Greek central bank calls debt restructuring “catastrophic”
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 has said.
Under increasing pressure from markets speculating that a restructuring is on the cards, Athens has repeatedly denied it plans to cut a deal with its international lenders.
EU and IMF officials have also issued denials, but yield spreads of Greek government bonds over German bunds have continued to hover around record highs.
“The Bank of Greece has explained with clarity since last October that such a (restructuring) option is not necessary, nor desirable,” Bank of Greece Governor George Provopoulos said in a report to shareholders.
“It would have catastrophic consequences.”
A finance ministry official earlier denied a Greek media report the country had already requested restructuring talks with the EU and IMF.
Provopoulos, also a European Central Bank Governing Council member, projected gross domestic product (GDP) will contract by three per cent or slightly more this year as the country’s €230bn (£283bn) economy stays in recession for a third straight year.
The economic downturn is expected to drive unemployment above 15 per cent 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 nine per cent of GDP, helped by an exports recovery and lower imports.
Consumer inflation is projected to slow from last year and average out at 3.25 per cent.