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05/06/2013

Is the worst over for Greece?

Greecehands
During the May Day march in Athens to protest against crippling austerity measures, an African immigrant holds hands with a Greek protester in solidarity.  (Yannis Behrakis/Reuters)

After six years of recession the Greek economy is looking brighter -- sort of.

The International Monetary Fund, based in Washington and one of the troika of European lenders bailing out struggling nations, on Monday issued its first consultation mission report on the state of Greece since 2009.

Their verdict: "Greece is making progress in overcoming deep-seated problems in the midst of a very serious and socially painful recession."

In Greece, the country's finance minister Yannis Stournaras, said in advance of the IMF release that "the worst is over" and that the country has reached the bottom of the "trough,"  according to the Greek Reporter

The recession in Greece has been much deeper than anyone ever expected, noted the IMF, but the Mediterranean nation gets full marks for trying to preserve financial sector stability, making progress on fiscal adjustment and for far-reaching labour market reforms.

Greece has borrowed a staggering 173 billion euros, roughly $226.6 billion, from its European partners since the country's economic downward spiral began.

Without Europe's money things in Greece would have been far worse, said the IMF. "This has significantly cushioned the adjustment need, preventing what would otherwise have been much more serious social hardship, while containing negative spillover to the rest of the euro area."

Well, on that last point, there is the little matter of Cyprus, the tiny island that nearly went broke recently partly to due with bad investments in Greek bonds, but, I digress.

However, says the IMF and here comes the rub, there are still some serious obstacles to overcome in order for Greece to recover. Three are singled out in their report.

Tax evasion is still enemy number one. "The rich and self-employed are simply not paying their fair-share, which has forced an excessive reliance on across-the-board expenditure cuts and higher taxes on those earning a salary or a pension," the report said.

Not to mention market reforms are causing a "notable decline" in nominal wages and, again, making life hard for those earning wages and pensions as people try to make ends meet with less, they noted.

Then there is the woeful unemployment issue. The youth jobless rate is about 50 per cent and for seasoned adults it tips 27 per cent in Greece.  Meanwhile, the IMF said the "over-staffed public sector has been spared, because of a taboo against dismissals."

The social strain on the downfall of the Greek economy has been immense to those living through the crisis -- from rising homelessness, mental health and suicide problems to violent protests and the rise of the extreme right.

However, the IMF has faith the Greek government is "refocusing its program" in recognition to the three economic albatrosses noted above.

Greece, and the rest of the European Union, holds its breath and waits.

Tanya Talaga is the Star's global economics reporter. Follow her on Twitter @tanyatalaga

 

Comments

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If Greece is NOT dealing with (1) tax evasion and (2) its bloated and evidently "sacrosanct" public sector, then it is simply NOT dealing with its problems...and everyone else involved in the bail-out is simply paying for this nonsense!!!...

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