Italy ‘star’ among bailout economies, Cyprus ‘roar­ing ahead’

Financial Mirror (Cyprus) - - FRONT PAGE -

With re­cent events in Greece bring­ing bailouts back into the head­lines, PwC econ­o­mists have as­sessed how the five Eu­ro­zone bailout economies – Cyprus, Greece, Ire­land, Por­tu­gal and Spain – have been per­form­ing.

The anal­y­sis shows that de­spite be­ing the first to en­ter a bailout in 2010, Greece is now back to square one. Where do the other pe­riph­eral economies stand on their re­cov­ery path?

Ire­land has been the ‘poster boy’ of eco­nomic re­form in the pe­riph­eral economies. Ire­land grew by 5.2% in real terms in 2014 and PwC econ­o­mists ex­pect out­put to ex­pand by a fur­ther 3.9% this year. Ire­land was the first of the bailed-out pe­riph­eral economies to see GDP break through its pre-cri­sis out­put level.

Ire­land – the star per­former:

Spain – fi­nan­cial sec­tor restruc­tur­ing is work­ing:

PwC econ­o­mists ex­pect strong growth of around 3% this year to grad­u­ally im­prove the fi­nan­cial sys­tem’s prof­itabil­ity and fur­ther re­duce non-per­form­ing loan ra­tios. Spain has also kept its struc­tural re­form mo­men­tum go­ing in the past 12 months with pol­icy aimed at bring­ing down its high un­em­ploy­ment rate in the medium term. For these rea­sons, Spain is placed highly on the bailout path and is ex­pected to ex­ceed its pre-cri­sis GDP level by 2017.

Por­tu­gal – com­ing along but work still to do:

Por­tu­gal has also made progress since the be­gin­ning of its bailout, but not to the same ex­tent as Ire­land and Spain. The econ­omy is ex­pe­ri­enc­ing a cycli­cal up­turn, grow­ing in 2014 for the first time since 2010. But it still has to deal with a few struc­tural is­sues. For ex­am­ple, its public debt to GDP ra­tio stands at 130%, the sec­ond high­est of the five bailout economies.

Greece has fallen be­hind Cyprus, which has now shifted its re­form at­ten­tion from public fi­nances ¯with the gov­ern­ment post­ing a healthy pri­mary sur­plus of 2.9% of GDP ¯to struc­tural re­forms in the health and telecom­mu­ni­ca­tions mar­kets. Cyprus is there­fore still at

Cyprus – roar­ing ahead:

the ‘re­form, re­form, re­form’ stage mak­ing de­cent progress.

Ac­cord­ing to PwC econ­o­mists, there are three things that busi­nesses should watch out for in the Eu­ro­zone over the com­ing weeks and months:

* The pol­icy re­sponse to any ‘wob­bles’ in the latest Greek bailout dis­cus­sions; * Any signs of strength­en­ing growth in the pe­riph­ery; * The prepa­ra­tions for the Euro­pean Bank­ing Au­thor­ity (EBA) banks stress tests, which will be car­ried out next year.

“Over the longer-term, the big is­sue is the high stock of public, and in some cases pri­vate, debt. Achiev­ing pri­mary sur­pluses should help to sta­bilise public debt lev­els,” said PwC se­nior economist Richard Boxshall.

“But the real ben­e­fits will come through stronger nom­i­nal GDP growth rates, par­tic­u­larly once in­fla­tion lev­els re­vert back to their tar­get rate of around 2%.”


its pro­gramme, but

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