Greece emerges from final bailout after eight years of austerity

Βut won’t repay a cent of its 289billion euro loan for another five years

Greece has emerged from its third and final bailout programme, after borrowing 289billion euro (£260billion) to fix its ailing economy – although officials warn the country still has a ‘long way to go’.

It means the country can now borrow again on international markets, having been effectively locked out by high interest rates for eight years.

The move comes after Greece saw its economy grow, unemployment fall and surplus in its budget and trade following years of heavy austerity.

New dawn: Greece has emerged from its third and final bailout programme, after borrowing 289billion euro (£260billion) to fix its ailing economy over eight years

New dawn: Greece has emerged from its third and final bailout programme, after borrowing 289billion euro (£260billion) to fix its ailing economy over eight years

The European Union, the European Central Bank and the International Monetary Fund loaned debt-wracked Greece a total of 289 billion euros ($330 billion) in three successive programmes in 2010, 2012 and 2015.

The final European Stability Mechanism (ESM) programme, which ended today, saw 62 billion euros (£55bn) of financial aid given to Greece to help it re-balance its economy and banking sector.

Greece is currently set to start repaying some of the loans in 2023, however a ten year extension has been requested following relief measures politically approved by the EU.

This means that if approved by the Board of Directors of the European Financial Stability Facility – which provides loans to euro zone members such as Greece – Athens will not have to start repaying their loans until 2033.

The economic reforms the creditors have demanded in return has brought Greece to its knees with a quarter of its gross domestic product (GDP) evaporating over eight years and unemployment soaring to more than 27 per cent.

Time to celebrate: Greek Prime Minister Alexis Tsipras is expected to hail the end of the bailouts with a televised address on Tuesday

Time to celebrate: Greek Prime Minister Alexis Tsipras is expected to hail the end of the bailouts with a televised address on Tuesday

But Greece has now returned to growth, its once vast public deficit has been turned into a solid budget surplus, and the jobless rate has fallen below 20 per cent, officials say.

‘For the first time since early 2010 Greece can stand on its own feet,’ said Mario Centeno, board chairman of the ESM in a statement.

‘This was possible thanks to the extraordinary effort of the Greek people, the good cooperation with the current Greek government and the support of European partners through loans and debt relief.

‘It took much longer than expected but I believe we are there.

Greek households, however, continue to feel the effects of unpopular and stinging austerity.

‘The reality on the ground remains difficult. The time for austerity is over, but the end of the programme is not the end of the road for reform,’ EU Economic Affairs Commissioner Pierre Moscovici said at the weekend.

Moscovici’s opinion is shared by Greece’s central bank governor, Yannis Stournaras.

‘Greece still has a long way to go,’ Stournaras said in an interview with the Kathimerini newspaper on Sunday.

He warned that if Greece backtracks ‘on what we have agreed, now or in the future, the markets will abandon us and we will not be able to refinance maturing loans on sustainable-debt terms’.

He also expressed concern that ‘if there is strong international turbulence, either in neighbouring Italy or Turkey or in the global economy, we will face difficulties in tapping markets’.

The Greek government estimates its financing needs are now covered until the end of 2022, opening up room for it to plan its return to the capital markets.

Prime Minister Alexis Tsipras, who is expected to hail the end of the bailouts with a televised address on Tuesday, said in June after the agreement by the eurozone ministers to put an end to the rescue programme that Greece could start focusing on a ‘social state’.

‘Now we have the opportunity to proceed with targeted reliefs, to proceed with tax reduction in 2019 and to support the social state and welfare,’ he said.

The country may have achieved budget surpluses – excluding debt repayments – of around four percent in 2016 and 2017, but its hands remain tied on social welfare spending.

Greece has already legislated for new reforms for 2019 and 2020 and will remain under supervision for several years.

The improving economic indicators are not yet translating into tangible improvements in the day-to-day lives of Greeks.

‘The bailout is over, but the shackles and the asphyxiation are still on,’ the opposition-friendly Vima newspaper wrote on Sunday.

Economics professor Nikos Vettas believes it is ‘imperative’ to generate ‘very strong growth’ in the coming years. Otherwise, ‘households that are in a very weak position due to 10 years of cumulative recession will continue to suffer’.

Greece, however, has gained some credibility among the international community.

‘The commitments assumed by Greece for the future are clear. I have no doubt that they will be respected,’ French Finance Minister Bruno Le Maire told Greek newspaper To Vima on Sunday, insisting that the country’s bailout exit was a ‘great success’.

source: Daily Mail