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Failing to complete bank recapitalization in 2015 will entail deposit haircut

28 September 2015 / 19:09:06  GRReporter
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The Greek economy will report growth in the second half of 2016 if the monitoring of the rescue programme is positive. This will pave the way to sovereign debt relief and bank recapitalization. Greek Minister of Finance Efklidis Tsakalotos made the statements in an interview with the economic publication Financial Times.

He indicates that the representatives of creditors will carry out the first monitoring at the end of November. According to Tsakalotos, the Greek government will have to proceed to the dynamic implementation of the reforms envisaged in the memorandum in October, because this will allow the granting of the sub-tranche of 3 billion euro, as agreed in August.

"It is essential to complete banks’ recapitalization before the end of the year," says Tsakalotos and the newspaper adds that if this does not happen, the new EU legislation is likely to be implemented, which provides for haircuts in deposits exceeding 100,000 euro in one bank account.

The Greek Minister of Finance adds that if the monitoring result is good, the government will endeavour to achieve a government debt relief before Christmas. "It is extremely important to obtain some debt relief. By the second quarter of 2016, if we get a positive review, bank recapitalization and debt relief, I don't see any reason why there shouldn't be a return to growth."

The newspaper notes that the monitoring in late November will represent a delay of almost a month compared to the schedule agreed in August, when the Greek government and its creditors in the euro zone agreed on a bailout to the amount of 86 billion euro.

The delay, however, was inevitable due to the announcement of early parliamentary elections on 20 September, adds the Financial Times.

In his interview Efklidis Tsakalotos states that the new government, unlike the previous ones, including the previous government of SYRIZA, will make serious efforts to combat corruption among the wealthy oligarchs. "It will be a central aspect of our policies, which will determine the success of the government because it is the only way for the Greeks to accept the difficult measures that show that we are all in the same boat."

Tsakalotos stresses that he has no illusions about the opposition that the government will face while implementing the reforms required by creditors, namely in the tax system, commodity and labour markets and in the inefficient public administration.

Another risk for the reforms is the possible disputes over the cancellation of tax breaks and subsidies for Greek farmers and over the future of the Public Power Corporation, whose trade union opposes creditors’ requirement for the liberalization of the electricity market, the newspaper notes.

"There are many interest groups, some of which have good targets, others not so good, that will oppose the reforms," ​​says the Minister in response. "In the current government, we are more organized than we used to be."

"Mr. Tsakalotos is perfectly open about his leftist views," notes the newspaper. "Politically speaking, I am one of the most leftwing ministers in the government. However, I want to do things like the recapitalization of the banks. I can do things that are not particularly leftwing too," he says.

 

Tags: EconomyGreek Minister of Finance Efklidis TsakalotosBank recapitalizationSovereign debt reliefReformsRepresentatives of creditors
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