Is Greece’s Economy Actually Healing?
Greece is getting some good economic news to start the week with the country’s primary budget surplus rising more than predicted in June. A rise in tourism was the main driver of the surplus as the struggling country saw receipts for tourism up 21 percent year-over-year, making for a total of 1.59 billion euros in June. For the first half of 2013, this brought the receipts total up to 3.32 billion euros — an increase of 18 percent from the first half of 2012.
What does this mean for Greece? Not much, in all actuality, since the expansive growth in tourism isn’t exactly being accompanied by expansion in other important economic sectors. While contraction did slow to 4.6 percent of GDP in the second quarter from a year earlier, growth is still quite a ways off.
Moreover, the country’s primary budget surplus of 1.6 billion euros, while no doubt a good thing, excludes obligations on existing debt and many of Greece’s entitlement costs. Recession could also continue into 2015, according to Ben May, an economist in London with Capital Economics. May told The New York Times that the numbers were “encouraging,” noting that a 4.2 percent economic decline looks achievable for the remainder of the year, a number that Greece’s lenders have been aiming for.
Yet there are so many more fundamental problems that remain unsolvable by either growth in tourism or perhaps any phenomena outside the political arena. Getting things done in parliament has been a stretch at times for Greece where spats over cuts to the state’s deep-rooted control of the economy have started political feuds that don’t die easily.
But areas like taxes, where the Greek government is famously inept, promise to plague the country and public finances alike until a solution can be found. Tax evasion is a cultural phenomenon in Greece, according to George Samothrakis, an Athens-based accountant, in a May interview with The New York Times.
“I am afraid it will take several generations to change the mentality here that it is better to not pay your taxes. But because that mentality can’t be changed right now, the government is doing whatever it can to increase collection. This is our last chance to get it right,” he said.
Yet this attitude he refers to represents the fundamental conundrum facing the Greek people. Years of high taxes and an overspent state pushed the country to the brink, and yet these taxes represent the funding needed to bolster state finances in the face of public sector cuts that have people protesting in the streets.
The alternative then becomes the privatization so adamantly protested by some — weak public finances are compelling Athens to let the private sector take over, especially since it is subject to the whim of its creditors who have pushed for such reforms. Certainly news of growth in tourism and a bit of extra cash are good news for Greece, but the promised land is still a ways off as the state continues to soul search for its economic future.