An effective judicial system can contribute to faster economic growth, the Governor of the Bank of Greece said, Giannis Stournaras, Speaking at the OPED’s scientific day at the Ministry of Justice, he referred to the decisive role of justice in the functioning of the economy.

According to Mr. Sturnarathis can be achieved through three basal channelsincreased investment, improve productivity and easier access to funding.

At the same time, he pointed out that Greece is one of the countries with the lowest effectiveness of a judicial system in the European Union (EU), giving this, inter alia, that dispute resolution procedures are much more time consuming than the average time required to resolve disputes in the EU.

“The experience of the last fifteen years has shown that the low efficiency of the judicial system and the inability to do so in the field of insolvency have a serious impact on both the stability of the financial system and on the funding of the real economy,” Mr Stournaras said, adding that the improvement of the effectiveness of the Greek economy.

“International experience shows that countries with faster and more effective insolvency procedures are achieving higher debt recovery rates and shorter business return to activity,” he said.

Finally, he referred to the actions of the Bank of Greece to protect the traders.

In detail, Mr. Stournara’s speech

Ladies and gentlemen,

I would like to thank the Ministry of Justice and the OPC for the honorary invitation. Today’s debate highlights the decisive role of the effective functioning of justice in enhancing citizens’ confidence in institutions, ensuring a competitive business environment and in the proper funding of the real economy. In my speech I will present: 1) The mechanisms through which justice affects the economy and 2) the Bank of Greece’s initiatives to strengthen transparency in transactions and protecting the traders.

1. Justice, economy and growth

In recent years, the quality of institutions in general has been increasingly concerned with academic literature and policy discussions internationally, as a decisive factor in the economic prosperity of a nation. Among the institutions related to the competitiveness of an economy, the system of justice is particularly important, as it depends on the enforcement of the law and therefore the protection of their investors and their rights.

An effective judicial system can contribute to faster economic growth through three basic channels:

a) Through the increase in investment, as the ability to execute contracts, which is a characteristic element, limits business and political uncertainty and at the same time increases the expected returns.
(b) Through the improvement of productivity, as it facilitates the entry and exit of businesses from the market, thereby enhancing business dynamism and helping to increase their size and innovation.
(c) Through easier access to funding, as faster settlement of non -performing loans enhances the supply of credit and improves the terms of funding of businesses and households by banks. ;

However, despite the recent progress, Greece is one of the countries with the lowest effectiveness of a judicial system in the European Union (EU).

In particular, the Rule of Law Indicators of the World Bank and the World Justice Project, which are closely monitored by international organizations and evaluation agencies, rank Greece low in relation to other developed economies. This is due to, inter alia, that dispute resolution processes are much more time -consuming than the average time required to resolve disputes in the EU.

This is attributed to factors that affect the side of both demand and supply. On the part of the demand, it is noted that during the debt crisis many cases accumulated due to the large number of bankruptcies and household bankruptcies, while out -of -court dispute resolution mechanisms were very limited. On the offer, Greece is characterized by a high proportion of judges per capita compared to the EU average (3rd position), but at the same time it has a very small proportion of administrative auxiliary staff. As a result, judges in Greece are involved in administrative and regional work, which absorbs them time from their main work. At the same time, the limited use of digital media and the lack of financial knowledge of judges significantly delay the completion of the proceedings, especially in cases related to the trial of insolvency cases.

The experience of the last fifteen years has shown that the low -profitability of the judicial system and the inability of a rapid hearing of insolvency cases have a serious impact on both the stability of the financial system and on the funding of the real economy. Delays in judicial proceedings involve extension of pending, as a significant number of cases remain open for years and bind funds that cannot be reintegrated to the economy. At the same time, as the bankruptcy of banking businesses but also the liquidation of collateral and in general the enforcement procedures, the value of real estate or other securities decreases, reducing the possibility of recovery for banks. Businesses and households that could come back to sustainable regulation lose this opportunity as their debts swell and their financial position is deteriorating, while banks see their balance sheets burden and their ability to grant new loans to limit. Thus, private debt delay is delayed, thereby undermining consumption, investment expenditure and, ultimately, growth.

The new Code of Civil Procedure, coupled with the development of out -of -court dispute resolution mechanisms, addresses to some extent the above problems and will help to accelerate procedures. Particularly positive interventions are a) the adoption of digital tools that accelerate the procedures and reduce uncertainty, (b) the reorganization of the Courts of First Instance through the new judicial charter, with the aim of more rational distribution of resources and the better service of citizens and businesses, as well as c) Social environment.
Improving the effectiveness of the judicial system is expected to bring significant benefits to the Greek economy, which is characterized by small business sizes, low private investment in the private sector, high stock of non -performing loans outside the banking system and low rates of non -economically healthy businesses. International experience shows that countries with faster and more effective insolvency procedures achieve higher debt recovery rates and a shorter business return to activity.

In addition, accelerating justice will help to increase allocative efficiency, as the most productive and dynamic businesses in each sector will be able to attract most of the labor and capital and less productive businesses will be out of the market. This will boost overall productivity and accelerate the medium -term growth rates.

2. Actions of the Bank of Greece to protect the traders

But beyond the highlight of the overall check to accelerate the dispute resolution process, as a means of contributing to economic development, the Bank of Greece, within the specific framework of its responsibilities, contributes decisively to the creation of a favorable environment for the economy and the sustainable development or by decisions. In this context, let me mention, completely briefly in the Bank of Greece’s actions to protect the traders.

The protection of traders is, as is well known, a foundation for the creation of a safety climate and maintaining confidence in the financial system. The Bank of Greece, as responsible for ensuring the transparency of banking transactions, has significantly enhanced the information framework for the traders, both through a regulatory nature of initiatives and in the exercise of its supervisory project. For the bank, proper information is a prerequisite for making rational decisions in the general financial sector.

Specifically, the Bank of Greece has already adopted in 2002, by an act of Commander, a compulsory framework for information to the traders on the terms governing their transactions with credit and financial institutions. This framework determines the information that at least at least must be provided by banks both generally and by category of banking product (deposits, lending, cards, etc.). More recently, the Bank has issued two new Executive Acts (PEPs), according to which she publishes information and information on her website on a periodic basis on her website and information rates on deposits, mortgage and consumer interest rates, and consumer interest rates, Comparable, updated and easily accessible information to traders.

In addition, as early as 2013 and in a revised edition in 2021, the Bank of Greece, with a view to the general protection of borrowers and the safeguarding of fair and transparent procedures for the management of non -performing loans, has introduced the Banking Code. The Code, which sets a framework for cooperation between banks and borrowers to find sustainable and personalized regulation solutions, is in the process of reviewing to make it more modern and more efficient.
Finally, with regard to the protection of insured persons under the supervision of the insurance market, the Bank of Greece oversees the implementation of the institutional framework governing the distribution of insurance products. This framework implies for insurance companies their obligation to provide proper pre -contractual information to their prospective customers when choosing the insurance product, to adhere to the rules of ethical behavior in the promotion of insurance contracts, as well as specific claims when planning their insurance products so that insured persons can enjoy the insured.

3. Epilogue

The experience of recent years teaches us that timely and predictable administration of justice enhances citizens’ confidence in institutions and creates the conditions for increased investment and sustainable development. The Bank of Greece, for its part, within the limits of its responsibilities, ensures the protection of traders and actively and institutionally contribute to the transparency and credibility of the financial system, which are decisive factors for economic growth.