Has Greece turned the corner?

In the spring of 2012, Greece almost crashed out of the eurozone. Today, the coalition government is stable and the economy is showing signs of improvement. Credit rating agency Fitch has upgraded Greece's sovereign debt to a higher class of junk. Ten-year bond yields have fallen to under 9%, down from 30% a year ago.

Athens is hitting its fiscal targets and looks on track for a primary surplus in 2013 (a surplus before interest payments). So it is unlikely to have to implement more austerity next year, says Hugo Dixon on Reuters.com. The drive to improve competitiveness, "mainly through much lower wage costs, is finally bearing fruit too". Take tourism, which accounts for 17% of GDP. Revenues are set to rise by 9% this year.

Other businesses are also feeling more optimistic. Greece's economic sentiment index has risen to a three-year high. Meanwhile, Greece's privatisation programme has finally got off the ground and is attracting interest from foreign buyers. Analysts are hoping that growth will return in 2014 after a six-year slump.

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But Greece is not yet out of the woods, as finance minister Yannis Stournaras warns. There is yet to be a turnaround in the labour market, where unemployment has reached 27%, notes Capital Economics. So far firms seem to be firing fewer people, but head counts are still declining. This means that incomes and household spending are likely to fall further. And while lending to firms has picked up, it will be some time before any improvement in investment is likely to come through. Greece's exporters, meanwhile, remain "deeply uncompetitive", reckons Capital Economics. The forecasts underpinning the bail-out package look too generous.

Also worrying, says Landon Thomas Jr in The New York Times, is how little progress there has been on tax evasion. In the past two years only around e19m has been collected from Greece's 1,500 biggest tax debtors, who collectively owe an estimated e13bn which would wipe out this year's budget deficit. The political backdrop "remains fragile" too, notes Dixon. Elections must be called by 2015 and the radical left is only a point behind the centre-right in the polls. In sum, as Fitch puts it, Greece's "capacity for recovery is still in doubt".