Greek central bank chief says delay in bailout review threatens recovery

ATHENS (Reuters) - Greece's central bank governor warned on Wednesday that further delay in completing a first review of the country's bailout reforms could imperil a projected economic recovery in the second half of this year.

Bank of Greece Chief Yannis Stournaras has repeatedly underlined the need to implement reforms the leftist-led government agreed with official lenders under a third bailout clinched last July, saying any backtracking entailed risks.

Reforming Greece's ailing pension system is a prerequisite for the conclusion of the review, which is expected to open the way for debt relief talks, but the government is facing protests from farmers and other groups of workers.

"Every hour that we fail to complete the review weighs on confidence," Stournaras told the Greek parliament's economic affairs committee. "It (completion) should have been done before the end of last year."

"Social and political consensus is very important, Cyprus is the closest example. It exited the bailout faster than us," he added, stressing the need to persuade Greeks of the need for further sacrifice to get the economy back on an even keel.

Eurogroup head Djisselbloem said last month the conclusion of the first review of Greek reforms could take months rather than weeks. There are also concerns in Europe that the review might be derailed by domestic politics. Prime Minister Alexis Tsipras has a parliamentary majority of just three.

A positive assessment of Greece's reforms by its official lenders would boost confidence, improve the banking system's liquidity through the return of deposits and pave the way for a further loosening of capital controls.

BIG DIVIDEND

Stournaras told deputies the Bank of Greece would pay the state a large dividend of around 700 million euros on the profits it has made from providing billions of euros of emergency funding to the country's banks.

Greece's banks will not need another recapitalization this year or in the future if they manage well their load of non-performing loans, he added.

The Bank of Greece, which supervises a 9.5 billion euro portfolio of 14 bad banks after a wave a consolidation, has so far managed to recover 800 million euros of low quality loans.

"This shows that banks could at least recover 10 percent out of the 100 billion euros of non-performing loans," he said.

Asked about the impact of Europe's migrant crisis on the Greek economy, Stournaras said transit countries such as Greece bear substantial costs while final-destination countries such as Germany enjoy long-term benefits from an expanded workforce.

Athens is speeding up the completion of five migrant centers and two relocation camps after the European Commission accused it of neglecting its duties as a member of Europe's passport-free Schengen zone

Stournaras said Greece would suffer significantly in terms of goods transportation and tourism if the EU followed up on its threats to expel the country from Schengen.

(Reporting by George Georgiopoulos; Editing by Gareth Jones)