Greece’s Economy Shows Tiny Signs of Recovery, Warning Signs Remain

December 26, 2017

ATHENS – While Prime Minister Alexis Tsipras is seeking debt relief, Greece’s economy expanded slightly for a third straight quarter this year for the first time in more than a decade although critics said the government is using accounting tricks to paint a rosy picture.

The Gross Domestic Product (GDP) grew 0.3 percent in the three months through September after expanding a revised 0.8 percent in the previous quarter, the Hellenic Statistical Authority said earlier. From a year earlier, GDP grew 1.3 percent.

The backdrop though isn’t as optimistic as the ruling Radical Left SYRIZA, in negotiations with the country’s creditors, has agreed to more austerity measures for 2018, when three bailouts of 326 billion euros ($386.52 billion) run out at the end of August, and automatic spending cuts could be triggered if fiscal targets aren’t met.

While Tsipras has taken credit for what he said is a recovery, building a primary surplus – which doesn’t include interest on the debt he said can’t be repaid, nor the cost of running cities and towns, state enterprises, social security and some military expenditures – he hasn’t mentioned it was done by reneging on anti-austerity promises.

The government has also slowed or stopped payments to vendors and admitted adding to the surplus by deliberately overtaxing the middle-class so Tsipras could hand out holiday bonuses to low-income pensioners and unemployed youth in what critics said was a transparent bid to buy votes and offset plummeting in polls.

While the third straight quarterly expansion provides some economic stability as the government tries to make a clean break from its bailouts and return to markets, the slowdown in the pace of growth compared with the second quarter will make it harder to hit its 1.6 percent full-year growth forecast this year, analysts said.

“To reach the 1.6 percent growth target for 2017 as a whole, the Greek economy would now have to expand by 1.2 percent over the last quarter of the year,” said Bloomberg economist Maxime Sbaihi. “That’s too high a bar: an expansion of half that pace is more likely in the fourth quarter. It would bring the annual growth rate to 1.4 percent only — closer but still below the goal.”


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