The Greek Prime Minister, Kyriakos Mitsotakis, assured at the beginning of the summer in the European Parliament that Greece “has regained control of its economy”. The Greek leader was pleased to be able to inaugurate a “new era” after the hard journey between austerity and reforms due to the crisis and the rescue that the country suffered in the past decade.
The European Commission has definitively put an end to the process of reinforced surveillance of Greek finances this Saturday, August 20, thus returning the country to ‘normal’ supervision from Brussels, the same to which the rest of the countries are periodically subjected.
“Greece has made significant progress and as a result has returned to a normal financial situation,” Greek Finance Minister Christos Staikouras celebrated when Brussels officially announced its decision a week ago.
As Mitsotakis recalled, ” in 2015 Greece was one step away from the abyss of leaving Europe “, after a rescue of 288.7 billion euros, the largest financial assistance in history, which cost it the obligation to take unprecedented austerity measures and a subsequent reinforced control by the European Commission that has been extended until this weekend.
A more open and competitive economy
Since then, Athens has promoted reforms in the public sphere, the labor market or taxation. However, for example, it has not managed to diversify its economy, which is highly dependent on tourism .
According to Oxford Economics economist Ricardo Amaro, who has been following the Greek economy in recent years, the Greek economy is now “more open, more competitive and much more capable of attracting foreign investment.” In addition, he highlights the “significant progress” in correcting macroeconomic imbalances such as the deficit.
For all this, last April, on its last trip to Athens , the Commission found that the growth forecast for the Greek economy remained strong for 2023 despite the global crisis and escalating prices and considered that the risks had diminished significantly, so tight surveillance was no longer warranted.
An economy still vulnerable
And Athens already celebrates economic independence from Brussels. With the end of control (and new elections in sight) the Greek government has announced, for example, the first increase in pensions for more than a decade.
However, the country’s economy continues to lag behind and many of its structural problems remain to be resolved, which makes it particularly vulnerable to the shocks that the European economies as a whole are currently suffering. Although it has been recovering (its GDP fell from 224,000 million euros in 2010 to 174,000 million in 2016), its GDP per capita is one of the lowest in the Eurozone , and its total economy is 22% far from its 2007 peak.
In addition, unemployment remains at levels well above the eurozone average (it closed 2021 above 14%, double that of the Nineteen), although in turn far from the 28% that it touched in 2013. And although It is far from the 45% of youth unemployment registered at the time, young Greeks also find serious difficulties in working without having to leave. All this at a time when high inflation is also hitting Greece, where prices rose 11.3% in July.
The debt problem
“There is still a long way to go”, concludes Amaro, who highlights that the Greek economy is still ” vulnerable in a good number of areas “, such as public debt, the banking sector or demographic trends that are very unfavorable to the potential growth of the GDP. Certainly one of the issues that most worries Greece is its level of public debt , which closed 2021 at 193% of its GDP.
It is worrying because the Greek bond remains the only one with a ‘junk ‘ rating, although it is only one step away from rising to investment grade. Greek sovereign debt continues to be one of the most expensive in the eurozone, with ten-year bond yields standing at 3.7% last Friday, well above Germany’s 1.2%.
The Oxford Economics expert is clear that this is a good step for Greece, for example to get rid of the stigma , but admits that further work is needed to correct economic vulnerabilities and achieve sustainable growth.