Greek economy surges after decade of pain

National Bank of Greece

18/04/2024 07:00

By Lefteris Papadimas
       ATHENS April 18 (Reuters) - A decade ago, Greece was in
the throes of a devastating debt crisis marked by years of
austerity, hardship and unrest. Now, officials and investors say
2024 could be the year its rebound is finally complete.
    The Greek economy is forecast to grow nearly 3% this year,
approaching its pre-crisis size of 2009 and far outpacing the
euro zone average of 0.8%.
    
    Borrowing costs have plummeted to below those of Italy, and
banks bailed out during the crisis are set to be fully
privatised for the first time in decades - a move some of the
country's largest investors see as a final sign of normality. 
    "With (the state's participation) out of the way, that's a
landmark," said Wim-Hein Pals of asset manager Robeco, which
recently bought shares in Greek banks.
    "The Greek economy is in good shape to benefit from further
growth going forward."
    The turnaround in Greece, whose debt crisis threatened to
cause the demise of the whole euro zone, is stark - on paper at
least. Now the country faces a novel problem: being held back by
stagnation in the same euro zone giants that once imposed strict
reforms on its economy.    
    After years shut off from international markets, Greece
returned to investment grade credit rating in 2023. When the
state's bailout fund last month sold its stake in Piraeus Bank
 BOPr.AT , one of the country's largest, the sale was
oversubscribed eight times. 
    Challenges remain, however. Falling birthrates and labour
shortages threaten the long-term outlook, and the spread of
climate-related disasters like wildfires and floods have
strained government finances. 
    Many ordinary Greeks reeling from the crisis say they see
little difference as economists say the wider benefits of the
rebound will take time. To ensure long-term growth, the country
needs to diversify beyond the typical economic drivers of
tourism, real estate and services. 
    More than half of foreign direct investment into Greece,
which totalled about 7.5 billion euros ($7.98 billion) in 2022,
comes from northern European countries like France and Germany
that are struggling with weak growth. Greek exports, such as
agricultural goods, fuel and pharmaceutical products - two
thirds of which head to the EU - fell almost 9% last year.
Economic growth slowed to 2% in 2023, partly a result of its
lagging neighbours. 
    "The lower expectations for growth in Europe affect Greece
in two main ways. Through pressure on exports... and through the
higher cost of money," said Nikos Vettas, head of economic think
tank IOBE.
    
    FINANCES REVIVE
    Decades of rampant tax evasion and overspending caught up
with Greece in 2009, when it went into recession and the
government revealed a giant hole in its finances that sent
shockwaves across global markets. 
    By 2015, it had signed three bailouts with the euro zone and
the International Monetary Fund worth 280 billion euros. In
return it agreed to austerity measures that slashed public
sector wages and pensions, and triggered years of violent
protests. 
    
    Since Greece emerged from the bailout in 2018 it has revived
its banking system and has relied solely on debt markets for its
borrowing needs. In 2022, it paid off the IMF two years ahead of
schedule.
    Calm is largely restored. In Athens' central Syntagma
Square, where 10 years ago protesters would hurl petrol bombs at
riot police in protest at austerity measures, today buskers
entertain tourists who sit in the shade of its sour orange
trees. 
    Visits to the Acropolis, Greece's best known ancient site,
hit 3.8 million in 2023, nearly four times the number seen at
the height of the crisis. 
    
    INEQUALITY REMAINS
    For many Greeks though, economic recovery has not translated
into improved living standards.
    Unemployment remains above 10%, the second highest in the EU
after Spain, and GDP per capita in purchasing power is among the
lowest in the bloc, Eurostat data show. The average monthly
salary of 1,175 euros is 20% lower than 15 years ago, according
to labour ministry figures.
    
    Greece needs to develop sectors where investments are more
long term, said Vettas from IOBE, "like infrastructure projects
and manufacturing." 
    Unions held a general strike on Wednesday in which trains,
buses, ships and taxis were halted and hundreds took to the
streets calling for higher wages. Some people haven't recovered
from losing everything when the economy tanked.
    Periklis Fryganas took out a bank loan in 2009 to expand his
motorcycle repair shop in Athens, only for the crisis to reduce
his turnover by 90% over the next six years. He closed the shop
in 2020 and recently lost an apartment he shared with his
unemployed wife and three sons after using it as collateral for
the loan. 
    "The crisis broke a lot of people and I was one of them,"
Fryganas, 61, said. "Things are getting better only for the
'rich ones', all the others are lοsing."



($1 = 0.9404 euros)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Greek GDP rebounds    https://reut.rs/3UlZyyE
Greek government debt to GDP higher than pre-crisis level    https://reut.rs/4aXxbfp
Unemployment in Greece remains higher than EU as a whole    https://reut.rs/3UkGTD5
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Lefteris Papadimas; Editing by Edward McAllister
and Susan Fenton)
 ((lefteris.papadimas@thomsonreuters.com; +30 210 3376477;
Reuters Messaging: lefteris.papadimas.reuters.com@reuters.net))