Greece has officially come out of the crisis but it still faces three big challenges

Business insider
Pavel Ramírez, Business Insider España Aug. 23, 2018, 6:14 AM

Eight years and three bailouts later, Greece is seeing light at the end of what has been a very long tunnel: the European Stability Mechanism (ESM) announced last week that Greece had "successfully" emerged from the three-year financial assistance programme agreed between Athens and its international creditors in 2015.

Over three years, the country had to fork out €61.9 billion to finance economic recovery and bank recapitalisation. The ESM reported that the remaining €24.1 billion available under the programme's maximum threshold of €86 billion wasn't needed.

While things are looking up for Greece, its economic data still looks far from ideal and there are major challenges still facing Athens.



The country needs to improve is GDP
Greece is, indeed, emerging from its third bailout and it's encouraging to see that, according to the Hellenic Statistical Authority, the country grew at a rate of 2.3% during the first quarter of 2018 — the highest rate in the last decade.

The Eurogroup, consisting of the Eurozone's finance ministers, approved one final injection of €15 billion to relieve the country's public debt at the end of June, which amounted to 178% of Greece's GDP last April.

The Greek government is currently looking, however, to maintain a primary surplus of 3.5% of GDP by 2022 and 2.2% by 2060, without taking into account the interest on the debt.

Greece's unemployment rate is still the highest in the EU
Greece's unemployment rate continues to fall and, according to data from March, has fallen from its peak at 27.4% in 2013 to 20.1% - two points less than in the same month last year.

The country's job creation forecasts point to a gradual reduction in the rate of unemployment.

However, when compared with the EU average, Greece is still the country with the highest unemployment rate, just ahead of Spain and Italy.

There's still the question of how to manage the debt
Before becoming prime minister, Alexis Tsipras based his 2015 election strategy on restructuring Greece's debt to the Troika. In fact, he went so far as to put forward a referendum to accept or reject the measures imposed by the European Commission, the European Central Bank and the International Monetary Fund.

The problem was that the level of debt in 2010, when Greece was first bailed out, stood at 146.2% of its GDP. In spite of the aid from international organisations and the economic cuts drastically impacting public services such as Greece's health care system and even the salaries of civil servants, this debt not only failed to decrease but actually increased to alarming levels.

In 2016, Greece had its worst debt level ever, at 180.6% of its GDP. This increase coincided with the restrictions imposed by Tsipras to prevent a massive capital drain in the banking sector.

The current level of debt at 178% indicates that there's been a marginal improvement, but it's still a severe stumbling block to Greece's growth, without a doubt.

For this reason, the Eurogroup has agreed to a debt restructuring, including a ten-year extension of the loan maturity, as well as a ten-year deferral before repaying them, as well as paying interest.

"This is no ordinary moment; it's an exceptional moment, an historic one. The Greek crisis will end tonight in Luxembourg", said the Commissioner for Economic and Monetary Affairs, Pierre Moscovici, on August 17.

Now all that remains to be seen is whether, without the Troika, Greece can catch up with the rest of Europe.

Read the original article on Business Insider España.
This post has been translated from Spanish.
Copyright 2018. Follow Business Insider España on Twitter.