After a wrenching depression that wiped 26% off GDP in six years, there are glimmers of hope in Greece. The unemployment rate has fallen for four months in a row, although it remains around 27%. The drop in GDP is expected to reverse later this year, as tourism picks up. The government has produced a primary surplus (in other words, its books balance before interest payments). This has boosted optimism and allowed the government and banks to tap markets again.
Still, Greece isn’t in the clear yet. Its overall debt pile has hit almost 180% of GDP, which is completely unsustainable. It is eligible for more debt relief from its partners. But creditors won’t agree to this unless they’re satisfied that Athens is sticking to the reform programme drawn up by the European Union and the International Monetary Fund (IMF).
And doubts have crept in. A growing public backlash after six years of austerity ensured that the main opposition party, the anti-austerity, radical left Syriza group, topped last month’s European elections. That spooked the government into making several populist appointments. Meanwhile, the head of the supposedly independent tax agency was forced to quit.
Tax evasion has been one of Greece’s biggest problems, and its creditors want to ensure “that politicians do not start meddling with the tax agency again”, says Hugo Dixon on Reuters.
The IMF assessment of whether Greece should receive more aid and debt relief could now drag on until the new year, by which time the prime minister could have had to call early national elections: he only has a four-seat majority in parliament. With politics set to cast doubt on Greece’s bail-out again, the country could soon return to the front pages.