Greece’s political leaders should continue cooperating to ensure the country meets the targets set out under its second aid package from the European Union and International Monetary Fund, the nation’s central bank said.
“The most crucial parameter, which will define its success, is consistent implementation,” the Athens-based Bank of Greece said in an e-mailed copy of its 2011-2012 Monetary Policy report released today. “The fastest possible return of the economy to GDP growth rates is key to meeting the targets set out” in the 130 billion-euro ($171 billion) new aid plan.
Greece completed the exchange of 177.2 billion euros of Greek-law bonds last week, part of the world’s largest sovereign-debt restructuring, and agreed to 3.2 billion euros of additional spending cuts this year to secure the new loans. Prime Minister Lucas Papademos’s interim government, formed in November, was charged with securing approval for the package, which provides funds to recapitalize Greek banks, before general elections.
The government, backed by the two biggest parliamentary groups, provided stability that halted Greece’s “catastrophic” course, the central bank said. “This development proved in the most convincing way the importance of consensus and cooperation of the political powers in light of the historically unprecedented challenges we face.”
The new aid package and the “exceptionally positive” participation rate in the debt swap give Greece an opportunity to fix imbalances as a euro-area member and get the economy back to sustainable growth, the central bank said in the report.
Greece’s debt reached 165 percent of gross domestic product last year and its economy shrank 6.9 percent, its fourth year of recession, European Commission estimates released last week showed. The economy is expected to contract 4.5 percent this year and 0.5 percent in 2013, while unemployment is seen at 19 percent this year, the central bank said today.
Greece will need to adopt additional measures, with an emphasis on spending cuts, to achieve sustainable reduction of its fiscal deficit and public debt and speed-up the implementation of structural reforms, the central bank said.