Friday October 24, 2014 Search
Weather | Athens
19o C
12o 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, Greece’s 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)  
Tension for tension’s sake?
Testing ground
Defusing a crisis
PM needs to step up
Greek private workers´ union calls 24-hour strike for November 27
The country's umbrella union representing workers in the private sector, known by its Greek acronym GSEE, on Friday called a 24-hour strike for November 27 to protest austerity measures bein...
Finance Minister appeals for support for amendments ahead of vote
Finance Minister Gikas Hardouvelis on Friday called on MPs across the political spectrum to support a series of legislative amendments proposed by his ministry, including a recommendation to...
Inside News
ECB bank assessment to show 6-billion-euro capital gap, Citi says
The euro area’s biggest banks will show a 6 billion-euro ($7.6 billion) capital gap in the European Central Bank’s tests of the quality of their assets and ability to withstand economic shoc...
ECB vies for third time lucky in European stress tests
For the European Central Bank, success as the euro area’s financial supervisor may begin this weekend with a few failures. At noon in Frankfurt on October 26, investors will learn which of t...
Inside Business
SOCCER
Panathinaikos snatches point at Eindhoven
Panathinaikos offered its fans a glimpse of its glorious past in European competitions snatching a draw at PSV Eindhoven, on an otherwise bad night for Greek soccer in the Europa League, as ...
BASKETBALL
Greens succumb to first loss at Bayern
Panathinaikos’s unbeaten run in all competitions came an end on Thursday as the Greek champion lost 81-75 at Bayern Munich for the Euroleague. Bayern is a team that improves every year, and ...
Inside Sports
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Greek private workers´ union calls 24-hour strike for November 27
2. Finance Minister appeals for support for amendments ahead of vote
3. Credit line only open to Greece if it meets economic targets, sources say
4. ECB bank assessment to show 6-billion-euro capital gap, Citi says
5. Venizelos slams Turkey for ´flagrant violation of international law´ off Cyprus
6. ECB vies for third time lucky in European stress tests
more news
Today
This Week
1. Woman killed in tram accident in Floisvo, south of Athens
2. Clocks to go back 1 hour on Sunday
3. ECB vies for third time lucky in European stress tests
4. Cyprus GDP upgrade seen as boosting bailout exit plans
5. Cyprus president to be released from hospital on Friday following readmission
6. Venizelos slams Turkey for 'flagrant violation of international law' off Cyprus
Today
This Week
1. The past, present and future of the Greek debt crisis
2. Greece’s closed society is central to its current malaise
3. Coalition shooting itself in the foot
4. Greece must stick to reforms, says Schaeuble
5. At least 11 banks to fail European stress tests, three in Greece, report says
6. Cyprus to block Turkey's EU talks after EEZ violation
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.