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Bank of Greece Monetary Policy Report 2017-2018

Bank of Greece Monetary Policy Report 2017-2018

The present Report on Monetary Policy is submitted by the Bank of Greece just after the successful completion of the fourth and final review of Greece’s economic adjustment programme. 20 August 2018 will mark the formal conclusion of the programme.

The sustainable return of the Greek State to the international sovereign bond markets will be the ultimate and definitive proof that the economy has overcome the crisis. Any other outcome would undermine the growth prospects and give rise to serious problems. As shown by the recent political crisis in Italy and the ensuing increase in Greek government bond yields, the Greek economy is still vulnerable, as a sharp increase in the cost of borrowing could derail both the economic recovery and debt servicing costs. Thus, in order to bolster market confidence, Greece must continue with the implementation of reforms, especially those concerning public administration and the strengthening of independent institutions. The Eurogroup decision of 21 June 2018 can be expected to contribute significantly on both fronts, i.e. Greece’s smooth return to the markets and the continuation of the reform effort, for the following reasons: First, it provides for enhanced post-programme surveillance and conditionality, to ensure that fiscal policy does not go off-track and that the reform effort is not abandoned. The European Institutions, together with the IMF, will monitor fiscal developments and progress with reforms and submit quarterly reports to the Eurogroup and the European Parliament. These reports will be made public, and the markets’ reaction will provide a rough indicator of actual progress or delay of reforms.