Greece turned a page on eight years of spending cuts and three straight international bailouts on Monday but experts warned that the country’s economic challenges are far from over.
“The conclusion of the stability support programme marks an important moment for Greece and Europe,” said European Commission President Jean-Claude Juncker, hailing “a new chapter” in the country’s “storied history”.
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 (GDP) 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,” said Mario Centeno, who heads the Eurogroup of eurozone finance ministers that monitored the bailout deals.
“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,” Centeno said.
“It took much longer than expected but I believe we are there.”
The leftist-led government, at loggerheads with the creditors just three years ago, also 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.
He said that Prime Minister Alexis Tsipras would give a televised address on Tuesday.
Tsipras is also rumoured to be planning a cabinet reshuffle.
Greece is the fifth and last eurozone country after Portugal, Ireland, Spain and Cyprus to emerge from a bailout programme.
Greek households, however, continue to feel the effects of unpopular and damaging austerity.
“Greece has many rivers to cross,” read the front page of the English edition of the Kathimerini newspaper.
It warned the country is emerging 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 welcomed 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.
– No backtracking –
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.
Following the agreement in June by eurozone ministers to bring the rescue programme to an end, Tsipras said that Greece could start focusing on a “social state”.
“Now we have the opportunity to proceed with targeted relief, 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 at the cost of crippling taxation, and its hands remain tied on social welfare spending.
Greece has already legislated new pension and tax break cuts 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.
As part of “post-programme surveillance” by Greece’s creditors, a team of auditors will visit the country after September 10.
Economics professor Nikos Vettas said he 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.”┬аGreece, however, has gained some credibility in 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”. AFP
