This week marks a historic time for Greece, the final country in the Eurozone to complete financial assistance after the sovereign debt crisis. After nearly nine years and three successive lending programmes, Greece has received a total of more than 260 billion euros from European creditors and the International Monetary Fund (IMF). They will be repaying 322 billion euros in debt for the next 42 years, marking the biggest bailout in economic history.
In a statement on August 20, European Stability Mechanism (ESM) chairman Mario Centeno said that today, “Greece can stand on its own feet. This was possible thanks to the extraordinary effort of the Greek people, the good cooperation with the current Greek government and the support of European partners through loans and debt relief”.
Loans over the past decade came with considerable conditions, like steep spending cuts and tax increases, causing anti-austerity protestors to parade the streets regularly. To pave the way for a more stable future, Greece has passed more than 15 economic reforms. Bailout exit terms were agreed to in June with extended maturities and softened interest rates. Thanks to the work that has been done, things are looking up after an incredibly difficult few years for leaders and citizens alike.
SYMBOL OF STRENGTH
Several signs highlight that Greece’s recovery is well under way. The heavy public deficit has now reduced to a budget surplus, and the economy grew 1.4 percent in 2017. In fact, this March marked the fifth straight quarter for economic expansion. Looking forward, the EU Commission forecasts a positive 1.9 percent growth for 2018 and a further 2.3 percent in 2019. Greek Prime Minister Alexis Tsipras hopes this strengthens consumer confidence in Greece, fosters trade relationships, and entices foreign direct investment. He aims to start selling Greek bonds on international financial markets again within two years.
Thanks to clever government stimuli, the startup and the domestic energy sectors are poised to reach new heights. Plus, tourism is booming. Tourism Minister Elena Kountoura estimated that the country will receive an extra two million international visitors this year, after three record-breaking years. Thankfully, the job market is improving in line with the financial market. Unemployment has slowly retreated to just under 20 percent. Though still the highest in the Eurozone, this is a huge improvement from its 28 percent height during the crisis. Capital controls were significantly eased in June, so Greek accountholders can withdraw more of their own money when they need.
Experts on all sides of the crisis can agree that the end of the bailout doesn’t mean that Greece is out of the water. Over the weekend, EU Economic Affairs Commissioner Pierre Moscovici emphasised that this is not “the end of the road for reform”. Greece’s Central Bank Governor, Yannis Stournaras, echoed the sentiment, saying “Greece still has a long way to go”. Lastly, European Commission Vice President Valdis Dombrovskis told CNBC “What matters now is to build on this achievement by sticking to sound fiscal and economic policies”.
The banks are still encumbered by bad loan portfolios and Greek households continue feel the stinging impact of austerity in day-to-day life. To achieve long-term sustainability and overcome enduring obstacles, Greece needs to take pragmatic political actions. Prime Minister Tsipras has promised to ease troubles with better social support, reduced business taxes, and higher wages. “Now we have the opportunity to proceed with targeted reliefs, to proceed with tax reduction in 2019 and to support the social state and welfare”, he said. Athens has also committed to attain primary budget surpluses of 3.5 percent of GDP until 2022 and 2.2 percent until 2060.
Just as Rome wasn’t built in a day, the Greek economy will need time to recover. However, it’s refreshing that national leaders are realistic about next steps and encouraging that proper procedures are already being put in place.
Lending has ceased, but payback is just beginning. Plus, part of the June agreement included a 24-billion-euro cash buffer. This should cover the country’s sovereign needs for the next 22 months, ensuring debt sustainability and facilitating the country’s return to capital markets. As such, ESM Managing Director Klaus Regling told Greek newspaper Ethnos that Greece will be tightly monitored as it exits the programme. The European Commission has specified that lenders will visit Athens every three months to assess progress.
European institutions are just as eager to commemorate Greece’s financial independence as its own leaders are. It moves the continent’s economy one step further from the global financial crisis. Regling expressed confidence that Greece can be a “success story” like Portugal, Spain, Ireland, and Cyprus as long as it continues down the path it is on. He encouraged the Greek people to celebrate the end of the bailout and shared that he will be indulging in “a good glass of ouzo” in their honour.