Interview: No complacency for post-bailout period in Greece, says expert

Source: Xinhua| 2018-08-20 19:34:16|Editor: xuxin
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By Alexia Vlachou

ATHENS, Aug. 20 (Xinhua) -- Greece does not have the luxury of a period of complacency after the exit from the bailout-program era on Monday, due to uncertainty beyond its borders, a Greek expert has warned while speaking to Xinhua.

After the end of the third bailout since 2010 which helped Greece avert financial meltdown and return to growth, the debt-laden country will have more freedom in shaping its economic policy after years of close monitoring by international creditors, Panagiotis Petrakis, professor in the Department of Economics at the National and Kapodistrian University of Athens, said in a recent interview.

"However, the exit takes place in an environment that is quite agitated. This turmoil concerns the borrowing cost of the weakest states and businesses and it is related to the Greek prospects and the exit to the markets," Petrakis explained.

"Fortunately, Greece's needs for public lending are not big in the short term, so I believe that despite the severity of the environment, we will be able to cope with the new challenges," the professor said.

The main feature of the post-bailout period, according to Petrakis, is that Greeks succeeded in a macroeconomic rebalancing, but the basic forces that could fuel a dynamic endogenous development are still missing.

"Therefore it is not a period of complacency. Serious initiatives of non-budgetary nature structural changes should be taken this time so that Greece can improve its competitiveness in the international stage," the Greek expert noted.

The country has been praised from an impressive progress from a government deficit of 15.7 percent of GDP in 2009 to return to growth, but Greek officials and lenders, as well as economists, have suggested that more emphasis should be put on reforms to ensure that Greece will not face a similar crisis in the future.

Commenting on the June agreement on debt relief which extended Greece's grace period on debt repayments to 2032, Petrakis said that it was just as expected, adequate in the medium term under conditions, but it does not solve the long-term problem of Greece.

Referring to IMF's skepticism on the sustainability of the Greek debt load in the long run, and the calls for a much greater reduction of the public debt and an aggravation of the structural changes in the Greek economy, Petrakis said that the IMF's position has remained stable and should be taken into consideration.

"There is nothing new in their report except for the fact that they insist on the fulfillment of the obligations we have undertaken for the next two years regarding changes in the pensions system and the tax framework," he said.

It was critical for Greece from now on to not generate any new deficits and show that after eight year mentality has changed, he added.

Greece managed to rebalance some financial figures, is in a much better position today in terms of public debt and in terms of competitiveness of the economy, because the wages were reduced, but on the other hand, the country still faces a very high social cost, Petrakis explained.

Following rounds of austerity measures, Greeks saw their living standards deteriorating amid record high unemployment rates and dramatic cuts in pensions and salaries. Tax hikes put a burden on entrepreneurship and the middle class and poverty rates increased.

"This social cost is preventing this experience from turning into a positive legacy for the future. That is the problem. Unfortunately, I am afraid that mentality has not changed significantly, although we can see some changes," the professor said.

Greeks now support a stronger, healthy entrepreneurship rather than a bloated public sector, he noted.