The European nation has successfully completed a three-year bailout program but officials have warned the country is still very much in a rebuilding phase.

By Daniel Herborn

Posted on August 20, 2018

Greece will now be free to borrow money on global financial markets for the first time since 2010. Under the European Stability Mechanism (ESM), it had received US$70billion over the past three years.

The country also received financial assistance from the International Monetary Fund (IMF) of around US$290 billion. It was the biggest bailout in history.

After having further debt forgiven, Greece has been able to recapitalise its banks and reshape its economy yet officials have warned the country has not yet returned to pre-crisis prosperity.

Greece’s years of austerity

Greece initially fell into financial turmoil around the time of the global financial crisis in 2008. The full extent of its woes was not revealed until October 2009 however, when the new socialist government revealed the country had cavernous gaps in its accounts and the national deficit had stretched out to 12.5% of GDP.

Then Prime Minister George Papandreou formally requested a bailout for Greece in April 2010 from the EU, the IMF and the European Central Bank (ECB). The three organisations agreed to an initial rescue fund of US$126 billion within a fortnight.

The country then implemented austerity measures which were the subject of widespread protests. The following year, it received a second bailout of US$120 billion from the EU, IMF and ECB.

Further rounds of austerity measures and ongoing political unrest followed in the intervening years and by 2018 Greece was able to post a budget surplus and had reduced unemployment to under 20%.

“Greece can stand on its own feet”

“For the first time since early 2010 Greece can stand on its own feet. This was possible thanks to the extraordinary effort of the Greek people, the good cooperation with the current Greek government and the support of European partners through loans and debt relief,” said Mário Centeno, Board Chairman of the ESM, said in a statement.

“It took much longer than expected but I believe we are there,” Centeno said.

Greece’s creditors and the investment community as a whole will continue to closely scrutinise Greece’s performance before they fully re-engage with its rebuilding economy. The country only ranked 67th in the World Bank’s 2018 rankings for ease of doing business, the second worst rating of any EU member nation.

Aristos Doxiadis, the manager of a fund for technology start-ups, said the challenges Greek companies faced in attracting investment are immense: “We’re coming from a place where domestic demand is dead. The greatest challenge now is to create an environment where investment can take place.”

Greece also needs to ensure that it maintains a primary surplus or some of the debt forgiveness it was granted in a deal in June 2018 will be withdrawn. It needs to ensure this number stays above 3.5% of GDP until at least 2022.

Poverty levels in the country are also dangerously high, especially when considering the drastic cuts the nation has been forced to make to welfare spending. Per figures from the Organization for Economic Condition and Development, more than a third of Greece’s population of 10 million are now living in poverty.

Greek banks are also being hamstrung by non-performing loans. 48% of total loans outstanding are non-performing, a figure that is more than 10 times higher than the European average.