Central bank: Greece on last chance - The Best from Greece

Greece has won a last chance to stay in the eurozone and needs an "all-out effort" to avoid being set back several decades, the central bank warned on Wednesday.

 

In a blunt snapshot of the country's precarious finances, the Bank of Greece said failure to hit fiscal targets, delays in implementing reforms and a sharp economic contraction had undercut its earlier assessments on the country's debt being sustainable.

 

"The country must avoid any further delays or deviations from targets at all costs; indeed, every possible effort needs to focus on overshooting the targets," the bank said in its interim monetary policy report.

 

"The present juncture is the most critical period in Greece's postwar history. What is at stake is whether the country is to remain within the euro area."

 

A euro zone bailout deal agreed in late October may well be the "last such opportunity" given to Greece, the bank warned, saying that Pasok and New Democracy, which have reluctantly agreed to back Papademos until early next year, must deepen cooperation.

 

"In order to consolidate confidence in the prospects of the economy, the convergence of political forces reflected in the formation of the new government must become more substantive," it said.

 

"There are two national objectives which we must now pursue at all costs: first to generate primary surpluses ... second, to speed up recovery," the central bank said.

 

It said the economy would contract by about 5.5 percent or more in 2011, with the recession continuing in 2012 when the economy would contract by around 2.8 percent.

 

Unemployment is expected to near 17 percent this year, and may exceed 18 percent next year, it said.

 

On the plus side, the report noted encouraging signs with respect to structural changes, indicating that in the midst of the crisis some underlying positive dynamics have been set in motion which, provided they continue, could lead to a significant restructuring of the economy over the medium term. (Reuters, AMNA)