Photographer: Matthew Lloyd/Bloomberg

Greeks Promised Economic Boost Despair of Seeing Debt Deal

  • Eurogroup debt fudge risks leaving Tsipras high and dry
  • Tourism, consumers keep investment-starved economy afloat

Alexis Tsipras has spent nearly two years telling Greeks that a debt deal and inclusion in the European Central Bank’s quantitative-easing program will unleash an investment boom that salves the pain of austerity.

The prime minister’s message hasn’t convinced Panagiotis Kouinis, a 60-year-old civil engineer in Corinth who says business has steadily dwindled through all of Greece’s eight-year crisis and has now ground almost to a halt.

“What I know is they tell you pensions will be cut another 20 percent, wages down, and what is quantitative easing?” Kouinis said in an interview in his office near the city center. “Do we have to be economists so we can understand what they’re saying?”

Across the country in places like Corinth, an industrial hub about 80 kilometers west of Athens, Greeks have spent years treading water as news bulletins bombard them daily with reports of meetings and decisions in Brussels and Frankfurt that will determine their economic future. In the meantime, as the ECB’s stimulus measures -- including its asset-purchase program -- buoy the rest of the euro-area economy, Greece’s output has been stagnant, leaving its people the most pessimistic in the region.

Yet the ECB remains unlikely to include Greek bonds in its QE program in the foreseeable future, according to a person familiar with the matter. That’s because a meeting on Thursday of euro-area finance ministers, whose electorates are leery of debt relief, looks like delivering another fudge. There may be agreement to disburse more bailout loans but without easing repayment terms enough to satisfy the ECB and International Monetary Fund.

That would leave Tsipras high and dry. The debt has acted as a brake on growth at a time when Greeks should have the chance to rebuild their lives, he wrote in an article published in Le Monde and Die Welt on Wednesday.

“The Greek government has done its part,” ECB Executive Board member Benoit Coeure said in an interview with Bloomberg Television on Monday. “They have done their part in terms of policies, in terms of the memorandum of understanding, and now it’s for Eurogroup ministers to deliver when it comes to confirming the sustainability of Greek debt.”

To get the debt relief, the government had to bow to IMF demands for politically painful pension cuts and tax increases that will take effect from 2019. Those now hang like a pall over sentiment among consumers and business.

Just west of Corinth, opposite a mall that recently opened on the site of a former pipework factory on the old road to Patras, Ioannis Stamoulis’s lumber yard is seeing some green shoots.

Business has been steadily picking up over the past few years, according to Stamoulis, 65, whose father started the business with him in 1974 and now runs it with his son. Still, he doesn’t tie the improvement he’s seeing to the broader outlook, and he expects the economy to take another turn for the worse when the latest measures take effect in 2019. 

“We took more of the pie from competitors that went out of business, but otherwise work is limited,” Stamoulis said.

Stop-Start Growth

Despite some signs of an improvement in industrial output, Greece has been heavily reliant on consumers and a booming tourist sector to keep gross domestic product -- which shrank by a quarter in the early years of the crisis -- from continuing its slide. While the economy hasn’t been in a recession since 2015, and grew 0.4 percent at the start of the year, it hasn’t strung together more than two quarters of consecutive expansion in more than a decade.

Accountancy firm PricewaterhouseCoopers said in March that infrastructure investment plunged during the crisis, leaving a backlog of planned and in-progress projects amounting to more than 21 billion euros. Near Corinth, that includes rail, waste management, road and marina developments.

“With taxation what it is, not only will no one come to invest here, but they’d need to be mad to,” said Kouinis, the civil engineer. “Growth needs to start from public works, because the private sector has been killed.”

Varfis Artemis, 35, co-owns a business by the Corinth Canal that’s bucked the trend, growing steadily throughout the crisis. While the 19th century French-built infrastructure project is too narrow for much commercial traffic, there’s no shortage of customers willing to jump off a bridge over its azure waters. Those willing to fork out 60 euros to attach a rope and take the plunge are evenly divided between Greeks and foreign tourists, according to Artemis.

But at least some of that spending doesn’t look so sustainable, as Greece’s savings rate has been negative since 2014 and was at minus 8.9 percent at the end of 2016, according to the Hellenic Statistical Authority.

“People will do what they want to do whatever happens, and they’ve stopped worrying about it,” the bungee jumping instructor said. “They’ll say, I don’t have money to pay social security contributions, I can’t go to the dentist, I don’t have money to eat. But I’ll try bungee, I’ll drink my coffee and I’ll gad about. Of course, the bills continue to pile up on the fridge.”

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