Greece’s return to the markets on Tuesday constituted a positive sign, but if reforms are not continued and the third bailout review is not swiftly concluded the country risks sliding back into recession, with social tension and more problems in obtaining financing from the markets, the economists of the Parliamentary Budget Office warned on Wednesday.
In its quarterly report the PBO estimated the economy would grow by 1.5-1.6 percent this year, undercutting the government’s estimate (1.8 percent) and stressing that the apparent rebound is fragile: “To make it clear, [the recovery] will be interrupted if the country leaves the path of reforms. The same will occur in case of political instability,” the PBO economists argued.
They did note that tapping the markets could be interpreted as a move expressing the government’s intention to fulfill its existing agreements (the supplementary memorandum of understanding and the letter of intent to the International Monetary Fund), thereby paving the way for the permanent tapping of markets after the end of the bailout program.
The report said there are four factors that will determine the continuity of bond issues for Greece: fiscal stability, sustained expansion (which requires reforms and the implementation of the bailout agreement), social stability and cohesion (through the remedy of inequalities, unemployment and poverty), and political stability with the greatest possible political consensus.
It went on to warn that the positive impact of the agreement reached last month regarding the second bailout review could prove temporary if the government sends mixed messages about its economic policy ahead of the third review. This would particularly concern the implementation of the 113 milestones of the adjusted bailout agreement and the letter of intent to the IMF. The 113 prior actions have to be implemented by the end of the third bailout in August 2018, with 95 of them having the end of the year as their deadline.