Tags: Greece | Chance | euro

Greece Faces Last Chance to Stay in Euro, Central Bank Says

Wednesday, 23 Nov 2011 06:44 AM

Greece has one last chance to reshape its economy and stay in the euro region as it goes through “a new, exceptionally critical phase,” the Bank of Greece said.

A 130 billion-euro ($174 billion) bailout approved by European Union leaders on Oct. 26 “represents a milestone on the adjustment path of the Greek economy,” the bank said today in its interim monetary policy report. Greece’s debt- sustainability dynamics have changed in the past year, putting the country in its most critical situation since World War II.

Prime Minister Lucas Papademos, a former vice president of the European Central Bank and governor of the Bank of Greece, must implement budget measures to get the rescue money from the EU and the International Monetary Fund. That will also mean arranging a Greek debt swap early next year that aims to slice 100 billion euros off the debt burden of 360 billion euros.

“The new opportunity provided to Greece under the agreement may well be the last opportunity,” the Athens-based bank said in the e-mailed report. “The country must avoid any further delays and deviations from targets at all costs.”

Signatures Needed

German Chancellor Angela Merkel said there will no payout of the next loan tranche from last year’s Greek bailout unless the leaders of all parties supporting the country’s interim government sign a document pledging adherence to austerity and other measures.

“We need not only the signature of the Greek prime minister, but also the signatures of all supporting parties,” she said today in a speech to parliament in Berlin.

On Nov. 22, European Commission President Jose Barroso accused Antonis Samaras, head of Greece’s New Democracy party, of playing “political games” for refusing to commit in writing. Luxembourg Prime Minister Jean-Claude Juncker yesterday set a one-week deadline for Samaras to sign.

The ratio of non-performing loans in the Greek banking industry was 12.8 percent as of June 30, up from 10.5 percent at the end of 2010, according to the report.

The Bank of Greece forecasts gross domestic product to drop 5.5 percent in 2011 and 2.8 percent next year before returning to growth in 2013, forecasts in line with the 2012 budget submitted to parliament on Nov. 18.

Unemployment may exceed 18 percent next year after coming close to 17 percent in 2011, the central bank said.

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Greece has one last chance to reshape its economy and stay in the euro region as it goes through a new, exceptionally critical phase, the Bank of Greece said. A 130 billion-euro ($174 billion) bailout approved by European Union leaders on Oct. 26 represents a milestone...
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2011-44-23
Wednesday, 23 Nov 2011 06:44 AM
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