Is Greece about to get out of its crisis?
Much noise is currently being made about the state of the Greek economy, the stabilisation of public finances, the expected end of recession and the return to growth. The Greek government is presenting the situation as light at the end of the tunnel and as a vindication of the policies followed. The EU is also gradually beginning to claim that ‘austerity works’, though the IMF appears to be much more sceptical. How much truth is there in all this?
Consider first some aspects of public finance. Preliminary figures announced by the government for the first eight months of 2013 showed a primary surplus of 2.9bn, and this was interpreted as a major success and a sign of return to fiscal stability. Things look rather different when one looks more closely at the figures. About 1.5bn is a one-off transfer of profits on Greek bonds by Eurosystem banks. The rest has accrued due to unprecedented slashing of public expenditure (1.9bn below the already very low target for the first eight months of 2013) and an even more reckless misuse of public investment funds transferred by the EU (public investment stood 1.4bn below a similarly low target for the same period). [...]