Cautious Warnings Remain About Greece’s Claimed Recovery

FILE - Pensioners gather in front of the Greek parliament during a rally in Athens, Friday, Dec. 15, 2017. (AP Photo/Thanassis Stavrakis)

With Prime Minister Alexis Tsipras saying he’s brought a coming recovery to Greece – ironically by reneging on anti-austerity promises – a Greek economist at a British college said it could still be tripped up by political and financial mistakes.

Ioannis Oikonomou, an Associate Professor in finance at Henley Business School told the British newspaper The Express that the European Union has made mistakes in its dealings with the Greek crisis, where governments have had to submit to withering austerity in return for three bailouts of 326 billion euros ($392.96 billion).

“The economy is showing signs of recovery with modest growth, low inflation and a drop in unemployment – now at about 21.8 percent down from almost 28 per cent in 2013,” but still the highest in the EU.

“Tourism, the country’s most important sector, has rebounded with about 30 million tourists arriving in 2017 and more expected next year,” he said, but they didn’t spend as much as anticipated.

With Greece in the spring beginning its eight year of austerity, and with the bailouts expiring in August, the ruling Radical Left SYRIZA-led coalition has to hope for a successful return to markets or face the political death knell of a fourth bailout.

Tsipras, after saying he would do neither, in 2015 sought and accepted a third rescue package for Greece, this one for 86 billion euros ($103.78 billion) and more pension cuts and taxes on low-and-moderate income families and an avalanche of tax hikes as well as an automatic spending cut if fiscal targets aren’t met.

That led to his popularity evaporating and a response of a flurry of holiday handouts to pensioners and jobless youth in a desperate bid to regain his standing amid calls from some in his party for early elections before the new austerity measures fully kick in this year.

Tsipras said back in July: “We can now say with certainty that the economy is on the up, the worst is clearly behind us,” but that came at the same time he asked for debt relief and said the country can’t pay back what it owes and as the government hasn’t paid vendors.

Oikonomou says the EU has both helped and hindered Greece’s road to recovery.

He said: “Last time I said that the worst times are over for Greece was at the end of 2014. A series of remarkable strategic mistakes and destructive negotiation tactics by the then newly elected Greek government proved me wrong.

“But Mr. Tsipras and his party seem to have learned from their mistakes in this regards. So yes, I am doing to say it again and hope I will not be proven wrong a second time: the worst is over,” he adds.

He said: “On balance, the EU has helped more than it has hindered Greece’s long road to recovery. But it has made mistakes, both politically and economically.”

The government sold a test market bond of 3 billion euros ($3.62 billion) last July, leading to Tsipras’ boast, but that came at interest rates more than three times higher than being paid for the bailouts and could pose an ominous signal for the bailouts end this year.

”This would mean a marked increase in the annual interest payments it would need to make. And the country could not afford another default event: that would lead to financial isolation. Naturally, this would lead to a double-dip recession – or really, triple dip if one looks at the recovery that was occurring in 2014,” said Oikonomou.