Greece’s economy soars after 10 years of suffering By Reuters

Lefteris Papadimas

ATHENS (Reuters) – A decade ago, Greece was in the midst of a massive debt crisis marred by years of austerity, hardship and instability. Now officials and investors say 2024 could be the year the rebound is finally complete.

The Greek economy is expected to grow by almost 3% this year, close to pre-crisis levels of 2009 and well above the euro zone average of 0.8%.

Borrowing costs have fallen below Italian levels, and banks bailed out during the crisis are set to be fully privatized for the first time in decades. It’s a move that some of Italy’s biggest investors see as the final sign of normalcy.

“This is groundbreaking because (state participation) has been disrupted,” said Wim-Hein Pals of asset manager Robeco, which recently bought shares in Greek banks.

“The Greek economy is in a good position to benefit from further growth in the future.”

Greece, whose debt crisis threatened to destroy the entire eurozone, is showing signs of recovery, at least on paper. Now the country faces new problems. Eurozone giants that once imposed stringent reforms on the economy are being held back by stagnation.

After being cut off from international markets for several years, Greece returned to its investment grade credit rating in 2023. When Greece’s bailout fund sold a stake in Bank Piraeus, one of Greece’s largest banks, last month, the sale was oversubscribed eight times.

But challenges still remain. Falling birth rates and labor shortages threaten long-term prospects, while the spread of climate-related disasters such as wildfires and floods is putting pressure on government finances.

Many ordinary Greeks reeling from the crisis say they see little difference as economists say it will take time to reap the fuller benefits of the rebound. To ensure long-term growth, countries must diversify beyond typical economic drivers such as tourism, real estate and services.

More than half of foreign direct investment in Greece, worth about 7.5 billion euros ($7.98 billion) as of 2022, comes from Nordic countries such as France and Germany, which are struggling with low growth. Greek exports of agricultural products, fuel and medicines – two-thirds of which are destined for the EU – fell by almost 9% last year. Economic growth slowed to 2% in 2023, partly due to sluggish performance in neighboring countries.

“Low expectations for growth in Europe affect Greece in two main ways: through pressure on exports and through rising currency costs,” said Nikos Betas, head of economic think tank IOBE.

Finances are revived

In 2009, Greece plunged into recession after decades of rampant tax evasion and overspending, and the government revealed a gaping hole in its finances that shocked markets around the world.

By 2015, three bailout loans worth 280 billion euros had been signed with the eurozone and the International Monetary Fund (IMF). In return, they agreed to austerity measures that cut public sector wages and pensions and sparked years of violent protests.

Since emerging from a bailout in 2018, Greece has revitalized its banking system and has relied solely on debt markets for its borrowing needs. In 2022, we repaid the IMF two years ahead of schedule.

Calmness has been greatly restored. Today, buskers sit in the shade of sour orange trees and entertain tourists in Athens’ central Syntagma Square, where 10 years ago protesters hurled petrol bombs at riot police to protest austerity measures.

Visits to the Acropolis, Greece’s best-known ancient site, reached 3.8 million people in 2023, almost four times more than at the height of the crisis.

Inequality still remains

But for many Greeks, the economic recovery has not translated into improved living standards.

Unemployment remains above 10%, the second highest in the European Union after Spain, and GDP per capita in terms of purchasing power is among the lowest in the EU, Eurostat data shows. According to the Ministry of Labor, the average monthly salary is 1,175 euros, 20% lower than 15 years ago.

Greece needs to develop sectors where investments are more long-term, “such as infrastructure projects and manufacturing,” IOBE’s Vettas said.

Unions staged a general strike on Wednesday, halting trains, buses, ships and taxis, and hundreds took to the streets demanding higher wages. Some people never recovered from losing everything when the economy collapsed.

Periklis Fryganas took out a bank loan in 2009 to expand its motorcycle repair shop in Athens, but the crisis saw sales fall 90% over the next six years. He closed his shop in 2020 and recently lost the apartment he shared with his unemployed wife and three sons after using it as collateral for a loan.

“The crisis broke many people and I was one of them,” said Fryganas, 61. “Things are only getting better for the ‘rich’; everyone else is losing.”

(1 dollar = 0.9404 euros)