Greece
ended its worst recession in more than a half-century, emerging from a period
marked by two bailouts and financial-market turmoil that almost pushed the
country out of the euro.
Greece’s six-year recession was deepened by
budget cuts tied to its rescue, which has left Prime Minister Antonis Samaras
struggling in political polls. The government’s reform efforts got the public
finances sufficiently under control to allow Greece to sell bonds in 2014 for
the first time in four years, and Samaras now wants to push on and exit the aid
program.
“For the rebound to be sustainable you need
investment, which will help the Greek economy recover the lost ground,” George
Papaconstantinou, Greece’s finance minister when it received its first bailout
in 2010, said by e-mail. “If we abandon the effort which started in 2010, we
run a real danger of reliving the same nightmare and all the sacrifices will
have been in vain.”
Bailout Exit
Confirmation
that Greece has pulled out of a recession may help Samaras follow Ireland,
Portugal and Spain out of the nation’s rescue program. To do so, he must
reverse an increase in Greek sovereign borrowing costs in the past two months
driven by renewed political instability and disagreements with euro-area and
International Monetary Fund officials about the pace of reforms.
The country’s 10-year bond yield fell 11
basis points to 8.04 percent at 12:26 p.m. in Athens today. While that’s down
from a record of 42 percent on the eve of the biggest debt restructuring in
history in 2012, it’s up from about 5.7 percent in early September, threatening
the country’s continued access to markets.
Greece was the first of five euro-area
countries to receive a bailout in 2010 after its budget deficit spiraled to
15.7 percent the previous year, more than five times the European Union limit.
As the crisis pushed the currency bloc to the brink of a breakup, Athens was
rocked by anti-austerity protests and violent riots as successive governments
pushed budget cuts through parliament in knife-edge votes.
Currency Exit
Harvard
University professor Martin Feldstein, Nobel laureate Paul Krugman and
economists at Citigroup Inc. and Roubini Global Economics LLC were among those
to say during the crisis that Greece might need to leave the euro to spur efficiency
via a cheaper currency.
Having
said during the euro-area crisis that it was more likely than not that a
country would exit the currency bloc within five years and Greece was the prime
candidate, Roger Bootle, the chairman of London-based Capital Economics Ltd.,
says the country still has little to celebrate.
While the economy has become more
competitive through deflation, its GDP remains well below what it was six years
ago. “It’s been devastating,” said Bootle. “So if it gets a flick up, does that
mean you should open the Greek brandy? I’d say no.”
High Cost
Highlighting
the social cost of the crisis, Greece’s jobless rate stood at about 26 percent
in August. That toll has left Samaras, trailing the anti-bailout Syriza party
in opinion polls, pushing for an end to the country’s unpopular rescue program
this year.
“The cost of taking the route that Greece
took turned out to be surprisingly high, but we don’t know how things would
have gone with Greece pulling out of the euro,” said Edmund Phelps, a professor
at Columbia University in New York and winner of the 2006 Nobel prize in
economics. “It’s important in Greece to look beyond the short run, and see what
you are willing to do to bring economic health in the long run.”
Outgoing EU President Herman Van Rompuy, who
presided over all-night leaders’ summits on Greece during the crisis, visited
Athens this month and urged the country’s politicians not to throw away the
“tremendous efforts” made.
The European Commission forecasts Greece
will grow 0.6 percent this year and 2.9 percent in 2015, when its budget
deficit will shrink to 0.1 percent of GDP. It warned last week that uncertainty
about the country’s implementation of reforms could weigh on investment in the
first half of 2015.
“The truth is that the 2010 bailout deal was
the best possible negotiated in the circumstances Greece was facing,” said
Papaconstantinou, the former finance minister. “The recession would have been
less severe with a longer adjustment period, but this required more funding,
which the EU countries were not prepared to give.”
(Πηγή:
bloomberg.com)