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In 2016 much of the world’s focus has been on turmoil in the Middle East, the rise of populist governments in the western world, and Brexit. While all of these massive movements have been taking place, one of the biggest economic stories of last year seems to be on the back burner for now, the Greek debt crisis. It wasn’t so long ago that Grexit was a much more real possibility than Brexit. With the overleveraging of almost every aspect of the Greek economy and the rise of a socialist government, many were worried that Greece would be the first southern European domino to fall in a rush of indebted countries leaving the European Union. Although things are quieter in Greece for now, things are still unsteady, and it is not definitive whether Greece will experience an economic resurgence or fall further.
On one hand, the Greek economy does have signs of life. The IMF is forecasting 2.8% GDP growth and predicts overall unemployment to decline. Furthermore, there are signs that the migrant crisis is actually having a positive effect on Greek GDP, due to the emergency money flowing from the European Union, which has boosted Greek GDP 0.3% this year. Both of these points, however, seem to only be half-truths. In all reality, the emergency money may not be enough to offset the money from the Greek budget that is being used on the migrant crisis instead of other components of the economy. Still to this day, more than 23% of working age Greeks are out of work, and pensions in the public sector have been cut by above 40% in some circumstances. Meanwhile taxes have been climbing upwards by 25%. Another potential positive for the economy that comes with major caveats is the inflow of the bailout money from the EU. Later this month, the Eurozone will release 1.1 billion euros to Greece as a part of the countries third bailout. While this will help stimulate the Greek economy, the bailout comes with conditions from the Eurozone, conditions that the left-wing SYRIZA government has been accused of failing to implement. One particularly troubling sign shows that even if there is some macroeconomic tailwinds, the Greek people themselves still face massive struggles every day, including a new wave of home repossessions.
Overall the Greek economy is still very tepid, and it is advisable to take any positive signs with some skepticism and evaluate whether there is some sort of conditional downside to the possible upside. This is not to say there is no hope in Greece for a brighter economic future, but rather that there is still a long road to go.
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