in fact, extending maturities and reducing interest rates on the outstanding debt may improve the growth outlook of the greek economy and, hence, provide further support to public debt sustainability. bank of greece staff estimates that a permanent reduction of the interest payments – togdp ratio by 0. 6 percentage points can lead to an increase in real gdp by a total of 4 – 7 % over the next ten years, depending on the fiscal policy mix. this corresponds to a boost in real gdp growth of ½ percentage point per year on average for a ten - year period. the economic rationale that debt relief of this form can provide a “ growth dividend ” is that reducing the debt servicing costs can free up resources which can be used for investment, job creation and economic growth. the growth dividend is more pronounced if such debt relief is combined with a credible expenditure based fiscal consolidation programme. however, broadening the tax base and fighting tax evasion should not be expected to weigh negatively on growth performance. alternative options could also be considered to improve the sustainability of greece ’ s public debt. however, they might be more contentious as they likely involve some costs for euro area partners. bis central bankers ’ speeches concluding remarks concluding, the immediate challenges of the government are to : consolidate fiscal achievements, further specify and agree with the institutions the full list of specific reforms by the end of april 2015, implement the agreed reforms in order to allow for a speedy and successful conclusion of the current evaluation procedure. this would allow greek banks to regain full access to the ecb ’ s monetary operations, alleviating liquidity pressures, reducing the funding costs for the greek financial system and the greek economy as a whole, and exploiting the accomodating monetary policy applied by the ecb in the eurozone. the conclusion of the current evaluation procedure by the end of june 2015 will pave the way for a final agreement on the follow up arrangement between greece and the eu partners. this should involve a credible medium term fiscal and structural reform programme, backed up by a reliable credit line, as well as further debt relief along the lines of the november 2012 eurogroup decision. these actions are prerequisites for strengthening both economic growth and employment and for greece ’ s return to international financial markets, thus, signaling the definitive exit from the crisis. the new greek government has a unique opportunity to implement bold structural reforms, which would be backed by a large majority of political forces in the country. this is in my view a historical

the identification of the most appropriate workout solutions and, where possible, ease the burden on cooperating borrowers facing temporary difficulties in servicing their debt. apart from effective npl management, the consolidation of positive growth rates will obviously contribute significantly to improving the npl recovery rate, by generating a self - reinforcing process of npl reduction as the debt servicing capacity of households and businesses increases. ( h ) securing the smooth financing of the greek economy. the capacity of the banking system to finance the real economy does not depend on capital adequacy alone, but also on its liquidity. following the recent capital increases, greek banks have a sufficient capital base, but their liquidity has come under considerable strain, especially in the last few months. the stock of outstanding deposits is significantly lower today than it was before the crisis, plus the banks still have no access to money markets. after the recent decision by the ecb ’ s governing council ( 4 february 2015 ) to exclude securities issued or guaranteed by the hellenic republic from the list of collateral acceptable for open market operations, the value of eligible securities held in greek bank portfolios dropped significantly. greek banks can still obtain liquidity from the bank of greece through the emergency liquidity assistance ( ela ) mechanism, but, as entailed by the rules of the eurosystem, at substantially higher cost. hence, there is need for greece to fulfil its recent agreement with our partners as soon as possible, so that this decision can soon be revoked. * * * in the past few years, we have covered some very rough ground at high cost to the whole of greek society. if we can address the relatively few issues still pending and complete the first phase of the effort launched in 2010, we will then be able to move on to the next phase, in which the growth potential of the economy will be considerably enhanced. rapid growth will enable the implementation of more effective policies for restoring social cohesion which has been eroded by the crisis. the priorities of these bis central bankers ’ speeches policies should be geared towards reducing unemployment and correcting inequality in the distribution of the burden from the adjustment effort. for this to happen, we must remain firmly committed to the country ’ s european course and fulfil the recently concluded agreement as soon as possible. bis central bankers ’ speeches