By Frances Coppola/
In all the drama of recent weeks on both sides of the Atlantic, the third review of the Greek bailout program appears to have gone almost unnoticed. On December 2nd, Greece quietly agreed to a new package of reforms. The Greek government will now force this through the Greek Parliament in time for Eurogroup ratification on January 22nd. As ever, the reforms are politically sensitive, including opening up state-owned natural gas and electricity utilities to competition and revising strike legislation. But this time, no-one doubts that the reforms will go ahead. Greece has already made far more difficult changes, notably to pensions, which the Syriza government originally regarded as sacrosanct. It has proved that it can take its medicine.
The quiet third review marks an important milestone. All parties are now looking forward to the fourth and final review in mid-2018, and a realistic prospect of exit from the bailout program. Two years ago, few would have thought this possible.
At the American-Hellenic Chamber of Commerce’s conference in Athens last week, I was struck by the sense of optimism. All the talk was of investment. Greece, it seems, is open for business.
The new interest in investment extends all the way up to the top of government. The Syriza government seems to have undergone something of a road to Damascus conversion. The Prime Minister’s spokesperson, Dimitris Tzanakopoulos, emphasised the need to create an investment-friendly environment. His focus on business was so intense that the BBC’s Ed Butler asked whether Syriza was still a left-wing party. “Yes, Syriza is still a left-wing party, and part of the European left movement”, replied Tzanakopoulos. But that doesn’t mean it isn’t interested in business. The Greek government has realised that attracting business and investment to Greece is essential to Greece’s recovery.
I have long suspected that the Finance Minister’s strategy is to restore confidence in Greece in the hopes of attracting foreign investment. Why else would he agree to everything the creditors throw at him? If this is his strategy, it does appear to be working.
But there is no doubt that Greece has taken one hell of a beating. In the last seven years its economy has shrunk by nearly a third. Although Greece is now growing, the years of depression have taken their toll. Even Athens, that great and proud city, looks distinctly run down: its apartment blocks are visibly crumbling, and every available surface is covered with graffiti. Outside Athens, living standards are distressingly low for a Western country.
And there is more pain to come. Greece’s banks remain riddled with non-performing loans: cleaning these out will mean more bankruptcies in Greece’s dominant small business sector, and more people losing their homes. Understandably, there are protests. Syriza’s left-wing credentials are looking distinctly thin these days.