Greece emerges from bailouts relieved, but not euphoric

Odile DUPERRY
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Greece's Prime Minister Alexis Tsipras is likely to avoid any triumphalism over his country's exit from international bailout programmes

The youngest Greeks may not be able to remember what life was like beforehand: the third and last of the country's international bailouts comes to an end on Monday, and while Greece is faring better, it still bears the scars of eight years of austerity.

After Portugal, Ireland, Spain and Cyprus, Greece was the last eurozone member to benefit from an international bailout programme in the fallout from the eurozone crisis.

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

But the economic reforms its creditors demanded in return almost brought the country to its knees, with a quarter of its gross domestic product (GDP) evaporating over eight years and unemployment soaring to more than 27 percent.

The economy is now expanding and the jobless rate in May was back below 20 percent for the first time since 2011.

But "it would be arrogant to say that we did everything right in Greece", said Klaus Regling, head of the European Stability Mechanism, which is in charge of the current programme, in a German magazine interview last week.

Regling told the online edition of the weekly Der Spiegel that he felt "tremendous respect" for the Greeks, whose salaries and pensions had been cut by as much as a third during the crisis.

Nevertheless, many economists, such as Theodoros Stamatiou of Eurobank, argued that while bailout programmes were "unavoidable" in a country lagging far behind in reforms, they were also too harsh.

- No new collapse -

Leftist Prime Minister Alexis Tsipras and his then Finance Minister Yanis Varoufakis tried to soften the terms of the second programme when they came into power in January 2015.

But despite the resounding "No" of the Greek population to the international creditors in a public referendum, Tsipras -- faced with a possible ejection of Greece from the single currency area -- was compelled to sign a third bailout programme the following July.

Nonetheless, all of Greece's major political parties, including Tsipras's Syriza, are convinced of the need for serious reforms.

Economics professor Nikos Vettas regards this as a favourable development and says that "nobody really thinks any more that Greece will collapse", a view that appears to be widely shared.

But Toulouse University economics professor, Gabriel Colletis, is highly critical of the bailout programmes and believes Greece could be facing "inevitable social conflagration".

While the country achieved budget surpluses -- excluding debt repayments -- of around four percent in 2016 and 2017, its hands remain tied.

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

Still, this is a win-win situation and Greece will receive debt relief which the international ratings agency Fitch described as "substantial" as it upgraded the country's sovereign debt to "BB-" from "B".

Even at that level, Greek debt still remains in the non-investment grade or "junk" category.

But another ratings agency, S&P, last month raised its outlook for Greece to "positive," suggesting another upgrade could be coming soon.

- Is Greece's debt sustainable? -

The key question remains, however: whether, at 180 percent of GDP -- and the highest in the EU -- Greece's debt remains sustainable.

The IMF, for one, is not convinced and, as a result, was only willing to take on observer status in the third bailout programme.

Athens argues that -- as a result of the extended maturities for the loans decided by eurozone finance ministers in June -- its annual financing needs will remain below the critical threshold of the 20 percent of GDP.

"Not only is Greece's debt not unsustainable, it is in fact highly sustainable", one official insisted.

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

"The euro-area crisis is now long over... August 20 is the epilogue", ESM cief Regling told Der Spiegel.

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

Economics professor 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".

Against this backdrop, any triumphalism on the government's part about the ending of the bailout programmes would probably not go down well with the wider population. Especially in view of the deadly wildfires that killed 96 people near Athens just a month ago.

According to government-friendly newspapers, premier Tsipras will simply give a televised speech on Tuesday.

On Saturday, Ta Nea, an opposition-friendly daily, summed up sentiment with its headline: "August 21st, zero hour. The bailout is over, the nightmare continues."