A welcome but wobbly ‘Grecovery’

The Greek economy is finally growing again. After a seven year, 27% fall in GDP – a slump to rival America’s Great Depression – output is now up on a year-on-year basis for the first time since 2008, revised figures show.

GDP is now growing at an annual rate of around 2%. A record tourist season has helped, while investment and consumption have picked up as public-spending cuts have eased.

But Greece’s problems are far from over. Its national debt comes in at a whopping 177% of GDP. That’s so high that some kind of debt restructuring – basically a partial default – looks inevitable. That will require tough talks with its creditors. Already the current round of talks, designed to secure the last slice of eurozone bail-out money for the country and pave the way for its exit from the rescue programme, has rattled investors. Yields on Greek ten-year bonds have jumped to over 8% in the past month as prices have slid.

The trouble is, the European Union wants Greece to make more reforms to its economy. But that’s not politically popular – and the anti-austerity Syriza party could soon replace the coalition government that has presided over Greece’s recovery. That could increase tension with its creditors, and reawaken fears of a messy Greek exit. It was the receding fear of a ‘Grexit’ that led to the recovery, says The Economist. “Should the jitters return, the Grecovery will surely wobble too.”