Athens.- “The prospect of Greece exiting the crisis is by now visible”, according to the governor of the central Bank of Greece George Provopoulos, speaking at a lunch on Friday organized by the Hellenic-American Chamber of Commerce in his honour.
Provopoulos stressed it wasn’t certain from the beginning that the country would manage to avoid bankruptcy and exit from the eurozone. “Finally, the disaster was averted with the will of the Greek people, the efforts of successive governments and the support of [European] partners”. During this course, the Bank of Greece exercised its institutional duties, protecting financial stability and deposits. “Thus, it [Bank of Greece] averted an open banking crisis, while the banking system was restructured on new foundations”, noted the central banker of Greece.
He also maintained that a necessary condition for Greece to be able to transform the stabilization of its economy into a recovery and ensure dynamic growth is the introduction of reforms for the fundamental reconstruction of the public sector. Provopoulos also believes it is important to encourage with every means the transition of the economy to a new growth blueprint which will be based on extroversion, i.e. dynamically increasing Greek exports for the long-term.
Provopoulos also made a reference to the key issue of insufficient funding of the economy, expecting that the improvement of macroeconomic conditions will allow for a gradual credit re-expansion. In this framework, he cautioned the banks against repeating mistakes of the past, when a large proportion of credit was directed to housing and consumption.
The central banker underlined, that the Greek banking system now has extended capabilities, being able to attract foreign capital, paving the way also for the re-emergence of the Greek state in the international financial markets.
“The successful re-emergence of Greece in the international financial markets shows we are following the right path”, German Finance Minister Wolfgang Schaeuble said while in Washington for an IMF conference, as reported by the German news agency DPA.
This doesn’t mean that “the tempest is over” for Greece, nevertheless “it shows we are on the right path”, he was quoted as saying.
Greece’s return to the international financial markets through an imminent bond issue is considered by the International Monetary Fund to be an important development, which will help to partially fund the country’s financing needs. The IMF opn Wednesday stressed the need for “seamless implementation” of the Greek bailout programme, so as not to derail the positive course of the country towards the end of its economic crisis.
In view of the forthcoming bond issue, IMF’s head of mission to Greece Poul Thomsen welcomed the news, noting that Greece’s return to the markets “was an economic target of the [bailout] programme”. Thomsen added, that “it is a milestone for Greece” which “proves the success of the programme”.
Greece’s return to the international bond market helps meet the sovereign’s funding needs and highlights the magnitude of its fiscal and economic adjustment under its EU-IMF programme, Fitch Ratings said on Friday.
The credit rating, in a report, noted however that economic and political risks to adjustment remained in the country, and that it was unclear how sustainable market access will be.
“Greece priced the EUR3bn five-year issue to yield 4.95% on Thursday. These funds should further reinforce the sovereign’s fiscal financing position,” the rating agency said in its report, part of which follows:
“Earlier this month, the Eurogroup stated that the adjustment programme is fully financed for the next 12 months, including by drawing on temporary sources of financing such as deposits of general government subsectors. This is in line with our view that programme funding shortfalls would be manageable. The generation of a primary surplus a year ahead of schedule in 2013 is a key measure of Greece’s enhanced ability to pay its way since restructuring its sovereign debt in 2012. ….
….. Regaining market access has been a key objective of the Greek programmes (substantial funding gaps emerged in the first programme because of an assumption that Greece would regain market access before it ended) and Thursday’s issue was heavily oversubscribed.
“But its success does not guarantee that Greece will have made a sustainable return to market funding by the time the current programme ends later this year. Market funding at around 5% is more expensive than the average annual cost of troika funds of 2%-3%. The IMF estimates Greece’s total fiscal financing needs for 2014 at 15.8% of GDP, declining to 10.2% in 2015 and 4.5% in 2016. And substantial risks to Greece’s sovereign creditworthiness remain. Public debt sustainability is far from secure and general government debt to GDP is very high at around 175% (far above the ‘B’ category rating median, although gross financing needs over the medium term are relatively low compared with ratings peers). Political risk to reform and consolidation remains high, with reform fatigue reflected in the government’s small parliamentary majority and the opposition’s anti-reform stance. This balance of achievements and risks is reflected in Greece’s B-/Stable sovereign rating.”