April 9, 2017
As an economic recovery gathers strength in even the more troubled parts of the eurozone’s periphery, the desperate situation in which Greece remains mired becomes ever more apparent. Almost a quarter of the workforce is unemployed. Growth stalled at the end of last year and business owners have been withdrawing their money from banks. The recent deterioration in confidence is in large part due to the pervasive uncertainty over the next stages of the country’s €86bn bailout programme.
The deal reached last week with monitors of the aid programme therefore comes as a huge relief. The agreement centres on income tax and pension reforms that Athens must enact now, in order to unlock further aid. It should pave the way for Greece to receive further financial assistance before July, when debt repayments of more than €6bn are due — a sum that would otherwise cripple the economy.
The measures, which will broaden the tax base and make the cost of pensions more sustainable, are worthwhile in and of themselves in the medium term. If they end the gridlock, the boost to confidence could also more than offset the immediate hit to incomes.
However, if the outlines of an agreement between creditors and debtor are now clear, there remain huge divisions to be bridged between the creditors.