Austere future

German finance minister says Greece bailout was a success

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Greece, you’re sounding better every day. Source: Reuters

Greece’s third and final rescue program ends today, leaving the country independent of outside help for the first time in eight years. German Finance Minister Olaf Scholz sang the praises of the country’s bailout — and the European Union’s ability to help in a crisis — but economists aren’t so sure.

“The conclusion of the Greece program is a success. The bleak predictions of the prophets of doom have not come true. That’s good,” Mr. Scholz told Handelsblatt. “Greece’s salvation is also a sign of European solidarity,”

Since 2010, the EU and the International Monetary Fund have bailed out the overindebted country with a total of €289 billion in low-interest loans. In return, Athens had to push through tough reforms, social cuts, and tax increases, and commit itself to maintain them.

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Finance Minister Scholz lauded the Greeks for their efforts and said it’s time for the EU to move on. “I think that the rescue of Greece should encourage us to quickly tackle the tasks now facing the European Union,” he said.

But economists don’t think the country is out of the woods yet. “Greece has not yet been saved. Whether the country will ever return to sustainable growth is not yet certain,” said Daniel Gros of the Centre for European Policy Studies (CEPS), a European thinktank. Greek bureaucracy prevented the implementation of many adopted reforms. “Greece can only save itself if the voters want the reforms themselves. This has not been the case so far,” Mr. Gros said.

The rescue package granted by the European Stability Mechanism, or ESM, gives Greece a good chance of becoming a success story after eight difficult years of crisis. “Provided that Greece remains on the agreed reform path,” ESM boss Klaus Regling said in an interview with the Ethnos newspaper and the News 24/7 portal on Sunday.

Mr. Regling, a German, emphasized the government in Athens must strictly adhere to all agreements with its lenders. “We are very patient creditors, but we also want our money back,” he warned. “Therefore, we will follow developments in Greece very closely.”

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“The ESM member states and the ESM as an institution take the implementation of commitments very seriously,” said the boss of the euro-zone institution. He referred to agreed close checks and visits by creditors’ experts every three months. “There is certainly more trust than a few years ago,” said Mr. Regling. “But in some of our member states, confidence may not yet be fully restored.”

The head of the Greek central bank made it clear: Without compliance with the austerity measures, including further pension cuts, Greece would not have access to the financial markets at reasonable interest rates, Giannis Stournaras told the Athens newspaper “Kathimerini” on Sunday. “We still have a long way to go,” the former finance minister added.

Martin Greive is a correspondent for Handelsblatt based in Berlin. Jan Hildebrand leads Handelsblatt’s financial policy coverage from Berlin. Gerd Höhler is a Handelsblatt correspondent based in Athens. To contact the author: hoehler@handelsblatt.com, hildebrand@handelsblatt.com, greive@handelsblatt.com

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