Athens News Agency: News in English, 09-10-20

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From: The Athens News Agency at <http://www.ana.gr/>

CONTENTS

[01] BoG on Monetary Policy

[01] BoG on Monetary Policy

The central bank, in its interim report, recommended the implementation of a realistic policy to return the country to fiscal discipline, cutting its structural fiscal deficit by 5.0 pct in the next two years (2010-2011) and a gradual reduction of the deficit by 1.5-2.0 pct annually later.

Fiscal consolidation must be based mainly on cutting public spending and not on rising revenues. More analytically, the central bank recommended that fiscal consolidation must cover spending by two-thirds and revenues by one-third. Efforts to combating tax evasion should focus on a reorganisation of the tax collect mechanism, which could result to lower tax rates in the country.

Provopoulos stressed that by cutting public overspending, the public sector could save 1.2-2.2 pct annually, or more than 30 billion euros over a decade and expressed his concern over the high "twin" deficits in the country (fiscal and external payments balance), noting that countries facing this combination of deficits and debts were in great danger of suffering a harder and slower exit from the economic crisis with a prolonged period of low growth rates. The central banker said it was urgent that a medium-term plan must be adopted including bold but necessary reforms.

The central bank forecasts that Greek GDP would shrink by 1.0 pct this year, or more, resulting to a 1.5 pct cut in employment and a jump in the unemployment rate to 9.0 pct. The inflation rate was projected at 1.0-1.3 pct, while the country's current accounts deficit would fall to 11.0 pct of GDP.

The Bank of Greece recommends a rapid implementation of structural reforms to boost the economy's production capacity and employment. Structural reforms should focus on steadily improving productivity and competitiveness, raising employment levels and creating the preconditions for a permanent and final restructuring of public finances, facilitating creation of new enterprises, strengthening exports, attracting foreign direct investments and creating job positions in the private sector. Also, reforms must effectively support a long-term sustainable growth, respecting and protecting the environment and strengthening social cohesion.

Structural policies should focus on a restructuring of the public sector and the improvement of its effectiveness, supporting the productive base through investments. The central bank's report stressed that actions were needed to create the necessary conditions for the start-up of new enterprises or expanding existing ones. Finally, the central bank recommended bold steps towards reforming the country's pension system as the country was about to face an acute structural problem from an ageing population in the long-term.

Caption: ANA-MPA file photo of Bank of Greece governor George Provopoulos

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