Greek economy surges after decade of pain
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[April 18, 2024] By
Lefteris Papadimas
ATHENS (Reuters) - A decade ago, Greece was in the throes of a
devastating debt crisis marked by years of austerity, hardship and
unrest. Now, officials and investors say 2024 could be the year its
rebound is finally complete.
The Greek economy is forecast to grow nearly 3% this year, approaching
its pre-crisis size of 2009 and far outpacing the euro zone average of
0.8%.
Borrowing costs have plummeted to below those of Italy, and banks bailed
out during the crisis are set to be fully privatized for the first time
in decades - a move some of the country's largest investors see as a
final sign of normality.
"With (the state's participation) out of the way, that's a landmark,"
said Wim-Hein Pals of asset manager Robeco, which recently bought shares
in Greek banks.
"The Greek economy is in good shape to benefit from further growth going
forward."
The turnaround in Greece, whose debt crisis threatened to cause the
demise of the whole euro zone, is stark - on paper at least. Now the
country faces a novel problem: being held back by stagnation in the same
euro zone giants that once imposed strict reforms on its economy.
After years shut off from international markets, Greece returned to
investment grade credit rating in 2023. When the state's bailout fund
last month sold its stake in Piraeus Bank, one of the country's largest,
the sale was oversubscribed eight times.
Challenges remain, however. Falling birthrates and labor shortages
threaten the long-term outlook, and the spread of climate-related
disasters like wildfires and floods have strained government finances.
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Many ordinary Greeks reeling from the crisis say they see little
difference as economists say the wider benefits of the rebound will take
time. To ensure long-term growth, the country needs to diversify beyond
the typical economic drivers of tourism, real estate and services.
More than half of foreign direct investment into Greece, which totaled
about 7.5 billion euros ($7.98 billion) in 2022, comes from northern
European countries like France and Germany that are struggling with weak
growth. Greek exports, such as agricultural goods, fuel and
pharmaceutical products - two thirds of which head to the EU - fell
almost 9% last year. Economic growth slowed to 2% in 2023, partly a
result of its lagging neighbors.
"The lower expectations for growth in Europe affect Greece in two main
ways. Through pressure on exports... and through the higher cost of
money," said Nikos Vettas, head of economic think tank IOBE.
FINANCES REVIVE
Decades of rampant tax evasion and overspending caught up with Greece in
2009, when it went into recession and the government revealed a giant
hole in its finances that sent shockwaves across global markets.
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A man looks at the Acropolis and the cityscape in Athens, Greece,
April 12, 2024. REUTERS/Louisa Gouliamaki/File Photo
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By 2015, it had signed three bailouts with the euro zone and the
International Monetary Fund worth 280 billion euros. In return it
agreed to austerity measures that slashed public sector wages and
pensions, and triggered years of violent protests.
Since Greece emerged from the bailout in 2018 it has revived its
banking system and has relied solely on debt markets for its
borrowing needs. In 2022, it paid off the IMF two years ahead of
schedule.
Calm is largely restored. In Athens' central Syntagma Square, where
10 years ago protesters would hurl petrol bombs at riot police in
protest at austerity measures, today buskers entertain tourists who
sit in the shade of its sour orange trees.
Visits to the Acropolis, Greece's best known ancient site, hit 3.8
million in 2023, nearly four times the number seen at the height of
the crisis.
INEQUALITY REMAINS
For many Greeks though, economic recovery has not translated into
improved living standards.
Unemployment remains above 10%, the second highest in the EU after
Spain, and GDP per capita in purchasing power is among the lowest in
the bloc, Eurostat data show. The average monthly salary of 1,175
euros is 20% lower than 15 years ago, according to labour ministry
figures.
Greece needs to develop sectors where investments are more long
term, said Vettas from IOBE, "like infrastructure projects and
manufacturing."
Unions held a general strike on Wednesday in which trains, buses,
ships and taxis were halted and hundreds took to the streets calling
for higher wages. Some people haven't recovered from losing
everything when the economy tanked.
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Periklis Fryganas took out a bank loan in 2009 to expand his
motorcycle repair shop in Athens, only for the crisis to reduce his
turnover by 90% over the next six years. He closed the shop in 2020
and recently lost an apartment he shared with his unemployed wife
and three sons after using it as collateral for the loan.
"The crisis broke a lot of people and I was one of them," Fryganas,
61, said. "Things are getting better only for the 'rich ones', all
the others are lοsing."
($1 = 0.9404 euros)
(Reporting by Lefteris Papadimas; Editing by Edward McAllister and
Susan Fenton)
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