What a difference four years can make. In January 2015, Alexis Tsipras, leader of the ostensibly ultra-leftwing Syriza party, came to power, promising to end the austerity that had plunged Greece into one of the deepest depressions in economic history. Today, under his leadership, a recovering Greece stresses its fealty to the eurozone’s policy orthodoxy.
So, is all now well? The answer is still “no”. The challenges ahead remain huge, but there is occasion for some optimism.
Few expected the current situation on July 5 2015, when a referendum rejected the terms of the bailout proposed by the “troika” (the European Commission, the European Central Bank and the International Monetary Fund) by a margin of 61 per cent to 39 per cent. But on July 13 that year, in what can be regarded as either a betrayal or a fit of common sense, the Greek government accepted even harsher terms from its creditors than those the referendum had just rejected.
Since then, Greek macroeconomic policy has been remarkable for its orthodoxy. The primary fiscal surplus (that is, before interest) was 3.8 per cent of gross domestic product in 2016 (up from 0.8 per cent in 2015), 4.1 per cent in 2017 and, according to the IMF, again 3.8 per cent in 2018. These surpluses are far larger than those of other crisis-hit eurozone countries. Between 2009 and 2017, the primary fiscal balance improved by more than 14 per cent of GDP, despite the depression. These numbers indicate a brutal austerity (see charts).
