In a speech given on occasion of the 2012 Spring Membership Meeting of the Institute of International Finance in Copenhagen on 7 June, Lucas Papademos addresses issues relevant to the pre-election debate in Greece and the decisions to be taken immediately after the elections. Among the issues discussed are the risks associated with two potential vicious circles. The first being a vicious circle of weaker economic activity, more fiscal consolidation measures and resulting deeper recession. Second, the risk of a further decline in confidence adversely affecting economic activity, bank system liquidity, credit expansion, and reducing public support for the second bail-out program for Greece. Papademos argues that the perceived trade-off between "austerity" and "growth-promoting" policies can be reconciled. The main policy message is for Greece to "stay the course" and implement effectively, supplement appropriately and amend reasonably the new economic adjustment program.
White Paper No. 09, 2012