“Europe’s success in dealing with Greece is Europe’s success in dealing with itself,” European Central Bank (ECB) Executive Board Member Benoît Cœuré said in Athens on Monday, while failure to support Greece will also be a failure to support itself. Coeure was addressing the 27th annual Greek Economy Conference “Greece and the Global Disruptive Environment: A look into the future” organised by the American-Hellenic Chamber of Commerce in Athens.
The ECB banker noted the general concern about the sustainability of Greece’s debt and said the ECB was looking forward to a solution that could reassure markets and ultimately lead to the success of the programme by restoring market access for Greece before the programme ends in 2018:
“All stakeholders in the Greek adjustment programme realise there are serious concerns for its sustainability. As you are all aware a discussion is currently ongoing in the Eurogroup on the short-term, medium-term and long-term measures needed to secure the sustainability of Greek debt. We are looking forward to a solution that can reassure markets, restore confidence in the sustainability of the Greek debt in an uncertain political environment and allow the full involvement of the IMF in the programme,” he said.
He noted that Greece had made a lot of progress in reforms but also that a lot more remained to be done, with the focus now turned on resolving the problem with non-performing loans (NPLs) and the very high NPLs ratio, which had reached 49 pct in Greece’s banks in June 2016. Reducing this was a key precondition for restoring and for achieving sustained growth, he said.
Coeure noted that reforms in this direction have already been passed, such as legislation allowing banks to deal with ‘strategic defaulters’ and measures that legalise NPL servicing for all loan categories. Among others, he said the ECB and the Bank of Greece had recently agreed with banks on national and financial targets to significantly reduced their stocks and exposures to NPLs.
Apart from improving frameworks, he said that the Greek authorities also need to fully implement measures to strengthen the judicial system, thereby substantially shortening legal proceedings.
“This requirement is not restricted to Greece. Experience has shown that any debt resolution requires a strong legal framework,” he said, pointing out that creditors in Greece have to wait longer for a case to reach conclusion than in any other European country apart from Slovakia. “It takes an average of three and a half years, compared to six months in Ireland, which is the EU’s best performer,” he pointed out.
Regarding the inclusion of Greek bonds in the ECB’s Public Sector Purchase Programme (PSPP), better known as quantitative easing, Coeure made it clear that this was a decision made by the ECB governing council, which he stressed made its decisions in full independence.
“Programme developments, and in particular the debt sustainability assessment of the institutions, are important input, and the deliverables. The governing council will base its assessments also on internal analysis….before making its final decision, he said, adding that other important factors will be a successful programme review and a successful conclusion to debt measures talks.
He also stressed that the Greek government’s perceived commitment to reforms was among the criteria that will be key to a successful conclusion to the programme.
“It is essential that Greek authorities continue to show commitment to the goals and measures taken under the programme….[leading to confidence] that reforms will not be reversed but in fact be strengthened after the programme,” he noted.
The success of the programme “ultimately rests on its capacity to reestablish conditions of growth that is sustained and sustainable, Coeure added.