of the first review of the 3rd mou, if possible yesterday! then this could pave the way for the following benign steps, a sort of roadmap : • reinstatement of the waiver : that will release at least €5 billion from the current ela programme ( at 1. 5 % interest rate ) to be channelled towards standard monetary policy operations ( mro ) with zero interest charge, contributing to greek banks ’ profitability. • debt relief negotiations from either of the two options on the table : the esm plan or the imf plan. • the country then will be getting the “ certificate ” of the dsa, which will open the door to credit rating upgrades for greek sovereign bonds, bringing closer the date of greece ’ s inclusion into the ecb ’ s qe programme which will help towards a lowering of spreads for ggbs and the gradual return to international capital markets. secondly, an equal focus should be given to short - and medium - term growth prospects of the economy because there is evidence that by now recession in greece has the characteristics of hysteresis, namely a persistent and long - lasting recession ( and this is the long - run downside risk for the greek economy ). let me explain. the initial, non - permanent ( cyclical ) effects of the recession have shifted into permanent, structural problems ( lack of new physical capital due to disinvestment, depreciation of human capital due to both the skills deterioration of the longterm unemployed and the brain drain ). to give you only one figure : in 2007, investment was 27 % of gdp, whereas last year it was 12 % of gdp, the lowest level since 1960. so very few would disagree that right now the country needs an investment shock within a new growth paradigm centred around the expansion of its export - oriented output base, aiming at internationally tradable goods and services with high value added. bis central bankers ’ speeches

would correct itself through the economy ’ s automatic fiscal stabilisers, provided that growthenhancing measures supplement fiscal consolidation { this is my ft article, january 2012 }. secondly, there is a certain misperception in the mous about how reforms would work in the economy. i identify three grey areas here : firstly, reforms take time to unlock their growth potential and their results are also country - specific. a recent study by the oecd indicates that the above time period may extend to five years or more. secondly, structural reforms work better and quicker when there is investment to take advantage of them and, more bis central bankers ’ speeches generally, demand in the economy, because the more the recession lingers on, the harder it is to get positive results by implementing structural reforms { see my wsj article, march 2012 }. an illustrative example from the recent greek experience is the liberalisation in the freight transport industry in 2012. despite the opening of the market which resulted in reduced freight transport charges, the industry did not grow as analysts had expected because of the recession and lack of demand in the economy. by contrast, the removal of cabotage restrictions in 2013 had a particularly positive impact on cruise - ship tourism in following years, because of strong foreign demand in this particular sector. last but not least, as regards the sequencing of reforms, the appropriate strategy is : product market reforms come first and are then followed by labour market reforms ( whereas in the case of greek mous the exact opposite took place ). { in my latest two - volume book “ the double sovereign debt – banking crisis ”, 2015 ) i explain all the above in more detail. } 2. on how to revive the greek economy in response to paul volcker ’ s earlier remark that greece is a relatively small country and it wouldn ’ t be difficult to achieve a turnaround of its economy, i would like to say a few words. indeed, greece is a small country, only accounting for 1. 76 % of the euro area ’ s gdp [ and just 0. 38 % of the world ’ s gdp ]. my own personal view on how to revive the greek economy from its current stalemate is the following : firstly, it is imperative to stabilise expectations as soon as possible. given the directionless economic governance of last year and the resultant huge cost of the economy ’ s backtracking ( capital controls, etc. ), this could be achieved through the timely completion