While the Greek economy is on track to shrink 4% this year, a recovery to flat or modest growth could occur in 2014. The good news is that the government that emerged from the second of two elections in 2012 has been stable and there is no longer talk of Greece exiting the common currency.
But the social cost of the austerity demanded by creditors has been enormous. Living standards have plummeted. Unemployment exceeds 25% and the Greek economy is 25% smaller than it was before the crisis.
Has the adjustment been worth it?
Yannis Ioannides, an economics professor at Tufts University outside Boston, says yes but believes the changes required to restore competitiveness have only just begun. He faults the government for weak leadership and putting the burden of adjustment on the poor instead of the rich, who for example, "are the biggest tax evaders."
"Reforms," says Ioannides, "have been legislated but not implemented." There's been almost no privatization of state assets.
Athens-based economic consultant Miranda Xafa agrees that more reforms are needed. She worries that even if growth resumes next year Greece is not out of the woods.
"The recovery," she says, "is likely to be L-shaped rather than V-shaped as long as private investment remains weak."
Despite hardship, there is reason for cautious optimism. A surprising number of Greeks say the country had lived beyond its means and had to cut back.
Certainly for tourists Greece has become a terrific bargain. Hotel prices are down by at least 20% and greatly reduced public protests have triggered a surge in tourist arrivals. 2013 saw a 15% advance in arrivals and revenue. Advance bookings suggest that another record will be set in 2014. Tourism accounts for 17% of Greek gross domestic product and 20% of employment.
Foreign investors are again poking their toes into distressed Greek assets. Hedge funds are investing in Greek! banks, which have been recapitalized thanks to $50 billion provided by Greece's troika of creditors — the International Monetary Fund, the European Commission, and the European Central Bank.
Prime Minister Antonis Samaras in late November conferred in Berlin with Chancellor Angela Merkel and addressed business leaders. He cautioned creditors not to push for a faster pace of structural reforms.
"You don't climb to the top of a mountain vertically," he said, "you advance from one plateau to another, catch your breath, and then proceed."
Analysts warn that the Samaras government is fragile and could fall if it orders more cutbacks in spending and jobs.
Economics professor Ioannides has turned relatively optimistic. He detects a significant change in Greek public opinion.
"Instead of just blaming outsiders," he says, "Greeks are taking ownership of the problem, recognizing that their economy is inefficient and corrupt and has to change."
What is needed now, he says, "is not for the government to merely take orders from creditors, but to step forward and present a comprehensive plan for growth, like the Irish have done."
With household incomes down by over 30% and house price down even more, there is little doubt that Greek citizens have made huge sacrifices. Jeffrey Anderson, senior analyst for Europe at Washington's Institute of International Finance, hails the Greek adjustment as "unprecedented in economic history."
And yet, further change is needed and the tug of war between the government and creditors continues. Poul Thomsen, the IMF mission chief for Greece, concedes that immense progress has been registered.
But he told the leading Athens newspaper on Nov. 24 that the government must overturn its ban on home foreclosures as wealthy Greeks are abusing the measure, failing to make mortgage payments. He also stressed the need to end "the extreme patronage" in public sector jobs where non-productive, well-paid workers are protected. Thomsen said th! e patrona! ge system deprives well-educated young people of opportunity.
Determined to force action, the troika has delayed its latest report on the Greek economy— and approval of a loan installment -- until mid-December.
