Greek economy gradually returning to normality, Stournaras says

The Greek economy is gradually returning to normality, Bank of Greece governor Yannis Stournaras said on Tuesday. Speaking in Parliament, in the framework of a briefing of the Parliament's economic commission on the central bank's interim report on Monetary Policy 2019, Stournaras noted the need to deal "with any means" with the high rates of non-performing loans.

Referring to the "Hercules" asset protection scheme, the central banker said it was a very important step, which had worked in Italy and other countries, "but not sufficient, given the size of the problem".

"We need more means. We must throw our entire arsenal at NPLs," Stournaras said, adding that the advice he got from his counterparts facing a similar problem was that banks should look to the future and not use funds for problems of the past, such as NPLs. He stressed that "Hercules" was not the only method. There was also what the finance ministry was doing in terms of modernising the solvency framework and bankruptcy law.

"This is perhaps more important than 'Hercules' and any method used by the Bank of Greece," Stournaras said, adding that for the first time "I feel we have an integrated framework."

The central banker said he expected the Greek economy to grow by 2.5 pct this year and in 2021, after a 2.2 pct growth rate estimated in 2019. For primary surpluses, he said that based on Bank of Greece estimates "a reduction of official targets for primary surpluses in 2021 and 2022 to a more realistic level of around 2.2 pct (from 3.5 pct currently) would not affect the sustainability of public debt and could boost economic growth if combined with a timely implementation of reforms and privatisations." Commenting on an increase in deposits by 2.0 billion euros in December, to a total of 155 billion euros from 120 billion in July 2015, he said it was positive that money was returning to banks.

Stournaras noted that a decisive implementation of reforms and an accelerating reduction of NPLs will further enhance investors' confidence in Greece's economic prospects, counterbalancing the impact of adverse demographic developments.