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A Glimmer of Hope in Greece

Mark Whitehouse writes editorials on global economics and finance for Bloomberg View. He covered economics for the Wall Street Journal and served as deputy bureau chief in London. He was previously the founding managing editor of Vedomosti, a Russian-language business daily.
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For all the difficulties that Greece has suffered and must yet endure, there is at least one sign of improvement: Since the government reached a deal with its European creditors in July, money has been flowing back into the country.

Let's be clear: The months of negotiations between Greece and its creditors, and the agreement that ensued, are nothing short of a political and economic fiasco. Europe, and particularly Germany, imposed terms that -- though they include some much-needed reforms -- will stifle growth in the near term and leave the government even deeper in debt, if the country's leaders can even follow through. Greece's economy, which had been poised to start recovering, is now expected to shrink through 2016.

That said, data from the Greek central bank -- which records a liability for every euro that leaves the country's banking system -- suggest that the end of the standoff has at least brought a bit of relief. During the year through June, during which the left-leaning Syriza came to power and clashed with European creditors, outflows amounted to more than 77 billion euros, equivalent to more than 40 percent of Greece's annual economic output. In July and August, after a bailout deal was reached, the flow reversed: About 6 billion euros came back in. Here's how that looks:

To be sure, the reversal doesn't necessarily reflect a change in private-sector sentiment. Greece imposed capital controls in June, and renewed loan disbursements from European creditors have boosted inflows (though much of that money went straight back out to pay off previously incurred debts). Still, if Greece has at least stopped the hemorrhaging, there's hope that with some political will -- and with help from Europe in the form of debt relief -- the winners of this past weekend's election can rebuild the confidence their country has squandered during the past year.

(Updates fourth paragraph to elaborate on possible drivers of capital flows.)

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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