Relief and worry as Greece emerges from austerity

Country recovering from crisis but bailouts have left economic scars

ATHENS - The youngest Greeks may not be able to remember what life was like beforehand: the third and last of the country's international bailouts comes to an end on Monday, and while Greece is faring better, it still bears the scars of eight years of austerity.

"Greece has managed to get back to its feet," Prime Minister Alexis Tsipras said in a statement earlier this month.

After Portugal, Ireland, Spain and Cyprus, Greece was the last eurozone member to benefit from an international bailout program in the fallout from the eurozone crisis.

In three successive programs - 2010, 2012 and 2015 - the European Union, the European Central Bank and the International Monetary Fund loaned debt-wracked Greece a total 289 billion euros ($330 billion).

But the economic reforms its creditors demanded in return almost brought the country to its knees, with a quarter of its gross domestic product evaporating over eight years and unemployment soaring to more than 27 percent.

The economy is now expanding and the jobless rate in May was back below 20 percent for the first time since 2011.

But "it would be arrogant to say that we did everything right in Greece", said Klaus Regling, head of the European Stability Mechanism, which is in charge of the current program, in a German magazine interview last week.

Nevertheless, many economists, such as Theodoros Stamatiou of Eurobank, argued that while bailout programs were "unavoidable" in a country lagging far behind in reforms, they were also too harsh.

But Toulouse University economics professor, Gabriel Colletis, is highly critical of the bailout programs and believes Greece could be facing "inevitable social conflagration".

Warning

Meanwhile, Greece's central bank Governor Yannis Stournaras warned the country not to backtrack on commitments to its lenders after it exits the last of its three bailouts this week, saying markets would abandon it.

He told Sunday's Kathimerini newspaper any backpedaling could leave Greece facing major risks at a time when it would be particularly vulnerable to financial turbulence in neighboring Turkey, Italy and beyond.

"If we backtrack on what we have agreed, now or in the future, the markets will abandon us and we will not be able to refinance maturing loans on sustainable-debt terms," he said.

The key question remains, however: whether, at 180 percent of GDP - and the highest in the EU - Greece's debt remains sustainable.

The IMF, for one, is not convinced and, as a result, was only willing to take on observer status in the third bailout program.

Athens argues that - as a result of the extended maturities for the loans decided by eurozone finance ministers in June - its annual financing needs will remain below the critical threshold of the 20 percent of GDP.

"Not only is Greece's debt not unsustainable, it is in fact highly sustainable", one official insisted.

The government estimates that its financing needs are now covered until the end of 2022, opening up room for it to plan its return to the capital markets.

"The euro-area crisis is now long over... August 20 is the epilogue", ESM cief Regling told Der Spiegel.

Nevertheless, the improving economic indicators are not yet translating into tangible improvements in the day-to-day lives of Greeks.

Economics professor Vettas believes it is "imperative" to generate "very strong growth" in the coming years. Otherwise, "households that are in a very weak position due to 10 years of cumulative recession will continue to suffer".

Afp - Reuters

(China Daily 08/20/2018 page11)