Is the Greek economy ready to come off life support?
By Benjamin Fox
After six consecutive years of recession, the Greek economy might finally be allowed to leave its life support machine this year.
The country's debt burden should start to fall in 2014. So should unemployment. It may even post economic growth by the end of the year.
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Both Greek and EU officials insist that the tide is finally turning.
But if the Greek economy is no longer on the precipice of one or two years ago, it is hardly in good health.
At 27 percent, Greece has the highest jobless rate in the EU. Its debt pile is also Europe's highest at around 180 percent of GDP. More than a quarter of its economic output has been wiped out since 2007.
The Greek government has forced through a programme of spending cuts, tax rises and labour reforms of unprecedented severity.
"No other country in peace-time has made such profound economic reforms," finance minister Yannis Stournaras told reporters on Wednesday (8 January), as he set out the economic priorities of his country's EU presidency.
He points out that in three years Greece's primary budget balance has been transformed from being in deficit to the tune of 14 percent to a surplus of 6 percent. Labour costs have also seen a 25 percent reduction.
Stournaras also says that average incomes have fallen by 35 percent in the past four years, signifying a huge drop in Greek living standards.
Although the Greek finance ministry has been something of a poisoned chalice in recent years - Stournaras is the fourth finance minister in three years - he remains optimistic.
This year will be about consolidation he says, adding that "people will start to feel the improvement in their pockets and everyday lives."
"It's not just Greece but the Troika that are predicting growth in 2014," he commented: "In economics there is no black and white but I am confident that there is going to be growth this year."
However, the pain is by no means over.
Exports increased by 5.4 percent in the first eight months of 2013 to €18.28 billion but, if you exclude petroleum products, the figures are much less impressive - an overall drop of 2.6 percent worth €293.8 million. Imports have also fallen by an additional €1.6 billion in 2013 compared to 2012.
Although an export surplus has long been a key target for the European Commission and Greece, it does not necessarily translate into a boon for the economy. Anaemic exports alongside declining consumption is a recipe for a spiral of deflation rather than growth.
Earlier this week Antonis Samaras' coalition government conceded defeat on plans to introduce a mandatory €25 fee for hospital admission after it became clear that junior coalition partner Pasok would not support the measure.
The collapse of the tax demonstrates not only that public tolerance for austerity measures is thin but also the weakness of the government in parliament. It also means that the government will have to cook up a new measure to bring in the estimated €40 million that the hospital tax would have brought into Greece's coffers.
The country is also still hamstrung by its tax collection regime which is one of the most abused in the EU. At 35 percent of GDP, Greece has one of the lowest tax revenue ratios in the EU. Meanwhile, government officials say that the country's 1,500 biggest tax dodgers owe around €13 billion in unpaid tax.
"We are trying hard to change the culture of tax avoidance and evasion," says Stournaras, adding that the government has "closed many loopholes..and are now ahead of our revenue targets."
But the minister is sanguine about the progress of the country's bailout programme.
When the government finally reaches agreement with its creditors on the next tranche of its bailout it will start discussions on how to plug an estimated €11 billion gap in the country's finances over the next year.
He seems not to be in a particular hurry.
"We want to see the stress tests on [European] banks to be concluded before doing anything else," he says.
Both Stournaras and deputy prime minister and foreign minister Evangelos Venizelos insist that Greece will not request a further haircut to its private debts.
But they accept that a solution will have to be found in the coming months. Stournaras would prefer a cut to the interest rates on Greece's bailout loans rather than more loans themselves, although both he and Venizelos were at pains not to close the door to further loans from the 'Troika' of international lenders.
"Markets are more interested in seeing the annual financing needs being reduced," he says.
They also hope to make tentative steps to go back to the financial markets in 2014, with a 5-year bond issue in the second half of the year - a symbolically huge step which indicates how far interest rates on Greek bonds have fallen over the past year.
With its relics of Ancient Greece, Athens has one of Europe's most inspiring sky lines. The Acropolis looks out over the city while the Greek parliament and ministries are within short walking distance of the Temple of Zeus.
The worst of the Greek crisis is probably over. But its recovery will need more heroism still.
Meanwhile, yields on 10 year bonds have fallen from over 30 percent to under 8 percent in two years.