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Challenges remain for Greece as bailout exit approaches

Challenges remain for Greece as bailout exit approaches

Mubasher: As Greece leaves the last of its three bailouts on 20 August after an almost nine-year debt crisis, the embattled country still faces challenges.

While Athens is now looking to return to normality and re-gain its economic sovereignty, Greek banks are still burdened with huge bad loan portfolios, while the country’s public debt remains at the highest level in Europe, accounting for 180% of national output.

However, the Greek economy is heading for growth, as tourism is flourishing and unemployment is waning towards 19.5% from roughly a peak of 28%.

In a sign of recovery, Greek economy sustained growth between January and March for the fifth quarter in a row, accelerating to an annual rate of 2.3%, on the back of higher net exports, while the European Commission (EC) projects a 1.9% expansion for this year.

Greece is aiming primary budget surpluses, less debt servicing outlays, to account for 3.5% of gross domestic product (GDP) until 2022, and 2.2% until 2060.

Under the debt relief agreement reached with Greece’s European partners, maturities would be extended on some loans, and interest rates would be lowered, which would secure the debt-saddled country’s return to markets.

Along with a EUR 24 billion ($27.39 billion) cash buffer, the relief measures would foster debt sustainability over the medium range, aiding Greece’s return to the markets.

Nevertheless, “external and domestic risks are tilted to the downside,” the International Monetary Fund (IMF) warned, saying that uncertainty about the long-term sustainability still persists. A “realistic” reconsideration of assumptions for primary balance targets and economic expansion would be required.

“Most people have been taxed dry, people are completely immersed in paying the tax man, with little money left on the side to put into your business and therefore improve and grow,” emeritus professor of history Thanos Veremis at Athens University told Reuters, describing the bailout exit as “jumping out of the frying pan into the fire.”