Greek Salad

First Tender Shoots of Recovery in Greece

Samaras and Merkel_DPA
Antonis Samaras and Angela Merkel are confident that the worst is over.

Angela Merkel and Antonis Samaras have been sounding optimistic. “I know what a hard time the country is going through, but the first tender shoots of success are visible,” said Ms. Merkel, the German chancellor. The Greek prime minister, visiting Berlin this week, agreed his country might have left its crisis behind. In the third quarter, the Greek economy may grow again for the first time after six years of recession, Mr. Samaras said.

Both Ms. Merkel and Mr. Samaras need a success story. The chancellor is keen to prove her reform medicine is also working in the country where the euro crisis originated. Mr. Samaras is under pressure domestically. Elections threaten in the coming year, and moreover, it’s a vote that Greece’s radical powers might win. That is also a horror scenario for Ms. Merkel. For this reason, she praised Mr. Samaras for strong leadership, which would lead step by step to success.

Domestic policy pressure was also the reason why Mr. Samaras refused a third rescue package from the European Union and International Monetary Fund before it was even offered to him. Greece does not want billions in aid anymore that is tied to the hard reform constraints of the Troika (a group that monitors the reforms made up of the European Commission, IMF and European Central Bank). Instead, Athens would like to stretch out its repayment of previous assistance loans, as Mr. Samaras indicated.

This year, Greece’s ratio of debt to economic output, GDP, will probably reach 177 percent. Meanwhile, the existing bailout programs mean the euro countries and IMF have become its largest creditors. That is one reason why the high debt level is causing less worries than three years ago – only a small amount is still in private hands. Greece’s state finances, however, are not yet healthy.

Experts were less optimistic than Ms. Merkel and Mr. Samaras. The reform constraints of the Troika have had success in reducing labor costs, according to an analysis of the German Institute for Economic Research (DIW). But there are further weaknesses in competitiveness. “Greece has no cost problem anymore, but rather fundamental institutional and structural problems,” wrote Alexander Kritikos, the DIW research director. Furthermore, businesses are still overregulated and there is no evidence that “corruption could be contained in the last years.” Both might prevent investment.

“Greece has no cost problem anymore, but rather fundamental institutional and structural problems.”

Alexander Kritikos, DIW research director

Theodore Fessas, the president of the Hellenic Federation of Enterprises, also was cautious. Although there might be signs of stabilization in the economy, “the recovery, however, will only come slowly,” he told Handelsblatt. One problem might here be high financing costs: Companies must pay 7 percent to 10 percent interest on loans, while firms in Germany pay only 1 percent to 2 percent.

Mr. Fessas requested further structural reforms also that more money be invested in research and development. Spending by Greek companies is “very low in a European comparison.” That was in line with the DIW study: Greece has invested only 0.67 percent of its yearly GDP in research and development, well below the E.U. average.

DIW saw potential throughout. Above all, Greek academics are disproportionally represented among the world’s top researchers. The problem is many are working outside the country. Incentives for research and a little political influence might lead more researchers to stay at home. That might help Greece develop an “an innovation-driven economy.”

Jan Hildebrand and Till Hoppe are Berlin correspondents for Handelsblatt. Mr. Hildebrand covers finance policy and Mr. Hoppe foreign policy. Contact the authors: and

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