ATHENS (Reuters) - Greece’s central bank governor warned on Friday that “uncertainty” could hobble the country’s economic recovery if the government and its lenders do not conclude a bailout review soon, urging both sides to be “flexible” in talks.
Governor Yannis Stournaras said the bank’s 2.5 percent growth forecast for this year, lower than a 2.7 percent growth expansion projected by the government and its lenders, hinged on a conclusion of the review, which has dragged on for months.
“The Bank of Greece is of the view that, if our partners, the institutions and the Greek government all show flexibility and pragmatism, substantial progress can be achieved very soon,” Stournaras said in a speech at the annual shareholders’ meeting.
“But if negotiations drag on with no agreement in sight, then Greece will enter in a new cycle of uncertainty, deteriorating relations with our partners and creditors, and a backslide of the economy into stagnation.”
Greece and its official creditors agreed on Monday to further reforms in a quid-pro-quo to ease a logjam in the talks, which has held up additional funding.
Inspectors from the EU Commission; the Europe Union’s rescue fund, the ESM; the International Monetary Fund and the ECB are due to return to Athens next week to agree the reforms Athens must adopt to convince the IMF to fund the bailout.
Speaking in parliament on Friday, Prime Minister Alexis Tsipras told lawmakers that relations with the EU and the IMF had turned a page after seven years of international bailouts, saying lenders accept that austerity should end.
“I think there was a turnaround of all sides ... in the direction of overcoming austerity and to now focus on a change to the policy mix that Greece must follow,” Tsipras said.
He also said the expected the review to be concluded by March 20.
Stournaras said recovery this year hinged on a “timely and effective” implementation of the bailout and would lead to the inclusion of Greek paper in the ECB’s bond-buying scheme, helping the country’s plans to return to market financing.
“The successful completion of the second review is imperative,” Stournaras said.
“It will bring about a decline in borrowing costs for the real economy ... and restore depositor confidence allowing a further easing or full lifting of capital controls. It will improve the confidence of global markets and investors in the economy’s growth prospects.”
Writing by Michele Kambas, editing by Larry King