GREECE TO EXIT LAST BAILOUT

Athens hopes to be able to borrow again in international markets after a nearly 9-year debt crisis

GREECE exits the last of its three bailouts on Monday and hopes to be able to borrow again in international markets after a nearly nine-year debt crisis that shrank the economy by a quarter and forced it to implement painful austerity measures.

The crisis has proven deeply traumatic for Greeks who had enthusiastically swapped drachmas for euros in 2001.

Adoption of the single currency ushered in an era of cheap credit that funded a splurge in private consumption and public spending that sent Greece’s budget and current deficits ballooning.

Since the debt crisis exploded in early 2010, four successive governments have fought to keep bankruptcy at bay, relying on the biggest bailout in economic history, more than €260 billion (RM1.21 trillion) lent by Greece’s eurozone partners and the International Monetary Fund (IMF).

As Athens now eyes a return to normality and reclaiming its economic sovereignty, the scars remain — banks are saddled with huge bad loan portfolios and Greece’s public debt load is still the highest in the eurozone, at 180 per cent of national output.

But sunshine is breaking through the clouds. The economy, which shrank by 26 per cent in the crisis years, has started to grow, tourism is booming and unemployment is slowly coming down — to 19.5 per cent from a peak of almost 28 per cent.

“If there is a lesson that we learned from the crisis it is that, under any circumstances, you must try to protect macroeconomic stability,” said Panos Tsakloglou, chief economist of the previous coalition government.

Greece’s economy grew for a fifth straight quarter in January-to-March, the expansion picking up pace to a yearly 2.3 per cent, a sign the recovery is gaining traction, helped by net exports. The EU Commission sees a 1.9 per cent growth this year.

But scepticism remains, including at the IMF, which sees the recovery strengthening and growth reaching two per cent this year and 2.4 per cent next year, but says “external and domestic risks are tilted to the downside.”

Post–bailout, Athens has committed to attain primary budget surpluses — excluding debt servicing outlays — of 3.5 per cent of gross domestic product until 2022, and 2.2 per cent until 2060.

Debt relief agreed with Greece’s eurozone partners in June, which extends maturities on some loans and softens the interest rate burden on others, will help cushion the country’s return to markets.

These debt relief measures, coupled with a €24 billion cash buffer, will help to improve debt sustainability over the medium term, facilitating Greece’s access to markets.