Will the Greek economy ever come back to growth?

Alexis Tsipras at the informal meeting of the Heads of State on the refugee crisis (TVNewsroom European Council, 23/09/2015)

Alexis Tsipras at the informal meeting of the Heads of State on the refugee crisis (TVNewsroom European Council, 23/09/2015)

Eurozone’s Finance Ministers convened in Luxemburg two days ago and proposed that Greece should immediately focus on the necessary reforms in order to be able to cope with the third bailout programme.

Both sides (creditors and Greece) agreed that Greece will have to implement the 48 prerequisites- measures that will unlock the next much needed tranche of 3 billion euros.

The aforementioned measures are included in the 2016 draft budget that was presented by the Greek government and show that the economy will shrink even more during 2015 and 2016 and will come back to growth no later than 2017.

However, the International Monetary Fund (IMF) warns at its World Economic Outlook report that there are still chances of market turbulences in case a Greek political uncertainty returns despite the fact that the dangers have been reduced due to the agreement and the new bailout programme. It is also noted that the consequences of an upcoming market unrest are possible to be transmitted to the rest of Europe.

It remains to be seen though whether the implementation of these measures will actually lead to growth and boost the Greek economy or the Greeks will become once again “subjects” of their creditors’ natural experiments.

Eurogroup keeps on demanding reforms

Once again the 19 Finance Ministers of Eurozone gathered to discuss Greece’s bailout programme and upcoming measures. The outcome of the meeting was, as in the past ones, a mutual understanding that Greece has to start working on the implementation of structural reforms in order to be financed by the EU creditors.

More specifically, the president of Eurogroup and Dutch Finance Minister  Jeroen Dijssebloem stressed: “A lot of work has to be done, a number of reforms still have to be implemented and new reforms have to be designed. It’s in the Greek interest to deliver as quickly as possible so we can also continue on the process of bank recapitalisation and go into the debate about debt restructuring.”

The Greek government is betting on this debt restructuring in order to make its debt viable; a debt which is currently at 187,6% of GDP. The EU creditors seem to be ready to undertake such action and bring the IMF back to participate in Greece’s programme. The latter was also underscored by Michel Sapin, the French Finance Minister, who mentioned that: “It’s crucial because the IMF is on a different timetable and the IMF can only put its next program in place when we have agreed to easing the debt burden”.

Will Greece’s tough draft budget bring growth?

It was last Monday when the Greek Prime Minister submitted to the parliament the draft budget for 2016; a year with lots of tax increases and spending cuts to come.  According to the budget, it is anticipated that the economy is going to be contracted by 2.3% in 2015 and 1.3% in 2016 which is in accordance to the creditor’s estimates.  The government is also supposed to receive 4.3 billion euros through the implementation of mainly tax-based measures.

The IMF’s report supports the aforementioned figures regarding the Greek economy’s growth and underlines the impact of a potential future political unrest on the country’s economy and to the rest EU member states in case the necessary reforms are not put into action.

But these measures are going to bring growth not before 2017. The Greek citizens are undertaking this long-lasting crisis for more than 5 years now and it seems that it would take several more years till the revival of the economy.

All the previous bailout programmes for Greece have failed to bring growth. The reasons are twofold. Either the Greek governments are incompetent to materialize the necessary reforms and implement the right measures or the measures proposed by the creditors are problematic and cannot bring the desired results. Whatever the reason the outcome remains the same. No growth for Greece.

The first review: Well begun is half done

The first review of whether Greece is in line with the programme is most likely going to take place at the end of October. The Greek government has little time to vote for the measures that have been agreed with the creditors and start implementing immediately fundamental reforms.

However, the leader of the governing left-wing Syriza party is aware of the fact that the first review will be very crucial which will lead not only to the recapitalization of the Greek banks but also to debt restructuring. More in detail, Alexis Tsipras mentioned during his speech in the parliament two days ago: “We are aware that the successful conclusion of the first review is the key that will open the door for the necessary debt restructuring.”

All in all, the Greek government seems to be ready to finally listen to its creditors and implement the necessary measures but we must wait and see whether this is going to last and most of all whether the measures will have the desired positive impact on the economy.

