Greece enters a new phase, after eight years of assistance programmes and austerity. The country must now find a way to lower its high stock of government debt, standing at 178,6% of GDP.
One of the top headlines of today is the formal exit of Greece from its 8-year-long bailout program.
Ekathimerini’s editorial showed that this might be “just a new phase”, criticizing the government for giving the news of the end of the bailout program as excessively positive, stating that “the only thing that the expiry of the third memorandum signals is that Greece is entering the next phase of the adventure”, a phase in which, according to the Greek newspaper, the country should “show even more determination and discipline to meet stringent targets and push through more reforms that will help it get back on its feet”.
On the other hand, The Economist was very critical of the “eurozone austerity dogma” that hit the country during the last few years, and seemingly skeptical about how Greece can deal with the severe effects of the austerity, showing in their article that “now Greece, left with threadbare public services, eye-watering tax rates, weak institutions and appalling demographics, is supposed to run large primary surpluses”.
The end of the “eight-year odyssey”
Everything started with a hoax, as Goldman Sachs helped the Greek government to manipulate its public finances, while only in 2010 it was discovered that the public deficit stood at 12,5%, more than double of what had been previously announced. The country was in need of a financial rescue, and austerity was in sight for the Greek.
Tax evasion was seen by the Greek with pride and as a “matter of legitimate defense against the high taxation”, that was used to feed an inefficient and heavy state machine. Even pools were taxed, but there were only 327 registered pools out of the 17 thousand existent in Athens.
The country lost 25% of its richness with the crisis, and a fifth of the population became unemployed.
The Portuguese PM reacted this morning, congratulating Tsipras, and Greece, for reaching the end of this Odyssey.
Amongst the countries most affected by the Eurozone crisis were Portugal, Greece, Italy, Cyprus, and Spain. After three rescue programmes and 8 years, Greece is now supposed to pick up from the rubble and at least feel like they are regaining some control over their public finances, facing now a new reality.
Mário Centeno, Eurogroup President and Finances Minister of Portugal, has congratulated the Greek government, and announced on EU Council’s twitter account that “Greece has regained the control it had fought for” as it “exits its financial assistance programme”. The Eurogroup President noted as well, that the country has been creating jobs, there is now a fiscal superavit, and the economy was restored and modernized.
Next years will be quite challenging for the Greek
Public debt is still at worrying highs, however. So, these will be very challenging times for the Greek. The economy is boosting after a long period of recession that lasted even longer than the Great Depression, as Tsipras administration has been successful in presenting high budgetary surplus that tampers the public debt from escalating above the 180% of GDP line.
This high public debt value limits the country and doesn’t allow it to have much leverage for improvements, with unemployment still being very high (21,5%) and youth unemployment at a worrying level: 43,6%, the second highest in the European Union, right after Macedonia (46,7%).
On 22 June 2018, Greece made a commitment with the Eurogroup to generate a primary budgetary surplus of 3,5% of GDP until 2022, and of 2,2% until 2060 (the year when the enhanced surveillance should be over). That surveillance plan demonstrates the depth of the political agreement between Greece and the Eurogroup towards implementing additional measures that ensure debt sustainability, specifically because of the country’s high stock of general government debt, which stood at 178,6% of Gross Domestic Product end-2017.