ATHENS (Reuters) - Greece faces a challenging task to win the trust of financial markets now it has emerged from bailout programs, European Central bank board member Benoit Coeure told a Greek newspaper.
Greece exited the biggest bailout in economic history on Aug. 20 and ECB policy makers have said that the end of its third bailout program is not the finishing line but a milestone on a long road to recovery.
“Make no mistake, the burden of gaining the trust of markets and depositors has now fully shifted to the Greek government. Don’t expect building trust among investors to be easier than convincing the institutions,” Coeure told daily Kathimerini in an interview published on Wednesday.
Coeure told the paper the ECB will stay involved in the enhanced surveillance of Greece post-bailout but will focus on financial and macro-critical issues including financial sector stability, macroeconomic projections and fiscal targets.
He said a top policy priority for Greece’s banking sector should be to reduce the burden of sour debt and with the legislative framework already in place, continued implementation will be key.
Impaired loans or so-called non-performing exposures (NPEs) are the biggest challenge facing the Greek banking sector. They amounted to 95.7 billion or 43.1 percent of banks’ overall loan book at the end of 2017.
“Reducing NPLs (non-performing loans) is certainly top of the list from our point of view. Only stronger and healthier banks can provide the necessary basis for an increase in the supply of credit that can support economic growth,” he said.
Coeure told the paper that the capital position of Greek banks strengthened during the bailout program and is now quantitatively at higher levels than in other countries affected by the crisis.
“However, the quality of Greek banks’ capital is lower than elsewhere in Europe, consisting partly of deferred tax assets, and there is still a large amount of non-performing exposures (NPE) as a legacy of the crisis,” Coeure said.
He said that the ECB’s lifting of a waiver that allowed it to accept sub-investment grade Greek government bonds as collateral for financing after the country exited the bailout program is a “non-event” for banks.
“Greek banks have broadened their market financing and successfully shifted parts of their financing from monetary policy operations onto the interbank repo market. The significant increase in deposits during the summer months helped as well,” Coeure told the paper.
Reporting by George Georgiopoulos; Editing by Andrew Heavens