Greek recovery still far off despite optimism

By Vasiliki Mitsiniotou

ATHENS (AA) - Greece is coming towards the end of its economic “disaster cycle” according to Prime Minister Alexis Tsipras but many economists believe the country has a long way to go before it reaches financial security.

Speaking at an international business fair in the northern city of Thessaloniki at the weekend, Tsipras told the audience that now that “all the signs and indicators show that the disaster cycle is closed, we can plan the next day, at least over a five year horizon.”

Tspiras used the event, during which it is customary for the premier to set out his policies for the coming year, to paint an optimistic picture of Greece’s near future.

Two years ago, as opposition leader, Tsipras declared the end to austerity policies and support for those on the bottom rung of the economy as Greeks faced the worst financial crisis in recent memory.

However, when his left-wing coalition took power, he failed to keep his promise and struck a third bailout deal with the country’s international creditors in July last year.

A year on and after further painful reforms, the government is still seeking a way out of the crisis.

According to the ANA-MPA news agency, Finance Minister Euclid Tsakalotos told his eurozone counterparts last week that Greece could expect three quarters of successive growth this year and claimed the economy was finally recovering.

However, nothing seems likely to stop the spiral of recession that has dominated since 2009.

“The government repeats the same policy as its predecessors and now presents a success story,” Apostolos Dedousopoulos, an economics professor at Panteion University, told Anadolu Agency.

- Cash outflow

“But the three key elements of the economy, such as exports, investment and private consumption, all steadily recede with a negative total overall despite some minor amendments from the government.

“Tourism is not able to reverse this climate and the index of retail sales is also negative.”

Dedousopoulos pointed to the huge flow of cash out of Greece as the country struggles to square its debts.

“Ten to 12 billion euros ($11.2 billion to $13.5 billion) for this year alone is hard to make up for,” he said. “It is like an open wound which keeps festering.”

Greek debt currently stands at 358.8 billion euros ($404.3 billion) or around 214 percent of Gross Domestic Product.

The unsustainability of the debt has led to calls for payments to be restructured to break free of the crippling commitment.

Late last month, in a decisive message to the country’s creditors, Tsipras told the Realnews newspaper that the EU was “sleepwalking towards a cliff” in enforcing austerity rules that created huge inequalities among members.

He said Greece expected debt relief to be in place by the end of the year so its economy could recover.

However, debt is just part of the problem.

- No room for optimism

Lambros Pechlivanos, an assistant professor at Athens University of Economics and Business, said the country faced a “multifactorial problem” that included factors such as the impact of capital controls imposed in June 2015, the inefficiency of public administration in exploiting foreign resources, the insecurity caused by geopolitical developments and heavy taxation.

“All this doesn’t allow much room for optimism,” he warned.

For most Greeks, who have seen their economic circumstances dramatically curbed over the last few years, the situation has created a similar feeling of debt burden as taxes rise.

According to latest General Secretariat for Public Revenue report, Greeks paid 1 billion euros more in taxes in June compared to the same month last year while the number of taxpayers with outstanding debts rose by 125,000 in a month to 4,128,962.

The latest additional state revenues come from a sales tax rise, further excise duties and an increase in advance tax payment for businesses and the self-employed.

The effects of this tax avalanche are overwhelming.

Ioanna Oikonomidou, 44, runs a grocery store in central Athens. She told Anadolu Agency people were buying less and less as their tax bills rise. “They say that they would like to buy more but can’t afford to,” she said.

Calling for an end to new taxes, she added: “We need to be able to plan our lives on safe ground. We can’t have new taxes every now and then destroying everything. We cannot take this anymore.”

Pensioners face a third and final round of cuts to their payments in October while the jobless face little change of getting back into work as the unemployment rate hits 23.5 percent.

- Promises not kept

“I have experienced the tax avalanche first hand,” 33-year-old Olga Tsikrika said in a cafe in central Athens. Olga has a degree in psychology and has been unemployed for months.

Without her family’s support, she wouldn’t be able to cope. “I feel betrayed,” she said. “Promises were made that were not fulfilled. I want to start working privately but I feel very insecure about this prospect.”

Interior designer Ioanna Mantzavinou, 39, recently found a job. “Things get worse every year and nothing works in our favor -- there are only taxes and unemployment. My plan for the future is to stay at work. I only wish my boss is able to keep me employed.”

According to Pechlivanos, the banks could play a vital role in Greece’s recovery.

“The reopening of the banking system… is a key parameter because the Greek economy hasn’t had a functional banking system for years now,” he said. “Once this is done, individuals and companies can plan ahead new activities and the banking system will be able to perform its role, which is to offer credit expansion to businesses and households.”

Dedousopoulos, meanwhile, sees a leading part to play for the government.

“The government is trapped in a narrative which is disorientating its efforts away from the necessary productive reconstruction of the economy,” he said.

“What is really needed in order to start a recovery of an economy such as the Greek one is a change of economic policy according to which the state doesn’t seek yearly surpluses but deficits.

“So far, the ongoing policies include small-scaled interventions in individual sectors and were believed to save the day while macroeconomic policies were ignored.

“It is like having a sick person with anemia and instead of giving him a transfusion you perform bloodlettings.”