Greece has made progress in tackling its debt crisis but cannot afford to relax the pace of reforms, the International Monetary Fund's (IMF) senior representative in Greece told a banking conference on Tuesday.
"Greece is at a critical juncture and has no time to waste, now is not the time to slow down," IMF representative Bob Traa said. "Without further reforms the economy will rebalance through lower incomes."
He said the IMF and European Union would continue supporting Greece if it fully implements the programme of austerity it has planned in exchange for international funding. He stressed that the IMF opposed any restructuring of Greece's debt, which totals about 340 billion euros or about 150 percent of GDP.
"The fate of the Greek sovereign and the banking system remain closely intertwined. We do not favour a sovereign restructuring scenario," he said.
Economists fear that any Greek default would badly hurt banks, including those in Greece, which hold large amounts of bonds issued by the Athens government.
Greek banks are excluded from wholesale funding due to the country's crisis, and they rely on funding from the European Central Bank. But Traa said this had to end eventually.
"The crisis has put Greek banks under a great deal of stress. The ECB's exceptional support needs to be unwound over time," he said.
Banks should increase further their capital cushions. Larger capital cushions will help reduce markets' doubts.
"The public sector needs to exit the banking system, banking sector consolidation remains necessary," he added.
REUTERS
