Greece gets budget approval after eight years of austerity

After eight years of toil by the Greek people, the European Union says that Greece’s budget is no longer breaking the bloc’s rules.

Wednesday’s recommendation from the EU Commission to end the so-called excessive deficit procedure on Greece comes after a sharp improvement in the country’s finances following years of spending cuts and tax increases and a recession that saw a quarter of the economy wiped out and unemployment and poverty levels swell. “This is a very symbolic moment for Greece,” said Pierre Moscovici, the EU’s top economy official. “Greece is now ready to exit the Excessive Deficit Procedure, turn the page on austerity and open a new chapter of growth, investment and employment.”

Greece has been under the spotlight since 2009 when its budget crisis first emerged in the wake of a statistics scandal that showed the country’s public finances were in far worse shape than thought. Greece’s budget deficit was suddenly revised upward to around 15 per cent of annual GDP, way above an EU limit of 3 per cent.

As confidence in Greece fell, the country found itself unable to borrow money in bond markets.

By May 2010, it required an international bailout to avoid going bankrupt and it’s been reliant on rescue funds ever since. In return for the money, successive governments enacted wave after wave of austerity measures as well as economic reforms to get the books back into shape.

In many ways, they now are. In 2016, for example, Greece posted a surplus of 0.7 per cent.

If the Commission’s recommendation is cleared by member states, then only three EU countries would remain in breach of the rules - France, Spain and Britain. In 2011, when the global economy was starting to recover from the post-financial crisis recession, 24 of the EU’s then-27 members were in breach of the rules, which are more strictly applied to countries that use the euro currency.

Greece is hoping to exit its bailout era next year and is planning to start tapping bond markets, possibly in the next few months.

The recent release of 7.7 billion euros ($8.9 billion) of bailout funds means the country has enough money to pay its upcoming debts.

Being outside of the EU’s corrective procedures doesn’t mean Greece can go back to its profligate ways.