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capital required to restart domestic investment. Apart from the inadequate volume of credit supply, impaired balance sheets do impact on lending cost with loan rates being higher in Greece compared to other euro area states. Significant differences continue to exist between Greek banks and banks in other euro area states concerning asset quality, CET1 ratios, quality of capital, NPEs ratio (Greek government expects it to be reduced in 20% by 2021), loan to deposit ratio (78.4% in the second-quarter of 2018), and access of firms to loans. Unavoidably, the challenge is to reshuffle NPEs and to strengthen bank’s governance so as to impose stringent risk controls and to attain high credit scoring. One should also underline that one of the basic indexes concerning companies which is the Athens composite share price index is also far below its early crisis levels. More specifically, the price of the index on 30th November of 2018 was only 630.23 relative to 1459.81 in November 24, 2010 (the price of the index was 740.20 on November 30, 2017). This downward trend has direct negative results not only on capitalization of the companies but also on taxation revenues and on the ability of Greek companies to find capital in international markets at low interest rates.
Evaluating Progress in Structural Reforms Structural reforms have been essential to all three adjustment programs in Greece. More open markets have been considered crucial for economic opportunities, curtailment of rent seeking, and oligopolistic behavior (Varga et al. 2013; Vogel 2014; Bourles et al. 2010; Canton et al. 2014). Reforms are also essential in the internal devaluation thesis that underlines the necessity of rationalization of both incomes and prices in an economy undergoing fiscal adjustment. However, in the first year of third adjustment program implementation, there was confusion over which structural conditions have been critical for growth drivers and which ones served only for macroeconomic stabilization. Structural reforms were not intertwined and had been applied disorderly and in an ad hoc way. Critical importance has not been attributed to the sequence or combination of structural reforms but rather to legislation. However, how one combines reforms in different sectors is crucial for the growth drivers. For example, ad hoc privatization without adequate product/services deregulation or without significant reforms in the sector where privatization occurs does not reduce prices and does not
