Achieving an inclusive and sustainable recovery in Greece

by Mauro Pisu & Tim Bulman

OECD
April 30, 2018

Greece is finally recovering from a deep depression. In 2017 GDP expanded by 1.3%, according to initial estimates, and is projected to accelerate to 2% in 2018 and 2.3% in 2019 (Figure 1). Labour market reforms have improved competitiveness and exports are leading the expansion. Overall the economy is becoming more open. Exports rose from 24% of GDP in 2008 to 34% in 2017. Employment is rising strongly while the external and fiscal imbalances are being addressed. Public finances are outperforming European Stability Mechanism (ESM) Stability Support programme’s targets, helping to restore fiscal credibility. Financial markets are taking notice, with bond spreads falling and agencies upgrading their ratings of Greece’s public debt.

Despite these positive developments, the long crisis has left deep scars in the society that have yet to heal. GDP per capita is still 25% below its pre-crisis level. The public debt is still high. Wages are low. Though poverty has stabilised, it remains near a record high, especially among the young and families.

The OECD’s 2018 Economic Survey of Greece suggests that maintaining the reform momentum and strengthening reform ownership will be essential to sustaining the recovery and moving towards a more inclusive and prosperous society. Keeping the reform momentum is crucial to tackle the three key challenges highlighted in the 2018 Survey: Improving debt sustainability, sustaining job growth and reducing poverty, boosting investment.

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Read the OECD 2018 Economic Survey for Greece

Relief for Greece? The debt dilemma facing creditors

by Jim Brunsden, Mehreen Khan & Kerin Hope

Financial Times
April 26, 2018

Greece is approaching a momentous moment: the end of eight years of international bailouts that forced the country into unprecedented belt-tightening in exchange for a cash lifeline from eurozone governments and the International Monetary Fund.

But even as the August 20 end date for Greece’s support programme looms into view, Athens knows the next few weeks will be crucial in determining relations with its creditors and the scale of its debt repayments for years, if not decades, to come.

Eurozone finance ministers will gather in Sofia on Friday to press ahead with negotiations that are supposed to deliver a political deal by June on an “exit package” for Greece. It is intended to ensure the country can smoothly return to the sort of normal market financing that most nations enjoy.

But that will require eurozone governments to tackle something they have avoided for years: how much debt relief Athens will be allowed.

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Greece’s Creditors Close to Compromising on Debt

by Viktoria Dendrinou

Bloomberg
April 21, 2018

Greece’s creditors are getting closer on a deal to ease the country’s debt burden, according to Eurogroup President Mario Centeno.

Greece’s 86-billion euro ($106-billion) bailout program is set to run out in August, and creditors are working on finding a compromise on debt repayments that would help to manage the country’s financing needs after it stops receiving international aid. A debt deal would also allow the International Monetary Fund to participate in the current bailout.

“The positions today are much closer than they used to be before,” Centeno, who is Portugal’s finance minister and chairs the meetings of his euro-area counterparts, said in an interview in Washington. “We still have a final mile to go but there is a positive sentiment around the table so I think that reflects a true willingness to be part of the program.”

Further easing Greek debt is a key precondition for the Washington-based IMF before it can participate in the country’s program. While the IMF has co-financed Greece’s first two bailouts it hasn’t yet activated its third one, arguing the euro area must arrange for more debt sustainability. But the participation of the fund, even a few months before the end of the bailout, is important for some countries including Germany, who see the IMF coming on board as a seal of approval that will offer credibility to the bailout.

A “committed presence” by the IMF will also help with market confidence, Centeno said.

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Greek parliament ends probe into bribery allegations

by Kerin Hope

Financial Times
April 19, 2018

Greece's parliament has ended a probe into allegations that 10 senior politicians, including two former prime ministers, the governor of the central bank and the country's current EU commissioner, accepted millions of euros in bribes from the Swiss drug producer Novartis.

An all-party parliamentary committee decided late Wednesday night that it was not competent to pursue the case.

The committee will hand back the case to a special prosecutor to investigate possible money-laundering by the 10 accused, a parliamentary spokesperson said. An anti-corruption prosecutor has already ordered bank accounts belonging to the politicians to be opened as part of the probe.

All those accused have denied wrongdoing, claiming they were targeted by the leftwing Syriza government in a drive to undermine the credibility of its political opponents.

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Tsipras Fights on All Fronts as Greece Is Back in the Spotlight

by Eleni Chrepa

Bloomberg
April 16, 2018

Consider what Greek Prime Minister Alexis Tsipras is up against.

As Greece prepares to free itself from an eight-year European bailout, its 43 year-old premier is confronting challenges at home and abroad. On the domestic front: preparations for post-bailout economic life and the first general election since the end of the program, including feuds with both allies and rivals. On the foreign-policy front: increased tensions with traditional rival Turkey and regional instability stemming from a dispute over a neighboring country’s name.

Tsipras’s ability to navigate through all this could determine just how stable the country and its region will be in coming years, experts say, and the European Union, the U.S. and the North Atlantic Treaty Organization are all watching with interest.

“The worst problem for Tsipras, for the government, but also for Greece is the evolving ‘rogueness’ of Turkey,” said Aristides Hatzis, a professor of law and economics at the University of Athens. “Diminishing American influence on the region is a destabilizing factor and the stakes are very high,” Hatzis said, adding that Greece is not a primary concern for Turkey, but a part of an overall plan by President Recep Tayyip Erdogan to establish hegemony in the region.

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How to Solve the Greek Debt Problem

by Jeromin Zettelmeyer, Emilios Avgouleas, Barry Eichengreen, Miguel Poiares Maduro, Ugo Panizza, Richard Portes, Beatrice Weder di Mauro, & Charles Wyplosz

Peterson Institute for International Economics
Policy Brief 18-10
April 2018

Greece’s debt currently stands at close to €330 billion, over 180 percent of GDP, with almost 70 percent owed to European official creditors. The fact that Greece’s public debts must be restructured is by now widely accepted. What remains controversial, however, is the extent of debt relief needed to make Greece’s debt sustainable.

This Policy Brief argues that the debt relief measures outlined by the Eurogroup will not be sufficient to restore the sustainability of Greece’s debt. At the same time it shows that Greece’s debt sustainability can in fact be restored without aggravating moral hazard—i.e., encouraging future governments in Greece and elsewhere in the euro area to take risks in the belief that they will be bailed out—and within the framework of EU law, in particular Article 125 of the Lisbon Treaty, which prohibits EU members from assuming liability for the debts of other members.

It concludes that only conditional face value debt relief, in combination with the measures already considered by the Eurogroup, would restore Greece’s debt sustainability with reasonable confidence. Furthermore, if the debt relief is structured in a way that creates incentives for additional fiscal adjustment, as proposed in this Brief, the amount of face value debt relief required could be modest—on the order of 10 to 15 percent of the outstanding official debt.

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Uber to suspend service in Greece after new legislation

Reuters
April 5, 2018

Ride-hailing service Uber said on Thursday it would suspend its licensed service in Greece after the approval of local legislation which imposes stricter regulation on the sector.

Uber, which operates a licensed service in the Greek capital, has faced opposition from local taxi drivers who accuse it of taking their business.

“New local regulations were voted on recently with provisions that impact ride-sharing services,” Uber said in a blog post. “We have to assess if and how we can operate within this new framework and so will be suspending uberX in Athens from next Tuesday until we can find an appropriate solution.”

Uber operates two services in Athens: UberX, which uses professional licensed drivers, and UberTAXI, which uses taxi drivers.

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