After almost nine crisis years, ruthless economy and four governments, Greece will complete its third financial assistance program next week-unlike the economic crisis that has engulfed Turkey.
On 20 August, at midnight, Athens will reclaim its sovereignty in what the prime minister, Alexis Tsipras, has called a transcendent moment for the debt-stricken nation.
“Greece has managed to stand on her feet again,” his office said last week describing receipt of a final as the “last act in the drama. Now a new page of progress, justice and growth can be turned”.
Athens’ battle to keep bankruptcy at bay took Europe into unchartered waters. From the beginning, the crisis not only exposed the rot in Greece but the flaws in the EU’s incomplete architecture. Under threat of seeing the bloc torn apart and the common currency broken up, Brussels was forced to devise a new tool kit to deal with what soon developed into a profound existential crisis.
The scars of the Hellenic crisis remain deep with weak banks, huge government arrears, almost no space for public spending and, at 180% of GDP, the highest debt load in the EU.
But light has begun to emerge. Growth is slowly returning, tourism is booming and once-record levels of joblessness are on the wane. On Friday, the credit agency Fitch upgraded Greece’s long-term foreign currency rating by two notcheds to BB, citing improved relations with the creditors that have kept the country afloat.
The Greek economy is poised to expand 2% and 2.4% this year and next, enough for Brussels to hail the halting recovery a success story.
“Without European aid Greece would have collapsed and been in deep political and economic chaos for decades,” the EU’s economics chief, Pierre Moscovici, wrote in a recent opinion column for the German media.
But scepticism remains, not least at the International Monetary Fund. While Athens has made significant progress in slashing its fiscal deficit it still faces “substantial external and domestic risks”. A recent debt relief deal offered some measure of hope but was unpinned by “very ambitious assumptions about GDP growth and Greece’s ability to run large primary fiscal surpluses”.
“Last year, 135,000 people filed court papers handing over real estate to the state”
Punishing budget cuts and structural reforms – the price of a €288bn rescue, the biggest bailout in global financial history – has reduced the nation to a shadow of its former self.
In an economy that has contracted by 26%, a fifth of the working population – two-fifths of young people – have been left unemployed, while about 500,000 people have fled, mostly to EU member states in Europe’s wealthier north.
And the hardship isn’t over. The leftist-led government has signed up to a staggering array of ambitious targets. Post–bailout Greece has committed to produce primary surpluses of 3.5 % of GDP until 2022, a feat achieved by only a handful of countries since the 1970s, and 2.2 % until 2060.
For Kevin Featherstone, who heads the Hellenic Observatory at the London School of Economics, such obligations amount to perpetual purgatory. “No other government in Europe would choose to follow this path,” he said. “Greece has been saved in the sense of avoiding the armageddon of euro exit but how it has been saved is so disadvantageous that one can’t talk of a rescue or exit from crisis.”
Although Tsipras is at pains to play down outside supervision, Greece will still be subject to a regime of enhanced surveillance initially. Further pension cuts are in store. In May he had unveiled a 106-page post-bailout growth plan. But no amount of preparation can conceal the country’s acute vulnerability to turbulence beyond its borders. Only days before the programme’s end, global market jitters saw yields on Greek bonds soared.
It is accepted that Greece has enough resources to meet funding needs for the next two years, but the IMF is far from persuaded that Athens will be able to sustain market access “over the longer run without further debt relief”.
If so, the fund is likely to clamour ever more loudly that the landmark deal, reached in June, easing Greek debt repayments (extending maturities on some loans and improving interest rates on others) just does not go far enough.
The crisis has lasted so long that many Greeks can no longer recall their country being “normal” or their pockets full. The middle class has been hardest hit with taxes as high as 70% of income earned. Controversial property levies have added to the toll.
“In reality this exit will be a formality because in truth it isn’t going to change a thing,” said Stratos Paradias, who leads the Hellenic Property Federation.
Every day the federation’s fourth floor offices were deluged by citizens seeking advice. “Taxes are so high that the younger generation are refusing to inherit family homes because of the burden,” he said. “It’s disastrous. Last year 135,000 people filed court papers handing over real estate to the state. That’s four times more than five years ago and, in a figure, tells the story of Greece.”