Greece is on course to economic recovery after reaching the end of its third bailout next month according to the key official in charge of providing financial assistance to euro area countries with financial problems. Klaus Regling, director of the European Stability Mechanism and its temporary predecessor the European Financial Stability Facility during the height of the financial crisis, was interviewed in German newspaper Handelsblatt.
He was quoted by Greek centre-right newspaper Kathimerini on Wednesday (4 June) as criticizing the Greek government and its former finance minister Yanis Varoufakis for having “embarked on a wrong path for six months, costing the Greeks billions” in 2015.
Things improved only after the government agreed to a new austerity program and painful structural reforms. Regling described Greece, contrary to other countries that had received financial assistance, as a “patient which had spent more than eight years in the intensive care unit”.
“Since 2016, the country whose deficit stood at 15 percent of economic output in 2009 is consistently at a black zero,” he said and is apparently convinced that the patient survived the cure. He did not mention that unemployment is still around 20 %, youth unemployment above 40 % and the national debt an unsustainable 180 % of GDP.
Kathimerini reported in 2016 that a Bank of Greece report showed that nearly half a million Greeks have left the country in search of better opportunities abroad since 2008 due to the financial crisis, with educated professionals among those leading the exodus. That brain drain has continued, making a recovery in Greece even harder.
Asked by The Brussels Times, Yanis Varoufakis declined to comment on the article in Kathimerini and referred to his own recent article (28 June) on the causes of the debt crisis and Greece’s new debt agreement.
“The Greek debt implosion, back in 2010, was the ugly symptom of the eurozone’s design flaws, which is why it triggered a domino effect across the continent. In 2015, the Greeks staged a rebellion, which Europe’s establishment ruthlessly crushed,” he writes.
Since 2010, Greece’s creditors have been practicing an extend-and-pretend strategy as though they were training for an Olympic event. “When bankers try to cover up bad loans on their books, they extend new loans to enable their insolvent borrowers to pretend to be servicing the original loan.”
In the new agreement the Greek state has been offered easy repayments until 2033 in exchange for continuing harsh austerity. “Any objective assessment of the Eurogroup’s recent deal on Greek public debt would conclude that it condemns Greece to permanent debt bondage.”
“I do believe the comments by Klaus Regling,” a well-informed citizen in Athens told The Brussels Times. “There is no doubt that the government became poorer but that did not cause a proportional impoverishment of the people in the same period.”
Greek newspapers are painting a contradictory picture of the economic situation, according to this person. On the one hand businesses have been closing in Athens; on the other hand new cafeterias have been opened. Salaries and pensions have been reduced but vacation booking has increased.
“There is a contradiction between reports of signs of people suffering financially and at the same time of signs of financial well-being,” he says. “Young people use high notes to pay for low expenses.”
He thinks that the economic situation will become better, especially if the EU continues its monitoring of the economy, but he is afraid that old habits will not allow his country to take off for good.
But it is difficult to foresee the future. According to the polls, a majority of the population is pessimistic about the future. Next parliamentary elections will be held not later than 20 October 2019.
“The looming question now is what will happen if the governing party Syriza loses next elections since the polls show that it trails behind National Democracy by 10-12 percentage points while internal discord is rampant.”
The Brussels Times