ATHENS – More than eight years after they began, what turned into three international bailouts of 326 billion euros ($371.02 billion) for Greece will end at midnight on Aug. 20, but economic uncertainty could go on for years, with the country being closely monitored to make sure fiscal targets are hit.
While his claim there would be a “clean exit” from the bailouts was shot down by the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) which said it will keep a close eye on the government to make Prime Minister and Radical Left SYRIZA leader Alexis Tsipras doesn’t renege on more austerity the same way he did on anti-austerity promises to voters.
“Greece has managed to stand on her feet again,” his office said after the Troika paid out the last 15 billion euros ($17.7 billion) from a third rescue package, this one for 86 billion euros ($97.85 billion) he said he would never seek nor accept because it came with more brutal measures but did both and then imposed them and is now trying to wiggle out of coming pension cuts.
The country would be at the mercy of the markets, with two previous test bond sales of 3 billion euros ($3.41 billion) each going at interest rates more than three times higher the bailouts before a recent recent debt relief deal granted more time to pay.
But some 9.5 billion euros ($10.81 billion) was set aside as a cash buffer that could provide up to 22 months – past the next elections that must be held by October, 2019 – with polls showing Tsipras’ party is far behind the New Democracy Conservatives they unseated in January, 2015.
lHis office said the last installment was the “last act in the drama. Now a new page of progress, justice and growth can be turned,” although many analysts said the debt is unsustainable and growth will be anemic.
Despite the bailouts and a 2012 stiffing of investors who lost 74 percent of their holdings in Greek bonds, the debt is soaring by the second and debt is at 180 percent of Gross Domestic Product (GDP) and not expected to come down to manageable levels for years.
There are some good signs, if perhaps it’s because rock bottom was hit. The unemployment rate is down to 19.5 percent – Tsipras said it’s because of him although he didn’t act to put people, especially the young, back to work, and the rate is still the Eurozone’s highest.
Growth is slowly returning, tourism is booming and credit ratings agencies have lifted the country’s standing although investors remain wary and scared off by an avalanche of tax hikes that put the corporate rate at 29 percent.
The Greek economy is poised to expand 2% and 2.4% this year and next, enough for Brussels to hail the halting recovery a success story, the Guardian reported, a rosy assessment disputed by the Washington, D.C.-based International Monetary Fund (IMF) which took part in two first bailouts totaling 240 billion euros ($273.06 billion) but stayed out of a the third.
“Without European aid Greece would have collapsed and been in deep political and economic chaos for decades,” the EU’s economics chief, Pierre Moscovici, wrote in a recent column for the German media although he too has issued cautions the government must stick to reforms.
The IMF though said while the deficit has been cut that the country still faces “substantial external and domestic risks””and that optimistic government predictions for a recovery were based on “very ambitious assumptions about GDP growth and Greece’s ability to run large primary fiscal surpluses” for years.
The economy has shrunk 26 percent, a fifth of the working population and some half a million Greeks have fled to other countries in search of jobs and a better life and to get away from the country’s political structure that holds down entrepreneurs and rewards unqualified loyalists.
Kevin Featherstone, who heads the Hellenic Observatory at the London School of Economics, told The Guardian that, “Greece has been saved in the sense of avoiding the armageddon of euro exit but how it has been saved is so disadvantageous that one can’t talk of a rescue or exit from crisis.”
More pension cuts that Tsipras said were a “Red Line,” he would never step over but jumped over will begin on Jan. 1 although he’s struggling to find some way to avoid that, and in 2020 comes new taxes on previously exempt low-and-middle income families and individuals who had been exempt while he failed to hunt down tax cheats or crush the oligarchy as he famously promised.
The middle class has been hardest hit with taxes as high as 70% of income earned on top of a punishing property tax surcharge Tsipras continued and hiked after swearing to end it while mocking previous governments for imposing it.
“In reality this exit will be a formality because in truth it isn’t going to change a thing,” Stratos Paradias, who leads the Hellenic Property Federation, told the paper.
He said his office is overwhelmed with people wanting advice on what to do as taxes are being based on what critics said were estimates of property being worth far more than it really is in a depressed atmosphere.
“Taxes are so high that the younger generation are refusing to inherit family homes because of the burden,” he said. “It’s disastrous. Last year 135,000 people filed court papers handing over real estate to the state. That’s four times more than five years ago and, in a figure, tells the story of Greece.”