by Richard Barley
Wall Street Journal
May 3, 2013
Greece's headline numbers make for grim reading: six years of recession and unemployment of 27%. But beyond the headlines, conditions may finally be taking a turn for the better. The benefit won't be tangible in the near term: The European Commission forecasts an economic contraction of 4.2% this year, and debt remains unsustainable despite two restructurings at 156.9% of GDP. But there are finally reasons for optimism.
One key factor is political stability, something few expected after last year's two highly charged elections. But Greece recently smoothly passed a bill including measures to dismiss 15,000 public-sector workers by the end of 2014, part of a wider effort to reduce the civil service by 150,000 between 2010 and 2015. Such parliamentary debates have previously had global markets hanging on the result. This vote, despite breaking a taboo in enforcing civil-service job cuts, hardly caused a ripple. Protests about government policy continue, but violent street confrontations have faded.
Fiscally, Greece has undertaken major efforts. The country ran a primary budget surplus before interest payments in the first quarter; the EC forecasts that the structural budget balance will show a surplus of 2% of gross domestic product this year versus a deficit of 14.8% in 2009, an enormous shift. Interest costs have been sharply reduced by the debt restructurings.