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In today’s article “Greece’s Economy is in the Recovery Room“, Bloomberg’s columnist Leonid Bershidsky argues that the Greek economy “has been doing better than expected despite its customary slowness in responding to creditor demands” but still there is no room for complacency. Besides reaching for debt relief deal with its creditors, Tsipras must show creativity to “start inventing ways to make life easier for Greek businesses and investors even as he keeps the creditors engaged”.
The article cites a series of recent encouraging news – banks showing signs of life with smaller than expected capital shortfall, Greek economy’s likelihood to shrink less than creditors expected, Greece’s purchasing managers’ index rebounding to the highest level since May, etc – showing that “creditor predictions were probably overly pessimistic” and that Greece could keep its head above water with the implementation of the so-called ‘prior actions’.
According to the article, despite some delays, the government is pushing through most of the required legislation and Greece’s creditors will probably release the money soon, given that the remaining difficulties are non-essential. Tsipras has “proved efficient at pushing the required austerity measures through the parliament” motivated by European leaders’ promises to “open debt relief talks if Greece does as told”. “International Monetary Fund bolsters that hope by putting forward debt restructuring as a condition of its participation in the Greek bailout”.
Thus, a fine balance must be struck: Avoiding a debt relief deal is risky while agreeing to it too soon could demotivate Tsipras. But “the only way to boost the economy is through structural reforms and deregulation” and the government needs to figure out how to “make export-oriented industries more competitive and to remove regulatory barriers”, the article concludes.