Greece is quietly backtracking in its reform process that is supposed to see it emerge from the bailout program this August, according to an analysis published on Wednesday by Bloomberg where the author urges caution as “growth is faltering and “prospects don’t look promising”, ahead of an election year too.
“Financial investors should curb their optimism,” according to the analysis which predicts that “Greece’s return to the markets and its economic recovery are likely to be bumpy and slow – especially if it continues to delay key reforms.”
Addressing a series of issues that hamper a decent economic rebound in the country, such as the poor consumption growth, the tax hikes and pension cuts planned, the unclear debt relief measures, the weak investment spending, and the failure to scale back domestic overrregulation, corruption and bureaucracy, the analysis highlights that “quietly the government has backtracked on important reform efforts such as privatizing key industries, where it continues to miss its targets.”
“A stalled recovery will mean no real boost in revenues to fund investments. [Greece’s] debt dynamics will also continue to result in a higher cost of financing,” the analysis warns investors: “Meanwhile, lack of clarity over debt relief will ultimately mean a costly re-entry into financial markets ... With a 176 percent debt-to-GDP ratio and little prospects for growth acceleration or healthy capital inflows, investing in Greece is not for the faint of heart.”
The analysis further observes that “despite progress with its primary fiscal targets and NPLs, rent-seeking and clientelism are still a feature of policymaking in Greece. Recent legislation by the SYRIZA government, for example, abolishes a 24-month limit to the renewal of short-term state labor contracts in favor of more permanent ones.”
The analysis does offer some hope, saying that New Democracy leader Kyriakos Mitsotakis “has said that he wants to help Greece’s supply side by restructuring NPLs, cutting corporate taxes and reducing bureaucracy for foreign investors. He has also declared that he has few qualms about having a leaner state in favor of boosting investment and jobs. That kind of governing program would be a welcome development.”