After years of international financial support, Greece’s third bailout program is due to finish in August this year. But what does this mean going forward? And despite appearing more stable economically, will confidence finally return – and with it, investment? The eurozone economy as a whole is much stronger, and the Greek government have made its debt more sustainable. Creditors have been relieved and the details of its debt restructuring have been prepared, and although its likely the plans won’t be implemented until the current program has ended, there are signs that the long term prospects could be brighter.
Yvan Mamalet, senior euro economist at Societe Generale commented: “Greece is definitely turning a corner, as it will exit its economic program successfully unlike the two other programs. On top of that, after growing by 1.3 percent in 2017, the Greek economy is likely to outperform the euro area this year. However, the medium-term fundamental situation remains problematic. Without significant debt relief measures, such as the ones recommended by the IMF (International Monetary Fund), the Greek debt level would most likely remain at (an) unsustainable level.”
When it comes to long term stability, the EU plays a vital role in ensuring enough money is invested in Greece’s economy. The government has already confirmed that the EU has approved a new cash injection under the bailout program, which should be paid in March – pending approval by lawmakers. The Commission has also announced new investment initiatives, which are designed to boost investment, generate jobs and growth and support SME’s in Greece – as well as in other member states like Romania and Bulgaria. It’s hoped that local businesses will directly benefit from expertise in several areas including international trade and operations.
George Markopouliotis, Head of Representation of the European Commission in Greece, said: “Greece has benefited greatly from the Juncker Plan, which so far is expected to trigger EUR 8.2 billion of investments in the country. But it can benefit even more: the joint SMEs support services venture will provide much needed technical assistance to Greek SMEs so that they can get more investment, improve their competitiveness and create much-needed jobs.”
Simon Barnes, Head of Advisory Services, European Investment Bank (EIB), added that “One key factor holding back sustainable economic growth in Greece is the limited availability of specialised SME advisory services. Through this new cooperation in Greece with EBRD, the European Investment Advisory Hub will bring together Greek and international partners to share valuable business experience and help firms across the country to flourish.”
Analysts, investors and market participants have all admitted they’re still cautious about the sustainability. However, a recent upgrade by the ratings agency Fitch, along with a 1.3% increase in GDP announced by Greece’s National Statistics Office are definitely positive signs of recovery. Unemployment, which peaked at 30% during the crisis, is now down to less than 20% and is continuing to fall. But, with the current program, which was worth €86 billion due to end this year, the EU and Greece both have a lot of work to do to make sure it can return to regular market financing.
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