Friday November 28, 2014 Search
Weather | Athens
16o C
10o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Is Greece really back?

By Mohamed A. El-Erian

It has been two years since Greece narrowly avoided an exit from the euro area that could have been disastrous for the country and extremely challenging for Europe and the global economy. Although the country has made a lot of progress since then, markets are far too sanguine about its rehabilitation.

On June 17, 2012 -- exactly two years today -- when Greeks went to the polls in parliamentary elections seen as a referendum on the government's austerity measures, investors were right to be worried about the country's economic future. An exit from the single currency, with all the financial chaos that could entail, was a clear and present danger.

Now, the seemingly tentative coalition that emerged from those elections has steered Greece to relative safety. But the attendant sharp drop in the government's borrowing costs, and investors' hearty appetite for new issues of Greek sovereign and bank bonds, overstate the domestic improvements.

The rally in Greek assets has been turbocharged by a global quest for yield amid western central banks' extraordinary efforts to keep interest rates low. To hold on to foreign capital and reduce the chances of further instability, Greece must do more to improve its economic health.

The government of Prime Minister Antonis Samaras has achieved a lot over the past two years. It has narrowed the budget deficit, improved tax administration, reduced spending inefficiencies, and increased the transparency and accountability of government operations. The country has also reduced its trade deficit and the risks associated with what was a heavily overextended and undercapitalized domestic banking system.

That said, not all is well. After enduring a sharp collapse in economic activity, Greece is still far from the rebound in growth that it desperately needs.

At 27 percent, the unemployment rate remains alarmingly high, threatening the very fabric of society. The 51 percent rate of youth joblessness is particularly worrisome: At the initial and early stages of a working career, the longer the period of unemployment, the greater the risk of becoming unemployable, raising the frightening possibility of a lost generation.

On the financial front, Greeces debt burden remains too heavy at more than 180 percent of annual economic output. Such a large "debt overhang" tends to discourage the influx of new productive capital. Meanwhile, the composition of the country's creditors has shifted markedly toward foreign public lenders, including the European Central Bank and the International Monetary Fund, whose claims are senior to those of other creditors. While this makes Greece less subject to the whims of the market, it might also limit the country's ability to negotiate additional debt restructurings.

The combination of insufficient growth, high unemployment, social strains and excessive indebtedness has weakened political cohesion. Ominously, Greece saw a rise in support for anti-European Union candidates in the latest round of European Parliament elections -- so much so that there is more talk about the possibility of early elections for the national parliament.

For all Greece's achievements, it's important to recognize how much more remains to be done. [Bloomberg]

ekathimerini.com , Tuesday June 17, 2014 (15:04)  
Change of US president wont mean change of foreign policy
The presidential election paradox
SYRIZA needs a Plan B
Scraping together the 180 MPs will not be enough
Moscovici urges Athens to take necessary measures, make way for troikas return
The Greek government must take all the necessary measures so that troika inspectors return to Athens for their final assessment on Greece's reform program, EU Economic and Tax Commissioner P...
Venizelos urges Turkey to respect Cyprus EEZ
Ankara must respect Cyprus's exclusive economic zone (EEZ) if it wants UN-brokered reunification talks to resume, Greek Foreign Minister Evangelos Venizelos said ahead of a weekend visit to ...
Inside News
Seven-month stock slide comes to halt
The local markets seven-month slide came to an end in November, with the month providing a 5.17 percent boost to the benchmark, which looks more like a correction considering the previous p...
Forthnet subscription base grows to record level
Leading alternative telecom provider Forthnet, owner of the Nova satellite TV platform, announced on Friday a record number of subscribers at end-September, totaling 1.177 million. It also r...
Inside Business
SOCCER
PAOK is one win from Europa Leagues last 32
A late brace by Stefanos Athanasiadis gifted PAOK a precious win at Dynamo Minsk on Thursday, meaning that the Thessaloniki team is one win away from graduating from the group stage of the E...
BASKETBALL
First defeat for Olympiakos in Euroleague
Olympiakos suffered its first Euroleague loss of the season going down 89-70 at Laboral Kutxa on Thursday, although the Greek team remains the favorite to clinch the top spot in its pool. Th...
Inside Sports
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
RECENT NEWS
1. Seven-month stock slide comes to halt
2. Forthnet subscription base grows to record level
3. Greek retail sales post rise but deposits take a hit
4. Cyprus president urges probe into airline bidding
5. Aegean Airlines flying high, nine-month results show
6. Bank of Cyprus posts 5-mln-euro loss in Q3
more news
Today
This Week
1. Lebanese FM: Cyprus may be jihadi transit point
2. Child molester suspect photo released by police
3. Athens water supply 9-month profit falls 45 pct on lower charges
4. Greek economy expands 0.7 pct q/q in Q3
5. Armed man arrested on Thessaloniki campus
6. Change of US president won't mean change of foreign policy
Today
This Week
1. Give Greece a chance
2. Extremism from a bygone era
3. Scientists expand excavation of ancient Amphipolis
4. Greece paralyzed by major strike, flights cancelled
5. Piraeus nightclub shooting leaves 3 seriously injured
6. Coscos Greek unit adds multinational rail-freight client
Find us ...
... on
Twitter
... on Facebook
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright 2014, H KAΘHMEPINH All Rights Reserved.