Former Finance Minister Named Greece's Central Bank Governor

Appointment of Yannis Stournaras Is Seen as Ensuring Continuity of Overhaul Drive

The Wall Street Journal

ATHENS—Former Greek Finance Minister Yannis Stournaras was named the country's new central bank governor, a move that ensures continuity in Greece's overhaul drive.

In a statement, the general council of the Bank of Greece TELL.AT +0.60%  said it had unanimously recommended Mr. Stournaras to the position, which must now be approved by Greece's government but which is seen as a formality.

The announcement was expected following this week's cabinet reshuffle and comes after months of lobbying by Mr. Stournaras, 57 years old, who was eager to leave government and take over the helm at the central bank. He will succeed Gov. George Provopoulos when his six-year term ends next week.

As head of the Bank of Greece, Mr. Stournaras will also sit on the governing council of the European Central Bank, which sets monetary policy for the 18 countries in the euro zone.

During his two years as finance minister, Mr. Stournaras pushed through many of the difficult changes demanded by Greece's creditors in exchange for two successive multibillion-euro bailouts. He has also produced Greece's first primary budget surplus—excluding debt payments—in a decade, and issued the country's first long-term bond this year after a four-year hiatus from international debt markets.

German Finance Minister Wolfgang Schäuble expressed confidence Wednesday that Greece would continue on its reform path following the cabinet reshuffle, and assured Athens that Berlin is willing to provide additional aid if needed.

"The change in the Greek finance ministry position doesn't mean there will be a change in policy," said Mr. Schäuble following a meeting with Mr. Stournaras.

Mr. Schäuble lauded Greece's reform efforts and said the country has so far met all requirements for receiving previous multi-billion-euro aid packages from international creditors.

Mr. Stournaras said Greece still has a funding gap, but he is optimistic it will be able to plug this without external aid.

In his new job, Mr. Stournaras's biggest challenge will be overseeing a local banking sector that is struggling with the fallout of Greece's protracted debt crisis as it wrestles with a mountain of bad loans built up during the crisis.

Greece's banks have been pummeled by the country's six-year recession, a steep decline in local property prices, deposit outflows and an unprecedented €200 billion ($271 billion) sovereign-debt restructuring in early 2012.

Last year, the country's four big banks were recapitalized with the help of a European Union loan, but together they still hold some €70 billion ($95 billion) in bad loans, a sum equal to a third of Greece's annual gross domestic product. Restructuring those loans, say bankers, will take months if not years, hampering the banks' ability to help finance a recovery.

In a report issued by the International Monetary Fund Tuesday, it warned that the staggering level of bad loans—equal to about one-third of the banking sector's loan portfolio—was the biggest threat facing Greece's economy and its hopes for a return to growth. The IMF also warned that the banks would likely require additional capital, something that will be determined later this year when the ECB performs a long-awaited stress test of the euro zone's major banks.

During his tenure, Mr. Provopoulos, 63, was widely credited with helping steer Greece's banking sector through the crisis, as well as engineering an unprecedented consolidation in the industry that saw more than a dozen banks—including several loss making, state-owned lenders—either sold off, shut down or restructured.

In a statement, Prime Minister Antonis Samaras thanked Mr. Provopoulos for his service to the country as it endured "the most difficult period in its post war" history.

Greece's main opposition, the radical left Syriza party, has warned the government not to appoint Mr. Stournaras to the central bank. The party, which opposes the terms of the country's bailouts and has seen its popularity soar as a result of the crisis, views the former finance minister as a proponent of the austerity policies that pushed Greece into deep recession.

—Andrea Thomas in Berlin contributed to this article.

Write to Nektaria Stamouli at nektaria.stamouli@wsj.com