esm ) for the creation of a cash buffer, have significantly improved the sustainability of public debt in the medium term. however, given that greek government bonds are still rated at below investment grade and in the absence of access to a precautionary credit line, greek bonds remained ineligible for the ecb ’ s quantitative easing programme ( qe ) that would have helped strengthen economic activity and further improve the credit standing of greek bonds. greek government bond yields are still high and volatile. they are sensitive to potential disturbances in international financial markets and are influenced by increased uncertainty regarding the maintenance of reform momentum. in fact, the yield spread of greek 10 - year government bonds remains elevated, at just under 400 basis points, despite the recent decline in yields. this persistent phenomenon is a matter that needs our serious attention. 2019 will be another challenging year for the greek economy. in the external 1 / 8 bis central bankers'speeches environment, the slowdown of world trade amid rising protectionism could dampen export growth. on the domestic front, increased uncertainty about the continuation of reforms coupled with credit constraints are weighing on investment. high taxation in recent years has taken a toll on the growth dynamics of the economy, the competitiveness of greek enterprises and confidence, and has caused tax fatigue leading to a contraction of the tax base and an exhaustion of the taxpaying capacity. in 2019, the growth momentum of the greek economy is expected to continue at the same pace as in 2018, despite a further slowdown of growth rates worldwide and, especially, in the euro area. however, this forecast is conditional upon the resolute pursuit of structural reforms, the implementation of the privatisation programme without delays and the strengthening of productive investment. these conditions are essential to completing a successful transition to a sustainable and extroverted growth model. more specifically, according to bank of greece forecasts, gdp at constant prices is expected to grow by 1. 9 % in 2019, driven mainly by exports and private consumption. however, in order to make up for the huge losses suffered by the greek economy in terms of output and employment during the long period of recession, higher growth rates are needed. the low level of investment, insufficient domestic savings, the high – albeit declining – stock of non - performing loans, the large loss of physical and human capital during the recession, as well as the apparently low expectations regarding medium - to - long term potential output growth as a result of adverse demographic trends and the sluggish adoption of

conducted, including greece ’ s four systemic banks, in order to assess bank resilience to hypothetical shocks over the period 2018 – 2020. the stress test exercise identified no capital shortfall in any of the participating greek banks. non - performing loans the high stock of non - performing loans ( npls ) on banks ’ balance sheets remains the major challenge for greek banks and a serious constraint on their lending capacity. banks are using the 3 / 8 bis central bankers'speeches options provided by the improved legal and regulatory framework, which has removed significant institutional and administrative impediments to npl reduction. these important reforms have begun to bear fruit, as indicated by the reduction of the stock of npls to €81. 8 billion at enddecember 2018 ( or 45. 4 % of total loans ), down from a peak of €107. 2 billion in march 2016. however, the npl stock is still excessively high. at the end of march 2019, greek banks submitted to the ecb and the bank of greece their revised operational targets for npl reduction, incorporating any recent changes in their strategies since september 2018 and any revised macroeconomic assumptions. according to the previous submission in september 2018, the banks aimed to reduce the aggregate stock of npls to €34. 1 billion by end - 2021, bringing the npl ratio down to 21. 2 % of total loans. with the new submission, the banks aim to reduce the npl ratio even further, to slightly below 20 %. despite the significant reduction, this ratio is still roughly six times the eu28 average, meaning that the npl reduction needs to be further accelerated. the successful resolution of the npl problem is one of the major challenges facing the greek economy in its effort to achieve sustainable growth, given that bank lending is the main source of financing for non - financial corporations ( nfcs ), owing to their structure and size, and for households. freeing the banks of the npl burden would help reduce the financial risks and funding costs faced by banks, thereby improving their internal capital generation capacity on a sustainable basis and enabling them to resume their intermediation role. in addition, alleviating the npl burden would strengthen banks ’ resilience and shock - absorbing capacity against potential future shocks ; support operating profitability and put the conditions in place for a gradual increase in loan supply and a decrease in lending rates to enterprises and households, thereby enabling the smooth financing of the real economy. the