Greece must try to cut deficits and pursue economic reforms at a faster pace to persuade markets of its ability to dig out of its debt crisis, its central banker said in a newspaper interview published on Sunday.
The overborrowed country avoided default after securing 110 billion euros ($147 billion) of emergency funding from its euro zone peers and the International Monetary Fund in May. Its fiscal derailment sparked a sovereign debt crisis that is still shaking the euro.
Fiscal adjustment cannot be continued successfully if it is not coupled with a radical revamp of the state and a structural modernization of the economy, Bank of Greece
Also a governing council member of the European Central Bank, Provopoulos repeated his view that debt restructuring was not necessary, nor desirable and projected that by the end of 2011 Greece would be in a position to return to bond markets.
Conditions for Greece to return to markets include the successful implementation of the (EU/IMF/ECB) fiscal program, that is meeting fiscal and structural targets, and clear signs the economy's recovery is about to begin, he said.
It is possible for all this to happen by the end of next year.
He told the paper Greece should strive for a speedier pace of fiscal adjustment as beating targets set by its lenders would positively surprise markets, improving investors' views on its economic prospects.
Concerns that Greece could be forced to some type of debt restructuring after the three-year funding program ends have kept Greek bond yield spreads over German bonds near peak-crisis levels.
Paying back the bailout money in a span of two years after a three-year grace period, on top of hefty bond rollovers, would make the repayment plan too tough to service, many analysts have argued.
But Athens is likely to get a break. On Monday, Finance Minister George Papaconstantinou said a repayment extension would be given to Greece, meaning it would have until 2021 to pay back its 110 billion euro EU/IMF bailout money.
Policymakers hope the move will help dilute fears the country will restructure its debt and facilitate its return to bond markets. An easier-to-service repayment plan can give its 240 billion euro economy more time to return to growth.
There is a preliminary intention of the IMF and recently of the Eurogroup to discuss an extension of the repayment of the 110 billion euros of loans. Such a development would suggest defeat for all those who propagate debt restructuring scenarios, Provopoulos said. (Reporting by George Georgiopoulos; Editing by Ron Popeski)