benoit cœure : greece - progress achieved and challenges ahead keynote speech by mr benoit cœure, member of the executive board of the european central bank, at the american - hellenic chamber of commerce conference on " greece and the global disruptive environment : a look into the future ", athens, 28 november 2016. * * * ladies and gentlemen, thank you for inviting me to this conference. i am grateful for this opportunity to share with you the ecb ’ s perspective on the third economic adjustment programme for greece. this conference aims to be “ a look into the future ”, and i will indeed try to provide that by considering the challenges and prospects ahead. before doing so, let me briefly recall the circumstances in which the third european stability mechanism programme for greece was negotiated, as this remains key to understanding where we are now. against this backdrop, i will review the progress made in the third programme and discuss the way forward. i will mainly focus on financial issues, as i believe this is where the ecb ’ s perspective is of particular relevance. challenges for greece at the start of the third programme what were the challenges facing greece in summer 2015 when the programme was negotiated? after a severe and long recession, which started back in 2009, the long - awaited rebound of the greek economy finally got under way in the second half of 2014. but renewed uncertainty and the lack of any prospect of continued financial assistance led to a worsening of the economic environment and of sovereign creditworthiness in early 2015. this in turn had a severe impact on an already severely weakened financial sector. between december 2014 and june 2015, deposit outflows amounted to more than a quarter of total deposits. lack of adherence to the second programme barred the ecb, under its rules, from waiving its minimum credit requirements and accepting greek government - linked securities as collateral in its monetary policy operations. nevertheless, the eurosystem provided the liquidity necessary for the greek economy to function, with adequate safeguards against monetary financing of the government. as a result, central bank funding rose from €56 billion to over €125 billion, more than two - thirds of greece ’ s gross domestic product. amid mounting uncertainty, bank holidays and capital controls were introduced in late june 2015, which eased immediate liquidity pressures in the banking sector. in august 2015 an agreement was reached on a third programme. one of the immediate priorities at that time was to regain depositor and market confidence in the greek banking system. to

at the end of august, to support domestic demand growth and to keep inflation near the target of 2 per cent over the medium term. and in our press release of 28 august we indicated that, given the continuing uncertainties in the global economy, particularly the timing and strength of the recovery in investment in the united states, and the uncertainty surrounding domestic demand growth in canada, we would continue to monitor developments closely. last week ’ s tragic developments in the united states, and their reverberations around the world, obviously bring with them further uncertainty with respect to the timing and extent of a rebound in economic activity. although it is too early to fully assess the likely consequences for our economy, the bank ’ s initial efforts involve trying to estimate the direct effects of disruption in sectors such as transportation, finance, and tourism. the terrorist attacks on the united states will also affect consumer and business confidence worldwide, including here in canada. it is precisely for this reason that we moved promptly this week to lower interest rates by one - half of one percentage point. this action, which leaves short - term interest rates 2 1 / 4 percentage points lower than at the beginning of the year, aims to provide further support for economic growth in canada. the bank also recognizes that a key factor in preserving the confidence of canadians in the prospects of our economy is a financial system that continues to function effectively. that is why, as i said earlier, we took steps, together with the other g - 7 central banks, to inject liquidity into the financial system to support its smooth functioning in the wake of the tragic events in the united states. we stand ready to do so whenever necessary. but it is encouraging that at this juncture, with each passing day, we seem to be moving back to a more normal state of affairs in the financial system. right now, it is difficult to look too far ahead in terms of the economic implications for canada of last week ’ s events. nevertheless, economic growth in the third quarter will likely be close to zero or slightly negative, and we will continue to feel the adverse effects into the fourth quarter. with the economic slack that is opening up, we continue to see core inflation falling to about 2 per cent by year - end. we also project that total cpi inflation will drop to close to 2 per cent over the same period, assuming that energy prices remain near current levels. there is a risk that world oil prices could rise sharply, depending on the fallout from last week ’