By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on Tuesday said Greece must maintain fiscal discipline, protect its banking system and raise productivity through investment and reforms to preserve the gains made since its debt crisis.

Stournaras, who heads the Bank of Greece, told Athens Voice that Greece had overcome its crisis-era problem only if it continued “to do the right thing.”

For Greece, there had to be political consensus on three priorities, he said: continued fiscal responsibility, protection of the banking system, and investment and reforms to increase productivity.

The first priority was for Greece to keep producing primary surpluses so that it could service interest payments and reduce still-high public debt, he said.

“At least this year, at the end of the year, I think we will no longer be the country with the largest debt as a percentage of GDP in Europe,” he said.

The second priority was to protect the banking system “as the apple of our eye,” Stournaras said.

Banks needed to accept deposits safely and lend safely to businesses, he said. “An economy without banks and liquidity, it will not have a high growth rate,” he said.

The third priority was to raise productivity, which did not mean longer hours but better equipment and organization, he said.

Higher productivity would allow Greece to raise wages and converge toward European prosperity without recreating macroeconomic imbalances, he said.

The pre-crisis level of Greek prosperity had not been sustainable because it rested on a public-sector deficit of 15% of GDP and a current-account deficit of 14% of GDP, he said.

“It wasn't sustainable, it was a bubble,” he said.

Stournaras said the Greek crisis had differed from those of some other European countries because it had started in the public sector rather than the banks.

“The Greek crisis was not a banking crisis, it was a public sector crisis,” he said.

On Europe, Stournaras said the euro needed stronger architecture to play a more global role and compete with the dollar on equal terms.

Completing Banking Union would require a pan-European deposit guarantee scheme, he said.

Europe also needed the Savings and Investments Union, he said, arguing that a company wanting to operate across the EU should not need authorization in 27 countries.

These steps did not require treaty change, Stournaras said.

“The Banking Union, the Savings and Investment Union, does not need to amend the Treaty,” he said.

Asked about the possibility Greece could have left the euro during the crisis, Stournaras said such an outcome would have been an “absolute disaster.”

Leaving the euro would not have been a simple devaluation, he said. Deposits would have lost around 80% of their value against foreign currencies and foreign goods, contracts with foreign counterparties would have had to be renegotiated, and banks and businesses would have faced severe balance-sheet problems, he said.

“If we were to leave the euro, it would be a very big disaster,” he said.

On inflation, Stournaras said central banks did not seek to maximize profits and were responsible for preserving price stability.

“The central bank wants inflation to be at 2%,” he said.

Inflation undermined the foundations of society and made people poorer without them realizing it, he said.