Follow Chris on Twitter @CAnyfantis

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Featured Stings

On Human Rights Day European Youth Forum calls for end to discrimination of young people

This afternoon Britain will be once more isolated from mainland Europe

Eurozone: Disinflation engulfs the industrial goods sector

Vulnerable young people must not be blamed & stigmatised for violent radicalisation

Britain and Germany change attitude towards the European Union

Alice in Colombia

The Parliament defies a politically biased Banking Union

The big challenge of leadership and entrepreneurship in Europe

Eurozone’s north-south growth gap to become structural

On the euro but out of it?

EU sets ambitious targets for the Warsaw climate conference

Intel @ MWC14: Our Love Story with Mobile – Transforming Wireless Networks

Trump asked Merkel to pay NATO arrears and cut down exports ignoring the EU

Everybody against Germany over the expensive euro

Doctors without borders

Arlington, USA: kick-off of the fifth round of the EU-US boxing match

European Confederation of Junior Enterprises hosts in Geneva the Junior Enterprise World Conference

ECB embarks on the risky trip to Eurozone banking universe

Medical students: The need for emigration

While EU Open Days 2013 discuss the 2020 strategy, Microsoft shares a glimpse of EU 2060

The scary EU elections result and the delayed Council’s repentance

China’s stock markets show recovery signs while EU is closely watching in anticipation of the €10bn investment

Germany fears that Americans and Russians want to partition Europe again

Trailing the US-EU economic confrontation

YOUTH RIGHTS AT RISK FROM RISE OF EXTREME-RIGHT AND POPULISTS IN THE EUROPEAN PARLIAMENT

EU to negotiate an FTA with Japan

ECB readies itself for extraordinary monetary measures defying Germany

Zhua Zhou: Choosing The Future

Marco Polo’s Dream

Any doubt?

Happens now in Brussels: Green Week sets the EU and global climate policy agenda

The completion of the European Banking Union attracts billions of new capital for Eurozone banks

Germany to help China in trade disputes with Brussels

Exchanges of medical students and the true understanding of global health issues

Access to health in the developped and developing world

Will the EU ever tackle the migration crisis despite the lack of political will?

GSMA Mobile 360: Connecting Cities, Connecting Lives, Connecting Europe

French elections: by the time the EU economy revives and the migration crisis is solved extremists could take over Europe

The next 48 hours may change the European Union

Nitrate pollution of water sources: new impulses for EU Water Policy?

18th European Forum on Eco-innovation live from Barcelona: What’s next for eco-labelling?

Intel, Almunia and 1 billion euros for unfair potatoes

COP21 Breaking News_03 December: Europe’s children urge leaders to commit to climate action at UN Climate Summit in Paris

No better year for the EU’s weak chain links

Can Kiev make face to mounting economic problems and social unrest?

EU and Amazon cut deal to end antitrust investigation over e-books deals

COP21 Breaking News_03 December: There is a new draft agreement on the negotiating table

Fear casts again a cold, ugly shadow over Europe; Turkey sides with Russia

The European Commission cuts roaming charges. But “it’s not enough”…

A hot autumn after a cool summer for Europe

EU-US to miss 2015 deadline and even lose Germany’s support in TTIP’s darkest week yet

Can the banking union help Eurozone counter its imminent threats?

Should Europe be afraid of the developing world?

Access to ‘affordable’ medicines in India: challenges & solutions

Is Europe misjudging its abilities to endure more austerity and unemployment?

IMF – World Bank meetings: US – Germany clash instituted, anti-globalization prospects visualized

Global Citizen – Volunteer Internships

10 months were not enough for the EU to save the environment but 2 days are

The EU accuses Russia of bullying Ukraine to change sides

More Stings?

Comments

  1. What else? says:

    “All the previous bailout programmes for Greece have failed to bring growth..”

    Does anyone believe that these programmes were designed to bring growth?

    They were vindictive punitive plans to bring apocalypse.

Trackbacks

  1. […] Will the Greek economy ever come back to growth? – The European … […]

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s