Greece’s Future in EU at Stake in May 6 Vote, Provopoulos Says

Greece is at a critical point in its history, with the country’s future in the euro area at stake in next month’s elections, Bank of Greece Governor George Provopoulos said.

The country must choose between “an organized and painstaking effort to reconstruct the economy within the euro area” with the help of its European partners, or “regressing decades socially and economically, which would eventually lead the country out of the euro area and the European Union,” Provopoulos said at the Athens-based central bank’s annual general meeting today, according to an e-mailed transcript of his speech.

Prime Minister Lucas Papademos called elections for May 6 after his interim government carried out the biggest sovereign debt restructuring in history and secured a 130 billion-euro ($172 billion) bailout, the country’s second, from the EU and International Monetary Fund. While the rescue package has improved conditions for Greece, the country must work to meet the targets it sets, said Provopoulos, who is also a member of the European Central Bank’s governing council.

Greece’s economy will shrink by almost 5 percent this year, more than the 4.5 percent contraction the Bank of Greece (TELL) forecast in a report last month, Provopoulos said.

After the elections the new government must fully implement reforms including modernizing the administrative and tax systems, Provopoulos said. This year will be a landmark in forming a healthy banking system, which is needed for sustainable growth, he said.

Greece can achieve a primary surplus in 2013 and its economy is expected to start to recover at the end of that year, Provopoulos said. Unemployment this year will be more than 19 percent and inflation will average 1.2 percent and could fall below 0.5 percent next year, he said.

To contact the reporters on this story: Christos Ziotis in Athens at cziotis@bloomberg.net; Marcus Bensasson in Athens at mbensasson@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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