On January 7th, Greek Prime Minister Kyriakos Mitsotakis announced that the IMF will be leaving the country. The fund is one of a trifecta of lenders, including the European Commission and the European Central Bank, that provided more than 290 billion euros to Greece between 2010 and 2018, in what is possibly the biggest national bailout to date.
Greece still owes the IMF around 9 billion euros and is subject to post-bailout scrutiny by its creditor. But the Prime Minister places more value on the symbolism of this move than the physical, noting that Athens is still within the IMF’s “surveillance framework”.
Mitsotakis has also indicated interest in lowering the country’s required primary surplus target in 2021. In a discussion with IMF Managing Director Kristalina Georgieva, Mitsotakis said, “I believe the time has come for this discussion with our partners in the eurozone. We are a credible government, we are implementing reforms, we are in a low interest rate environment, our borrowing costs are lower than those of Italy. There is no reason to be limited by these high primary surpluses.”
Despite technicalities, Greek government members are hailing the IMF’s departure as a positive step. Some have called it “the end of the crisis in the country”, and Mitsotakis is unfailingly optimistic: “We look forward to a whole new chapter in our relationship, a relationship of positive cooperation,” he said.
This positive cooperation with the fund is a relatively new experience for Greece, after a long-standing, contentious relationship that began with the first bailout in May of 2010. In exchange for funding, the former Prime Minister and socialist party leader George Papandreou, committed the country to harsh austerity measures that included tax hikes and spending cuts. Especially in the early years, it was not uncommon to see anti-troika (IMF) graffiti around the city as jobs were lost, and citizens had their salaries slashed.
In 2015, as austerity measures continued to increase, the Greek people elected a member of the liberal Syriza party, Alexis Tsipras, as their new leader. From the beginning, the IMF was critical of the new administration’s effect on the country’s finances, claiming that the financial situation deteriorated rapidly after Tsipras’ election. In return, the fund had to contend with growing public criticism that they were attempting to influence Greek politics – a claim they fiercely denied.
Tspiras’ first finance minister, Yanis Varoufakis, felt strongly about the IMF and its pressure on Greece. Before exiting the cabinet – following the country’s infamous referendum in the summer of 2015 – Varoufakis publicly stated that he would rather lose his arm than accept a bad deal from the IMF and other lenders, adding that talks with creditors and eurozone finance ministers consistently failed.
Even through to the end of his term in the summer of 2019, Tspiras had little luck with the fund; one of his proposals for an economic stimulus package was rejected. The IMF claimed that these measures did not take long-term planning into account, adding that they rejected the organisation’s recommendations.
Even now, Varoufakis isn’t sold on Mitsotakis’ idea that the IMF’s departure is a sign Greece is on the mend. He took to Twitter, writing, “As we speak, troika representatives are in Athens, going from one ministry to the next, pushing viciously for an acceleration of foreclosures and evictions of families from their primary residence. Meanwhile, the international press is celebrating the end of Greece’s debt bondage”.
A Sign of Things to Come?
As the IMF packs its bags, Mitsotakis – and much of Greece’s government – continues to revel in this good news. This is just one of several positive economic signs coming to Greece after New Democracy came to power in a landslide victory over Syriza in July 2019. This past September, the Prime Minister announced an end to capital controls, with Bank of Greece Governor Yannis Stournaras saying that “It marks a return to normality and growing confidence”.
The country is committed to reducing all non-performing loans, and Mitsotakis’ government has already begun working on processes meant to incentivise businesses and investors into Greece. Construction for a major development project in a formerly dilapidated region of Athens, known as Hellenikon, has been greenlighted. Meanwhile, China has signed agreements that will pour money into Greece’s public entities, including the airport and the port, with plans to also invest further in energy, agriculture, and tourism.
All of this activity is part of a larger goal to increase investment inflow to 100 billion euros, and achieve a 4 percent growth rate, over the next three years; constituting further evidence that the sky is the limit for Greece’s growing economy.