Domestic saving is insufficient to meet the investment needs of the Greek economy; hence, it is crucial to attract foreign direct investment by cutting red tape and accelerating the privatisation programme.
In order to attract the capital needed to finance these investments, and achieve macro-economic equilibrium, a higher interest rate is needed. The central bank must take this upward movement of interest rates into account when formulating monetary policy. Before this new equilibrium is achieved, the economy goes through a complex adjustment process.