A Greek debt restructuring is not needed and would be catastrophic for the country, hitting bank and pension fund assets and closing off access to capital markets, the head of its central bank said on Monday.
“Since last October, the Bank of Greece has clearly explained that such an option is neither necessary nor desirable,” Provopoulos said, speaking at the Bank of Greece’s annual shareholders meeting and presenting the bank’s 2010 report on the Greek economy.
“It is not necessary because we can achieve our goals if we properly implement our policies, and it is not desirable because it would have disastrous consequences for the access of the government and of Greek enterprises to international financial markets — as well as very negative effects on the assets of pension funds, banks and individuals holding Greek securities.”
The economic downturn is expected to drive unemployment above 15 percent while credit expansion to the private sector will stay negative this year, he said.
Provopoulos said lower unit labour costs would help competitiveness, with the country’s current account deficit shrinking below 9 percent of GDP, helped by an exports recovery and lower imports.
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