Greek debt cut deal paves way for recovery, cenbank says

ATHENS Mon Dec 3, 2012 6:33am EST

ATHENS Dec 3 (Reuters) - Greece's economy may start recovering faster than currently expected if the debt-laden nation quickly implements reforms it has agreed to under its bailout deal, the country's central bank said on Monday.

"A new start is now possible," the Bank of Greece said adding that the deal, which will shave about 40 billion euros off debt, "creates plausible expectations of a recovery of the Greek economy, perhaps even earlier than projected at present".

The Bank of Greece expects gross domestic product to shrink by slightly more than 6 percent this year and by up to 4.5 percent in 2013, bringing total economic contraction in 2008-2013 to 24 percent, it said in a monetary policy report.

"Positive growth will be witnessed in the course of 2014," the central bank said in the report.

But the debt cut deal agreed by the country's international lenders last week is creating hopes for a quicker recovery, providing that structural reforms to make the economy more competitive will be fully and quickly implemented, it said.

Helped by wage cuts, Greece is expected to recoup next year all the cost competitiveness it has lost in 2001-2009, the Bank of Greece said.

Greek banks, whose recapitalisation is a key element in the recovery effort, must complete the required capital increases by end-April, the Bank said. It said it expected just three large banks to remain in the country after consolidation in the sector is completed, down from six before the crisis.

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