Greece successfully concluded its three-year European Stability Mechanism (ESM) programme on 20 August 2018, thus exiting from its third and final bailout since 2010.
About:
Bailout package:
Since 2010, Greece borrowed €289 billion from a ‘troika’ of lenders, the IMF, the European Commission and the European Central Bank when it was on the verge of bankruptcy and close to be pushed out of the eurozone.
In return, Greece undertook structural reforms including the controversial austerity programme.
Greece also agreed to need to maintain a 3.5% primary surplus (a budget surplus prior to interest payments) until 2022 and then around 2% until 2060.
Impact of Bailout package:
The bailout has left Greece with a debt of 180 % of GDP.
Moreover, the austerity programme resulted in 25% contraction in Greece’s economy, soaring unemployment and poverty, massive emigration and high rates of suicide.
Comment:
While several of the required reforms were initiated during the bailout period, a lot remains to be done as challenges remain.
According to IMF, maintaining 3.5% primary surplus will constraint government spending programmes that could, for instance, be used to stimulate growth.
Some of the recommended steps are simplifying licensing processes for companies, banking reforms to help clean up the non-performing assets and widening the Tax base.
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