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Greece will meet its very ambitious deficit-reduction goals and the country's government is prepared to take additional measures, Greek central bank governor George Provopoulos said in an interview with Bloomberg.
"The government has said already on several occasions that it will take any additional measures required in order to achieve its goal," Provopoulos, who is also a European Central Bank policy maker, was quoted as saying. "This gives me comfort. Even if some risks materialize -- like growth -- the government is prepared to take immediate corrective action."
He said the government's efforts would help Greece to resist further rating downgrades. Currently, the ECB accepts bonds rated BBB- by at least one rating agency as collateral for loans. In December, rating agencies Standard & Poor's and Fitch have cut Greece's credit rating to BBB+ .
According to the Bloomberg report, if Moody's Investor Service cuts Greek credit rating to the same level as the other major ratings companies did, Greek government bonds would no longer be eligible as collateral at the ECB. Such a move would make it difficult for the country to borrow. Earlier in February, the rating agency has warned Greece that the country faces a risk of further downgrade if the government fails to stick to its plans to cut debt.
ECB President Jean-Claude Trichet has already made it clear that the ECB will not change its norms for Greece or any other country in the currency bloc. In January, he said no government, no state can expect special treatment from the central bank.
Provopoulos criticized markets for overreacting on weak conditions. "They take advantage of the weak link to make profits," he said. "It's clear that there is a certain degree of overshooting. Given the high degree of uncertainty in the markets, one should not expect that the situation will normalize overnight."
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