Spotlight on... Greece
Background: Greece's political and economic path since 2010
Greece has come a long way since the Eurozone’s sovereign debt crises in 2010. With three bailouts under its belt from the ‘troika’, the IMF, ECB, European Commission, Greece has received a record 260 billion euros in bailouts since 2010. Hand in hand with the bailouts to the Greek economy came strict conditions, notably the imposition of harsh austerity measures from 2010 which were seen as the best medicine for Greece’s debt crisis. Deep budget cuts and steep tax increases followed. However, eight years later, Greece is still riddled with staggering levels of public debt at 180% of its GDP. Greece continues to have the highest public debt in the Eurozone despite being one of the smaller Eurozone economies.
There have been economic reforms, with a push towards privatisation in the Greek economy. The Greek government has undertaken privatisation as a key feature of the country’s economic approach to reduce its public debt since 2010. But, privatisations have raised proceeds of 5 billion euros rather than the predicted target of 50 billion euros. Despite this, the Greek government is pushing for privatisation and the competitiveness of state companies. For example, the government expects state companies to submit their plans by April 2018 to demonstrate how they will make themselves more competitive. As well as this, the Greek government has vowed to launch stake sales in Athens International Airport, gas company DEPA and oil refiner Hellenic Petroleum by March 2018. All these efforts by the Greek government are aimed at addressing the mountain of debt that Greece has to pay back to its Eurozone partners, who own 80% of Greek debt.
Impact on Investors
Greece’s eight-year bailout programme will end in August 2018 and the Greek government and its EU creditors have begun talks this year for preparations after August. The main question currently discussed is the kind of arrangement that Greece will enter into once it exits its bailout programme. Greece still owes its European peers 224 billion euros. Therefore, its EU creditors are expecting to continue to monitor Greece’s economic performance after August. Like Portugal and Cyprus after their bailouts ended, Greece will undergo post-programme surveillance linked to its ongoing reforms under the current third bailout programme.
Investors’ expectations have been boosted by the speculation that Greece will exit its latest bailout in August and get debt relief from its international creditors. The Greek government’s bond yields decreased in February 2018 after a ratings upgrade from Fitch, the credit ratings agency. Fitch upgraded Greece’s long-term rating to “B” from “B-” demonstrating its positive outlook on Greece, even with its high debt. Standard and Poor’s Global Ratings also raised Greek ratings for the first time in two years on improvements in the fiscal outlook and finances of Greece.
The Greek economy has been improving albeit slowly, with the economy becoming more attractive for investors compared to in previous years. Unemployment is still the highest in the Eurozone at 20.9% in November 2017 but it has fallen dramatically since its all-time high of 27.9%, in September 2013. The economy grew in the third quarter in 2017. Also, the Greek government is adamant in its commitment to reforming its economy and is willing to continue its overhauls after the end of the bailout in August. Privatisations, electronic property auctions, an elimination of tax breaks in certain islands, labour and energy sector reforms, and measures to make Greek public administration more efficient are among 88 actions that Athens needs to deliver on in the coming months. The Greek government aims to stick to its reform path in order to ensure both to creditors and investors that there will be no backtracking of the reforms that have been implemented till now.
About Yllka Krasniqi
Yllka is a third year BSc student of Government and History at the London School of Economics. She has a particular interest in the political economy of Greece and the consequences of the Eurozone crisis.
