Bailouts end but Greece still has long way to go

Greece has successfully exited its final, three-year bailout programme but the struggling euro zone country still faces many risks.
Unpopular economic reforms brought Greece to its knees, with a quarter of its gross domestic product evaporating over eight years and unemployment soaring to over 27 per cent.
Unpopular economic reforms brought Greece to its knees, with a quarter of its gross domestic product evaporating over eight years and unemployment soaring to over 27 per cent.PHOTO: AGENCE FRANCE-PRESSE

Austerity continues to hurt even though country is growing again

ATHENS • After years of tough austerity measures, Greece emerged yesterday from its third and last bailout, although officials warn the country still has a "long way to go".

The European Union, European Central Bank and International Monetary Fund loaned debt-racked Greece a total of €289 billion (S$453 billion) in three successive programmes in 2010, 2012 and 2015.

The economic reforms the creditors demanded in return brought the nation to its knees, with a quarter of its gross domestic product evaporating over eight years and unemployment soaring to over 27 per cent.

But Greece has returned to growth, its vast public deficit has been turned into a solid budget surplus, and the jobless rate has fallen below 20 per cent, 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 Mr Mario Centeno, board chairman of the European Stability Mechanism. "It took much longer than expected but I believe we are there."

Greek households, however, continue to feel the effects of unpopular and stinging austerity.

"The reality on the ground remains difficult. The time for austerity is over, but the end of the programme is not the end of the road for reform," EU Economic Affairs Commissioner Pierre Moscovici said at the weekend.

NOT END OF THE ROAD FOR REFORM

The reality on the ground remains difficult. The time for austerity is over, but the end of the programme is not the end of the road for reform.

EUROPEAN UNION ECONOMIC AFFAIRS COMMISSIONER PIERRE MOSCOVICI

Mr Moscovici's opinion is shared by Greece's central bank governor Yannis Stournaras. "Greece still has a long way to go," Mr Stournaras said in an interview with the Kathimerini newspaper on Sunday.

He warned 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".

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

Prime Minister Alexis Tsipras, who is expected to hail the end of the bailouts with a televised address today, said in June, after the agreement by euro zone 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 some 4 per cent in 2016 and last year, but its hands remain tied on social welfare spending. It has legislated for new reforms for 2019 and 2020 and will stay under supervision for several years.

The improving economic indicators have not translated into tangible improvements in Greek daily lives. "The bailout is over, but the shackles and the asphyxiation are still on," the Vima newspaper wrote on Sunday.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on August 21, 2018, with the headline 'Bailouts end but Greece still has long way to go'. Print Edition | Subscribe