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TheStreet Open House

Greece Expects Economy To Grow, Finally

By NICHOLAS PAPHITIS

ATHENS, Greece (AP) â¿¿ Greece expects its economy to grow next year â¿¿ at last.

In its draft budget presented Monday, the government forecast the economy would grow 0.6 percent in 2014, its first annual increase since 2007. This year it is predicted to shrink 4 percent, leaving the economy 25 percent smaller than when it first slid into recession in 2008 during the global financial crisis.

The government even expects some jobs growth and a continued improvement in the state of the country's public finances. Deputy Finance Minister Christos Staikouras noted a rise in investment and exports.

Greece's economy was hit by the global market turmoil in 2008. But its problems multiplied in late 2009, when it revealed that its public debt was far higher than expected as a result of dodgy book-keeping. That scared international investors away from buying its government bonds, bringing the country to the brink of bankruptcy in early 2010.

It was saved when other European countries and the International Monetary Fund stepped in with two massive bailouts. In exchange, Athens has had to make harsh spending cuts and tax increases to rein in the runaway deficits. Its economy has been put under strict supervision from the IMF, European Commission and European Central Bank, known collectively as the "troika."

The austerity and accompanying economic reforms have hit living standards hard and contributed to huge increases in unemployment.

The country is now seeing some rays of hope, though the recovery is expected to be slow.

Staikouras said four years of hardship and sacrifices "are beginning to produce a result, creating the first indications of Greece exiting the crisis."

Such bold talk would have been unimaginable just over a year ago, when many analysts were expecting Greece to ditch the euro amid political uncertainty and foot-dragging on the reform agenda. Since then, its creditors have eased loan conditions and promised further assistance once Athens achieves a primary budget surplus â¿¿ that is, makes more than it spends before counting the cost of debt servicing.

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