work abroad ) requires the adoption of policies and reforms that encourage research, facilitate the diffusion of technology and boost entrepreneurship. policies include providing incentives to increase investment in research and development ( r & d ), strengthening the links between enterprises and the academic / research community by allowing universities to commercially exploit research results and ideas, and effectively using available eu funds. alongside structural reforms, and in order to facilitate the recovery through a normalization of financial conditions, as a matter of urgency the private debt overhang problem is addressed, since it is the greatest challenge the greek banking system and the greek economy faces. on the one hand, the high stock of npls reduces bank profitability and thus constrains the supply of credit, which primarily affects bank dependent smes. on the other hand, high npls delay corporate restructuring and thus thwart the ability of viable firms to finance new investment projects. according to research by the oecd, when more industry capital is sunk in non - viable ( “ zombie ” ) firms, the average viable firm undertakes less investment than otherwise. simulations by the oecd suggest that reducing the share of capital of non - viable firms in greece to the minimum across oecd countries would be associated with a gain in investment for a typical viable firm of 4. 7 %, improving productivity - enhancing capital reallocation in the greek economy. a series of legislative and regulatory reforms have already been enacted as part of the strategy to reduce npls, such as the operational targets of individual banks, revisions of the insolvency law and the gradual setup of a secondary market for npls. in addition, a number of new measures have already been legislated as prior actions of the second review, such as the introduction of an out - of - court workout framework, the revision of corporate insolvency law and the launch of a platform for electronic auctions. besides structural reforms and npl management, growth prospects can also be improved by acting on the fiscal policy front in two ways : first, a growth friendly fiscal policy mix can be adopted. the increased emphasis on taxation needs to be reduced in favour of policies that focus on restraining and restructuring non - productive spending and making more effective and efficient use of the public sector ’ s assets, especially land. second, the medium - term fiscal target can be reduced. according to estimates by the bank of greece, a lowering of the general government primary surplus target from 2021 onwards to 2 per cent of gdp, from the

hand diagram shows, in terms of gross financing needs, option 1 makes debt sustainable at the margin. hence, further debt relief measures are necessary in order to reduce gross financing needs significantly below the 20 % threshold and bring debt to a sustainable path. of course, were the interest smoothing accompanied by higher growth, as a consequence of lower primary surpluses, then the debt - to - gdp profile and gross financing needs would be more favourable. alternatively, if interest rate smoothing were to occur and the costs shared equally between greece and the esm, this would also lead to more favourable outcomes. 4. conclusions and final remarks the economic adjustment and the structural improvements during the past seven years have made greece more business friendly, have created significant investment opportunities, and have generated positive prospects for the greek economy. the realization of these positive prospects requires a consistent and determined implementation of the reform and privatization programme including tackling the private debt overhang problem. these enable the adoption of medium - term measures to ensure the sustainability of greek public debt, which will pave the way for the inclusion of greek government bonds in the ecb ’ s quantitative easing programme. such developments will set in motion a virtuous circle leading to greece ’ s return to international financial markets in 2018, the elimination of capital controls, the return to financial normality and the definite exit from the crisis. in order to capitalize on the macroeconomic and fiscal adjustment achieved so far, the institutions and our european partners must act now in a decisive and bold manner by specifying the medium - term debt relief measures for the sustainability of greece ’ s public debt, which, as was agreed last year, will go into effect at the end of the current programme. this must be done because the markets on which greece will need to borrow after the end of the programme in the summer of 2018 are demanding to know from now whether the debt will be sustainable or not. we are all aware of the fact that re - gaining access to financial markets after the end of the current programme is the only way forward. no one, neither the partners nor greece, are in any mood for another memorandum. sources : mcgowan a. andrews, m. d. and millot v. 2017 “ the walking dead : zombie firms and productivity performance in oecd countries ”. oecd economics department working papers no. 1372. stournaras, y. 2017 “ entrepreneurship, npl resolution policies and economic growth prospects in greece ” speech at an