yannis stournaras : reforming and rebalancing the economy in greece introduction by mr yannis stournaras, governor of the bank of greece, to the presentation of the european bank for reconstruction and development ( ebrd ) transition report 2016 - 2017, athens, 25 january 2017. * * * it gives me great pleasure to welcome artur radziwill, director for country economics and policy of the ebrd, and his colleagues to the bank of greece. as you are aware, the bank of greece has on several occasions provided the venue for the presentation of the transition report and for many other ebrd initiatives. it this vein, we endorse the activity and positive role of the ebrd in greece, in particular during the last couple of years following the establishment of its local office. its commitment to the country sends a strong signal to private sector investors that greece is serious about reforming and rebalancing its economy. the 2016 transition report is of particular relevance to greece, since it deals exclusively with the important subject of inequality and economic inclusion. the report focuses on a number of key aspects of inclusive growth : the distribution of income ; the impact that the transition process has had on people ’ s well - being and happiness ; equality of opportunity ; and financial inclusion. these aspects are topical for greece. the economic adjustment programmes that have been implemented since 2010 in greece aimed at addressing the twin deficits ( i. e. fiscal and current account ) and structural weaknesses from which the economy has suffered for decades. the achievements so far have been remarkable : unprecedented fiscal consolidation. over the period 2013 – 16, the primary deficit was eliminated and, for the first time since 2001, general government primary surpluses were recorded. moreover, the improvement in the “ structural ” primary budget balance by more than 17 percentage points of potential gdp between 2009 and 2016 means that, taking the impact of the economic cycle into account, the fiscal adjustment in greece was more than double the one achieved in other member states under similar programmes. a recouping of the sizeable cumulative loss in labour cost competitiveness vis - a - vis our trading partners between 2000 and 2009. an elimination of the external deficit, which exceeded 15 % of gdp in 2008. an increase in the share of exports from 19 % of gdp in 2009 to 32 % today. structural reforms, notably in the labour market, but also in the product markets and in public administration. recapitalisation

3. 5 per cent that is envisaged now, would be consistent with debt sustainability if combined with some mild debt relief measures and structural reforms to raise potential growth. the easing of the primary surplus targets, together with the implementation of the agreed structural reforms, would put the necessary conditions in place for a gradual lowering of tax rates, with positive multiplier effects on economic growth. c. ensuring debt sustainability a final condition for return to financial markets is to ensure debt sustainability. the ratio of general government debt to gdp is still high. in 2008 that ratio stood at around 110 %. it is now around 179 %. the debt path has been strongly affected by the so - called snowball effect – that arises from interest rates on debt being much higher than growth. indeed, from 2010 to 2016, the snowball effect is estimated at some 82 % of gdp. but whatever the causes of its rise, it is crucial that it is put on a sustainable path. in the context of the above proposals in the area of fiscal policy making, the bank of greece recently made specific proposals to ensure the sustainability and manageability of public debt. the short - term measures decided at the eurogroup meeting of december 5, 2016 are a positive step and are expected to reduce public debt as a ratio of gdp by 20 percentage points by 2060. however, to ensure the sustainability of public debt going forward, additional medium - term measures are necessary. when the debt - to - gdp ratio is above 100 %, measures that reduce interest payments on debt can improve the ratio quicker than a rise in the primary balance. slide 4 the interest burden of greek public debt is low until 2021 but increases substantially thereafter because of payments of deferred interest on the efsf loans and interest on new debt issued in financial markets. a simulation performed by the bank of greece defers interest on efsf loans, extending their weighted average maturity by 8. 5 years – option 1 in the right - hand diagram. slide 5 if, in addition to interest deferment, we assume a primary surplus target of 3. 5 percent in 2018 - 2020 and a reduction to 2 percent thereafter, we can see from the left - hand diagram that the debt path is close to that where a primary surplus of 3. 5 per cent for 10 years is assumed. this exercise is indicative of how admittedly mild debt relief measures can have significant effects on the debt profile with no cost for the creditors. however, as the right -