Greece exits bailouts after biting austerity
ATHENS: After years of stinging austerity measures, Greece emerged on Monday from its third and last bailout, although officials warn the country still has a “long way to go”.
The European Union, the European Central Bank and the International Monetary Fund loaned debt-wracked Greece a total of 289 billion euros ($330 billion) in three successive programmes in 2010, 2012 and 2015.
The economic reforms the creditors demanded in return 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.
But Greece has now returned to growth, its once vast public deficit has been turned into a solid budget surplus — before interest payments are made — and the jobless rate has fallen below 20 percent, officials say.
“For the first time since early 2010 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,” said Mario Centeno, chairman of the European Stability Mechanism (ESM) in a statement Monday.
“It took much longer than expected but I believe we are there,” he added.
Athens hailed the move as a turning point. “The economy, the society and the country as a whole are now entering a new phase,” government spokesman Dimitris Tzanakopoulos told Greek media Monday.
He added that Prime Minister Alexis Tsipras would give a televised address on Tuesday. Greek households, however, continue to feel the effects of unpopular and damaging austerity.
“Greece has many rivers to cross,” read Monday’s front page of the English edition of the Kathimerini newspaper.
It warned the country emerges from the bailout “with a shrunken economy and highly vulnerable to market turmoil”.
EU Economic Affairs Commissioner Pierre Moscovici also cautioned that “the reality on the ground remains difficult” but nonetheless praised the bailout exit as “historic”.
“Greece will be able to finance itself on (the financial) markets…, define its own economic policies all the while following the reforms of course,” he told French radio station France Inter Monday.
Central bank governor Yannis Stournaras warned at the weekend that if Greece backtracks “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 also expressed concern that “if there is strong international turbulence, either in neighbouring Italy or Turkey or in the global economy, we will face difficulties in tapping markets”.
Athens estimates its financing needs are now covered until the end of 2022, opening up room for it to plan for the future.
Prime Minister Tsipras said in June after the agreement by the eurozone ministers to put an end to the rescue programme that Greece could start focusing on a “social state”.
“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.
The country may have achieved budget surpluses excluding debt repayments of around four percent in 2016 and 2017, but its hands remain tied on social welfare spending.
Greece has already legislated for new reforms for 2019 and 2020 and will remain under international supervision for several years.
‘Shackles still on’
The improving economic indicators are not yet translating into tangible improvements in the day-to-day lives of Greeks.
“The bailout is over but the shackles and the asphyxiation are still on,” the opposition-friendly Vima newspaper wrote on Sunday.
Economics professor Nikos 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”.
Greece, however, has gained some credibility among the international community.
“The commitments assumed by Greece for the future are clear. I have no doubt that they will be respected,” French Finance Minister Bruno Le Maire told Greek media on Sunday, insisting that the bailout was a “great success”.