Greece is not yet out of the woods. But there is a credible path that could lead the country back into the sunlight. That’s the main conclusion of a week I have just spent in the country.
Although the economy will have a terrible 2013, next year should be better. But the outlook is fragile: political crisis could yet rear its ugly head, tax evasion is rife and there’s the risk of external shocks.
Look first at the good news. Antonis Samaras’ coalition government has held together surprisingly well since it came to power last June following a period of political chaos, despite pushing through extremely unpopular measures. Samaras’ centre-right New Democracy party is neck and neck in the opinion polls with the radical left Syriza, the main opposition party. Samaras hasn’t suffered the plunging support of Spain’s Mariano Rajoy or France’s Francois Hollande.
Largely as a result of Samaras’ effective government, the troika – the European Commission, the International Monetary Fund and the European Central Bank – last week gave Greece a thumbs-up in its latest progress report. More bailout funds, which so far total around 200 billion euros, will be disbursed.
Last year’s trauma, when it looked like Greece might quit the euro, and the ongoing austerity will cause the economy to shrink by another 5 percent or so this year, taking the cumulative decline to around 25 percent. Unemployment will probably rise to about 30 percent.