ATHENS (Reuters) – Greece's central bank chief warned the country against withdrawing its obligations to its lenders after completing the last of its three bailouts next week, saying the markets would give up.
The Governor of the Bank of Greece, Yannis Stournaras, speaking during the annual meeting of the Bank's shareholders in Athens, Greece February 26, 201
Yannis Stournaras told the Kathimerini newspaper on Sunday that a relapse Greece could put Greece at great risk, as it would be particularly vulnerable to financial turmoil in neighboring Turkey, Italy and beyond.
Athens will leave its last bailout on August 20, relying on bond markets to refinance its debt after a nearly nine-year debt crisis that has cut its economy by a quarter and forced it to painful austerity measures.
"If we go back to what we have agreed upon now or in the future, markets will leave us and we will no longer be able to refinance maturing loans on the basis of sustainable debt," said the Governor of Bank of Greece Yannis Stournaras of the newspaper.
Since the debt crisis exploded in early 2010, four consecutive governments have been struggling to keep bankruptcy in check, relying on the biggest bailout in economic history, more than 260 billion euros from the Greek Eurozone partners and the IMF.
Following the closure of the bond markets following a fiscal derailment, Greece formally applied for a rescue plan in April 2010, with the International Monetary Fund and its Eurozone partners providing € 110 billion in loans to avert a financial meltdown. Two more help packages followed.
Athens returned to the sovereign debt markets in July 2017 with a € 3.0 billion bond purchase, marking a milestone in the return to economic health.
"If there is strong international turbulence, either in our neighboring country of Italy or in Turkey or in the global economy, we will have difficulty opening markets as the sensitivity coefficient of Greek bonds remains high," Stournaras said.
But that, the second risk, is more manageable, he said, and should disappear as long as the markets are convinced that Greece is pursuing the right economic policy and keeping its promises.
"Let's not forget that the eurozone still has gaps in its architecture, and the banking union is not yet completed, so any shock will affect the weaker Member States more," he said.
Following the rescue package, Athens has committed to achieving ambitious primary budget surpluses of 3.5 percent of GDP by 2022 and 2.2 percent by 2060 – and without debt repayment.
French Finance Minister Bruno Le Maire told Greek newspaper To Vima that the goal of Greece's economic adjustment program is to make the country's return normal and that his rescue plan is a "great success".
But the agreed obligations must be respected.
"The commitments made by Greece for the future are clear, especially with regard to primary surpluses and the maintenance of reform momentum, and I have no doubt that they will be respected," the minister was quoted as saying.
Reporting by George Georgiopoulos; Edited by Andrew Heavens