A eurozone bailout deal set up last month to slash Greece’s huge debt by nearly a third is “probably the last chance” to reconstruct the country’s economy, the Greek central bank said on Wednesday.
“What is at stake is whether the country is to remain within the euro area,” the Bank of Greece said in its interim monetary policy report delivered to parliament.
“The new opportunity given to Greece is probably the last,” the Bank said i, adding: “New delays or slippage from targets must be avoided in every way possible.”
Eurozone leaders in late October set up a rescue plan to provide Athens with 100 billion euros ($135 billion) in loans and 30 billion euros to recapitalize its banks, coupled with a scheme for private lenders to write off 50 percent of Greek debt.
But the latest bailout, in addition to the timely release of pending loans from an EU-IMF package set up in 2010, have been held up by reform delays which the Bank castigated on Wednesday.
“Thus far, the pace and degree of policy implementation have failed to convince both the markets and the general public that Greece is on the road to achieving the goals set,” the central bank said.
“This ‘credibility deficit’ has its roots mainly in the fact that economic policy has often been conducted in a piecemeal manner, indecisively, with backtracking and delays, and following rather than leading developments,” it noted.
A new unity government under former European Central Bank deputy chief Lucas Papademos was set up in a power-sharing deal between three Greek parties earlier this month to ratify the eurozone deal.
Greece needs an eight-billion-euro ($11-billion) pay-out by December 15 to avoid bankruptcy but the conservative group in the three-party unity government has now refused to sign a reform pledge the EU says is needed for the funds.
The central bank urged te Greece’s new coalition government to restore confidence, fix the country's finances and kickstart growth.
“There are two national objectives which we must now pursue at all costs: first to generate primary surpluses... second, to speed up recovery,” the central bank said.
On Tuesday French President Nicholas Sarkozy embraced a German campaign for treaty change that could give European authorities intrusive powers to intervene in the national budgets of countries sharing the euro currency.
France and Germany will soon propose amendments to the European Union treaty in response to the bloc’s sovereign debt crisis, Sarkozy said .
EU paymaster Germany continues to block the two most widely-touted exit routes from a crisis that is shaking the world economy – massive ECB intervention to buy government bonds, or joint issuance of euro zone debt.