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Historical Review 

WAR, RECONSTRUCTION AND THE CURRENCY COMMITTEE

During the World War II, the Governor of the Bank followed the Greek Government into exile. The Bank' s gold reserves were transferred first to South Africa and then to London. After the end of the War the economy in general, and the financial system in particular, were in a highly disorganized state. In 1945 the cost of living rose twenty-fold, industrial production stood at one-third of pre-war levels, and bank deposits in real terms stood at one-thirtieth of the levels recorded in 1939. In view of this crisis situation, it was deemed necessary for close cooperation to be established between the central bank and the Government. Such cooperation was institutionalized by the formation in 1946 of the Currency Committee.
The Committee comprised the Minister of National Economy as chairman, four other Ministers and the Governor of the Bank of Greece. It was responsible for the formulation of monetary, credit and foreign exchange policy. The position of the Bank of Greece was prominent, since the Bank was responsible for designing and proposing policy measures which were, as a rule, adopted by the Committee

THE ABOLITION OF THE CURRENCY COMMITTEE AND THE ENTRY OF THE DRACHMA IN E.R.M. OF THE E.M.S.

In 1982 the Currency Committee was abolished and most of its responsibilities were transferred to the Bank of Greece (Law 1266 of 1982). Nonetheless the complicated system of direct controls, though frequently modified, essentially remained in place until the late 1980s. Under that scheme, a two-tier approach was adopted, according to which the Government was responsible for formulating overall economic policy while the Bank of Greece implemented monetary and exchange rate policy within the limits set by its Statutes. The role of the Bank of Greece changed again in the late 1980s following moves to deregulate the financial system. The Bank of Greece at present controls liquidity indirectly - mainly by open market operations and by changing official interest rates and reserve requirements. The monetary policy framework was modified in 1998 following the participation of the drachma in the ERM and the priority given to exchange rate stability within this Mechanism. The exchange rate of the drachma is the intermediate target of monetary policy, while monetary and credit aggregates are monitored as indicators.

As of 1994 the Bank of Greece no longer provides finance in any form to the public sector. Another reform of long-standing arrangements took place in June 1994. In the past, the Bank of Greece accepted deposit liabilities from public organizations (mainly social security funds) and used these funds to finance the acquisition of government securities which were held on the Bank' s own account. Following the prohibition of monetary financing, the Bank of Greece currently acts only as the manager of the portfolio of government securities directly owned by public organizations.


THE LAW FOR THE INDEPENDENCE OF THE BANK OF GREECE

The Statute of the Bank of Greece was amended by the decisions of the General Meeting of Shareholders of the Bank of Greece held on 22.12.1997 and 25.4.2000, ratified by Laws 2609/98 and 2832/00 respectively, to meet the requirements of the Treaty of the European Union. Price stability is now explicitly stated as the Bank' s primary objective. Moreover, the independence of the Bank is safeguarded and accountability to the Parliament is ensured.

A new body has been established at the Bank of Greece, the Monetary Policy Council, responsible for monetary policy and exchange rate policy. As from the adoption of the euro as the currency of Greece, the Bank of Greece performs its tasks as an integral part of the European System of Central Banks in accordance with the guidelines and instructions of the European Central Bank.