July 7, 2014

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Financial Times: Signs of recovery for Greece

The signs of economic crisis are visible everywhere in Athens and yet there are also signs that the wrenching reforms imposed in return for the current  €172bn bailout by the EU and the International Monetary Fund are finally starting to bear fruit, says a lengthy report on the Financial Times.

Growth is set to turn positive this year and accelerate in 2015, driven by a boom in tourism, the revival of EU-backed infrastructure projects stalled by disputes with contractors, and the increasing availability of loans from newly recapitalised banks, says the British paper.

Greece’s successful return to international capital markets in April has boosted confidence in the country’s medium-term prospects whilst budget figures for the first five months show revenues on track to hit this year’s target of a primary surplus of 1.5 per cent of national output, it says.

“Success story” narrative

These developments contribute to the narrative of a Greek “success story” being promoted by prime minister Antonis Samaras and his government. However, more hurdles must be overcome before Greece can claim to be heading for a sustained recovery.

The first is the European Central Bank’s stress testing of eurozone banks this year, which is expected to give an accurate picture of Greek lenders’ non-performing loan portfolios, settle a long-running debate about the banks’ recapitalisation needs and lead to writedowns of bad debt on a scale that will prevent “zombie” companies from draining funds needed for healthy businesses to grow.

Then come long-awaited negotiations with the EU and IMF on debt relief. These are made more complicated by differences over whether Greece should be offered another debt “haircut” on top of its 2012 sovereign debt restructuring as the Fund would prefer, or settle for the commission’s proposal of a lower interest rate and a lengthening of maturities.

A third worry for Mr Samaras is the election by parliament next February of a new president to replace the incumbent Karolos Papoulias, who is retiring.

If parliament fails to elect a president with the required three-fifths majority, a general election must be held, which pollsters already forecast would lead to the formation of another coalition government. This would delay the completion of structural reforms aimed at boosting competition and making

Read More At: Financial Times

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