this means that we cannot pause, and certainly not change direction, in our attempt to maintain a low deficit. raising the deficit is not an option, especially because our public spending level is already one of the highest, if not the highest, in the world. our estimate is that in the current year, 2001, our ratio of public spending to gdp amounts to 54 %, compared to an average of 42 % in 20 of the oecd countries, where all of the individual countries ratio are lower than ours. so what can the government do, given the current slowdown, to help the economy get out of the recession? the only viable option is to change the composition of spending so that growth - enhancing expenditures will get priority. government investment in infrastructure, for example, ought to get precedence over government programs to support those who are not working. this does not mean that these programs should be scrapped altogether. but it does mean that they should be refocused. the question should not be how the state can help those who are not working to maintain a modest standard of living, but rather how the state can help them join the labor force. another example, often quoted, relates to the efficiency of our public education programs. international comparisons indicate that, in some instances, we get less for our money, compared with other countries. furthermore, we still grapple with the question whether, and to what extent, there is room for private sharing of educational expenses - not necessarily to save public money but, for example, to focus more on education in development towns. these are only some aspects of fiscal discipline or, as it is sometimes called, fiscal consolidation. they serve to illustrate why it seems, sometimes, easier to bypass the need to be more efficient, and just increase overall government spending and the deficit. * * * a good reason to resist the temptation to give up fiscal discipline is its implications for financial markets : - the first, and most immediate, effect of increased deficit is an increase in the interest rate on government instruments to finance the deficit. this has already started to take place in the last few months. the outcome holds not only for the increase in public debt, but also for that part of the debt that needs recycling every year. interest payments take already some 15 % of the government current resources, and are larger than the education budget and very much larger than government investments. - the increased interest on government instruments reverberates to private ones. this is the second effect. we

be distressed - assets managers. 6 / 7 bis central bankers'speeches moreover, one of the main channels through which high npls can have a feedback effect on the macroeconomic environment is through their impact on bank lending capacity to the economy. npls can weigh negatively on the supply of credit by locking in bank capital and funding in the financing of non - productive assets. in addition, high npls distort credit allocation, as non - viable firms are kept artificially alive in an attempt by banks to avoid or delay loss recognition on these loans at the expense of firms that are competitive and have better growth prospects. this brings us to the necessity of restoring the intermediation role of banks in an economy that is suffering from a significant savings – desirable investment gap as well as continuous deleveraging. it is well documented that a credit - less recovery is weaker, mainly because the lack of bank credit affects investment. yet such a recovery can hardly be tolerated given other drags on potential output growth, such as the high public debt ratio and the negative demographic trends. the improvement in the liquidity position of banks on the back of gradually increasing deposits, enhanced access to the secured interbank market and a handful of covered bond and securitization transactions is encouraging. crucially, the elimination of the recourse to ela will allow banks to design and implement credible medium - term credit expansion plans. against this backdrop, financing of non - financial corporates for working capital or investment projects would be given priority. that said it is also important to restore the access of the household sector to credit after a protracted period of almost a complete standstill. that brings us to the challenge for bank managers to come up with a sustainable business model for greek banks. in the midst of the crisis, greek banks were obliged to reduce substantially their international operations as well as non - core domestic activities, as part of their restructuring plans agreed with dg competition in the context of state aid support approval. as a result, domestic traditional banking activities contribute the bulk of their operating profitability and will continue to do so in the foreseeable future. undoubtedly, banks face a challenging, to say the least, operating environment in greece, while some of their best customers, i. e. large extrovert non - financial corporates, can tap the international bond markets directly at relatively favourable terms. against this backdrop, a digitalization drive coupled with other cost containment efforts can further improve banks ’ efficiency, which