker Yannis Stournaras, a standing “thorn in the side” of the current leftist-rightist coalition government, again cautioned against complacency and overly optimistic scenarios – a day before Greece’s third successive bailout officially ends.

“We have a great deal of distance to still cover,” the Bank of Greece (BoG) governor said, in an interview published by the Athens daily “Kathimerini” over the weekend.

The current memorandum adjustment program is set to end on Monday, Aug. 20, almost three years to the day after the first Tsipras coalition government submitted the voluminous third bailout draft plan in Parliament for ratification. The development followed six months of shambolic negotiations between Athens and its institutional creditors, a contentious early July 2015 referendum and subsequent “no” vote to a withdrawn offer by creditors at the time, with yet another round of last-minute negotiations at the heads of government level leading to the Tsipras government’s acceptance of the third bailout and billions of euros worth of austerity measures.

Stournaras, a prominent finance minister in a previous Samaras-Venizelos coalition government, said unresolved problems remain, listing a ballooning public debt, high unemployment, Greece’s education system, as well as what he called ineffectiveness in the public administration sector, among others.

Nevertheless, at the same time he acknowledged that several structural weaknesses in the country were overcome in previous years.

Conversely, in again taking direct aim at the virulent anti-austerity and anti-bailout rhetoric employed by the current ruling party, hard left SYRIZA, before it rode to power in January 2015 and up until the summer of the same year, Stournaras said Greece’s punishing economic crisis was a result, primarily, of flawed economic policy decision-making over previous years. He also emphasized that the memorandums were “part of the solution, not part of the problem”.

Along those same lines, the head of the independent central bank insisted that the third bailout could have been avoided in the summer of 2015.

“The differences separating the two sides (the Greek coalition government led by Antonis Samaras and institutional creditors) in the fall of 2014 were much smaller than the measures instituted later, under the third memorandum,” he stressed, while warning of the risk, as he said, of markets eschewing the country if it backtracks on agreed-to reforms.

As such, he pointed to efforts to further depoliticize Greece’s cavernous public sector and to promote the evaluation process at all levels of public administration, while at the same time applying policies that attract foreign direct investments.

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