Greece’s central bank urges Athens to act on reforms

The Bank of Greece has urged the country’s left-wing government to carry out bailout reforms and privatizations agreed with the country’s lenders but warned that the emphasis on tax increases posed the biggest threat to the struggling economy.

In its annual monetary report published Wednesday, the central bank said the greatest risk to the Greek economy this year comes from an excessive emphasis on tax increases aimed at meeting austerity demands made by international creditors–eurozone countries and the International Monetary Fund–in exchange for further rescue funding.

“Furthermore, any delay in the implementation of reforms and privatizations envisaged in the [bailout] program would dampen economic growth, thereby refueling uncertainty, undermining confidence and weakening the prospects of a definitive exit from the crisis,” it said.

The outcome of a British referendum on whether the country should remain in the European Union and a possible worsening of the refugee crisis were among other economic risks cited by the central bank in its report.

Greece’s economy has been reeling from a seven-year slump, which has seen its economy contract by more than a quarter over the period. The Bank of Greece forecasts the economy will contract further this year by 0.3%.

The central bank also weighed in on the debate on Greece’s debt relief, siding with arguments put forth by the IMF.

It said few countries have managed to secure a primary budget surplus of 3.5% of gross domestic product, as is being demanded of Greece for 2018, and that this target should be lowered to 2% to enable a faster return to sustainable growth.

Source: MarketWatch