The Greek economy has been through a severe crisis but there are seeds of optimism at last. With strict monitoring to end next year, how robust will the country be by then?
The left-wing Syriza-led coalition was meant to change Greece’s fortunes. Instead it reneged on electoral pledges to kick out the country’s lenders, introduced restrictive capital controls and voted in favour of some of the most painful measures of Greece’s bailout package. The nation’s financial crisis has been defined as the most devastating economic period of its modern history, wiping out more than a quarter of its economy and plunging the country into debt to the tune of €320bn. In exchange for massive loans from the EU and the International Monetary Fund, Greece has implemented crippling tax hikes and spending cuts. And yet prime minister Alexis Tsipras, in office for nearly three years, has outlasted his recent predecessors, likely due to mainstream opponents being equally pro-bailout.
Repercussions have been far-reaching. The country has witnessed a mass exodus of educated workers, while extreme-right party Golden Dawn is a disturbing fixture. But some progress has been made: the country has overhauled its pension system, modernised its tax administration and privatised sectors. Yet many say it’s too slow. Greece is scheduled to exit its strict monitoring in August 2018 but will the country be out of the woods by then? “Governance will be a big question: will it be a country that has learnt a lesson and is moving ahead or will whoever is in power try to go back to the old practices?” says Wolfango Piccoli of political risk consultancy Teneo Intelligence.
Through it all a strong sense of solidarity and a Mediterranean zest for life have helped. Ample sunshine and endless beaches are not only good for morale: the Greek tourism industry has flourished, alleviating unemployment. Shipping and the chemicals industry are also stable. A revival in the agricultural sector has seen high-quality niche products, such as olive oil and spirits, being exported. While Greece’s economic tragedy continues, few believe this is the nation’s final act.
Alexis Tsipras is the country’s first unmarried leader, and a father of two, in a country where the Greek-Orthodox church weighs heavily. The young PM hoisted his once marginal leftist movement to power after promising to tear up painful lending agreements. He soon realised Athens had no room to manoeuvre and admitted to learning on the job, at a huge cost to the taxpayer. Despite his massive political turnaround and plunging approval ratings, he continues to rein in his government’s coalition parties to consistently push through controversial measures. But his biggest test lies ahead: can he lead Greece to recovery?
The economy is on the brink of returning to sustainable growth. But despite recording its first overall budget surplus in more than 20 years, Greece has unpredictable taxation, shuttered companies and weakened banks. “With stable leadership and strong institutions, foreign investment might start to come in,” says Megan Greene, chief economist at financial services group Manulife. New sectors such as the technology market are finding it hard to take off with high taxation and no lending.
Poised between Europe, Africa and Asia, tiny Greece has managed to maintain alliances in a tense neighbourhood. More recently, foreign minister Nikos Kotzias has attempted to open up communication with Iran, Russia and Israel as the country’s natural-gas reserves have ushered in new friendships. The administration has also invested time in traditional relationships with countries such as the US.“In spite of its ideological opposition to US policies, Syriza has finally contributed to a remarkable improvement of Greek-American relations,” says political analyst George Tzogopoulos. Both Greece and Turkey have honoured a EU-Turkey deal, which is aimed at stemming the flow of migrants to the Greek islands – it has welcomed tens of thousands of refugees in recent years with the help of volunteer groups and NGOs. The Cyprus reunification effort has also taken up a lot of Greece’s diplomatic attention.
The sight of heaving cafés and bars in Greece has many visitors asking: what crisis? It seems cash-strapped Greeks will give up everything but a drink in good company. With the domestic market stable over the past several years, producers have also managed to increase their exports by 64 per cent in five years; seven out of 10 bottles produced are now exported.
Tilos, a little-known island, is set to revolutionise the region. Home to some 400 residents, the island has been powered by an underwater cable leading from the diesel-oil power station of neighbouring Kos. But mayor Maria Kamma-Aliferi hopes Tilos will soon be energy independent and operate solely on clean energy. Renewable sources such as a solar park, wind turbine and battery storage system have been built and could prove to be a model for other remote islands.
Judiciary: Dealing with lawsuits effectively is conducive to a healthy economy. A massive backlog of cases, lengthy trials and red tape means judges take more than four years (or 1,580 days) on average to enforce a contract between parties that are caught in a commercial dispute.
Politics: Decades of clientelism and corruption have fostered a deep-seated mistrust in politicians across the board. Surveys show that a crushing majority – 88 per cent – of Greeks don’t trust their parliamentarians.
Unemployment: Greece has the EU’s highest unemployment rate and one of the most insecure job markets in the western world. One in two recent graduates are jobless despite high education levels and low wages. Without a radical change, more people will leave.
“Greece is in better shape but still needs help to sustain itself financially and ensure there’s pressure to implement reforms. The government is struggling because it’s in conflict between its ideology and market realities. Tsipras has shown Greeks there is no alternative other than reducing public-sector costs and improving the country’s appeal to foreign investors.”
“The political system will mature. That’s the positive. But the negative is that the reforms aren’t being carried out.”
“The big question for Alexis Tsipras now, since Syriza has lost so much support, is what is his goal over the next year or two. Is it to limit the damage? Or is it to leave the country in as good a state as he can?”
Political analyst, Macropolis
Tourism: Millions flock to Greece each year, doubling the country’s population. It isn’t just the beaches: it’s also benefited from tensions in nearby Turkey and Egypt.
Shipping: Greece has a leading position in the world’s shipping industry. Despite a poor image at home – largely due to cushy tax breaks – they continue to connect the world’s trade routes. The Greeks have been responsible for the largest volume of fleet growth since the start of 2010.
Centenarians: Recent scientific research indicates that the Mediterranean diet and Greek way of living can lead to a longer life. On the island of Ikaria, average life expectancy is over 90 and it is one of the five places on Earth with the highest concentration of centenarians.
Monocle comment: Greece’s economic woes and struggling political class are in desperate need of real transformation. While reforms are being implemented and tourism remains a saving grace, fractured politics and gloomy job prospects for young people means optimism in the country is struggling.