The governor of Greece’s central bank has warned that political infighting over a critical final round of economic reforms is threatening to derail a long-awaited recovery in 2016.
On Friday, Yiannis Stournaras took the unusual step of prefacing the bank’s half-yearly report to parliament on monetary policy with an appeal to MPs on the need to maintain consensus on implementing Greece’s €86bn third bailout programme.
“Parliament must contribute to the legislative work of completing the programme, at this precise moment when most of the adjustment has been achieved and only a very small portion remains,” the report said.
“A basic condition for returning to economic normality is to maintain a climate of political stability and consensus.”
The Syriza-led coalition government faces a tough challenge to push through unpopular structural measures this month with a majority of only two seats in parliament.
These include an overhaul of the pension system, measures to tackle a large backlog of bad loans and complete the opening up of closed professions such as pharmacists and notaries to new entrants.
While the Bank of Greece governor normally keeps a distance from day-to-day politics the country’s travails this year, ranging from a default on an International Monetary Fund loan to the imposition of bank capital controls, required the central bank to take a more activist role.
Mr Stournaras, a former finance minister who helped avert an involuntary “Grexit” from the euro in 2012, is known to speak his mind to leaders across the political spectrum.
“The government is bleeding support and risks losing its majority when it attempts to enact pension reform,” said Mujtaba Rahman, EU practice head at Eurasia Group, a risk consultancy.
“Stournaras’s intervention is designed to focus minds, he wants to prevent Greek politics from becoming a big mess again next year.”
Greece’s budget for 2016 includes pension savings of €1bn, signalling across the board cuts for the country’s retirees as creditors are unwilling to accept a rise in employers’ contributions.
Following successful recapitalisations last month, Greece’s four biggest banks are preparing to form joint ventures with international asset recovery firms as soon as parliament approves new legislation licensing such partnerships.
Several hard left Syriza MPs are likely to defect on both issues, according to mainstream colleagues in the party.
All three pro-European opposition parties backed the latest rescue package in a vote last July, but the consensus failed to survive a snap election in September that brought Syriza back to power along with its rightwing coalition partner, Independent Greeks.
Meanwhile, the centre-right New Democracy party, the main opposition which had been expected to back the full bailout programme, has fallen into disarray over a long drawn-out leadership contest which may not be settled before the reform measures are voted on.
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