Latest projections from the European Central Bank (ECB) see growth rates for Greece rising, forecasting 0.1 % of GDP in 2016, and then seen rising to 2.5% of GDP in 2017 and 3% of GDP in 2018 and 2019 prompting optimism from the German Economic Research Institute to express its satisfaction and optimism.
"2017 will be a year of political, economic and social uncertainty because nobody knows what will evolve from the elections in the EU countries. However, I am optimistic for Europe and for Greece, Italy and Spain because a large number of reforms have been implemented", said president of the German Economic Research Institute Marcel Fratzcher to Greek media adding that the first results are already visible.
“The Greek economy is recovering and Greece is developing again. The growth rate is low as it is in Italy but there are serious reasons indicating that the growth can be accelerated in the next year and afterwards. My hope is this acceleration to be faster than what it is now" he said.
The European Central Bank’s projections for the job market see a decline in unemployment, falling to 23.5 % in 2016, 22 % in 2017, 20.5 % in 2018 and 19 % in 2019.
Throughout the Euro area, real GDP is expected to rise 1.7% in 2016 and 1.6% in 2018 and 2019. Unemployment is forecast to reach 10 % in 2016, while Eurozone inflation will increase from 0.2% in 2016 to 1.3% in 2017.
"In culture, in quality of life and innovative minds. Greece has made progress in the reforms but be we can't fool ourselves that they will be completed in 2018 with the conclusion of the third programme but in 10-15 years because Greece's major problem is the state mechanism. Greece must have a state that will operate, where all the citizens will pay their taxes and will allow investors to take a licence without lengthy bureaucratic procedures. In the short term Greece's public finances should be consolidated in order in one to one and a half year to set them under control, to have a perspective in order to not depend on is lenders any more. Referring to the Christmas bonus to the low pensioners and the freezing of negotiations for the debt relief, Fratzcher said.
Fratzcher, like many others however, are concerned over the primary surplus target of 3.5% and the debt burden, both factors that could cause impediments to growth.
“If the 3,5 % primary surplus is realistic, if Greece grows by 2 to 2,5 % it is", adding however that "the problem is how we will have this growth rate when there is the debt burden".
He had proposed "one and half year ago the interests to be linked with the growth" because if there is no growth Greece will not pay but if there is growth it will be able to pay the interests. In Brussels and Berlin listened to this proposal but they said that "it is politically difficult to be implemented’’.
‘’From an economic point of view this compromise is feasible because what happens right now with the interests is useless. These interests are linked with the growth in Europe, with the market and not with Greece's growth rate. In my opinion this is the mistake and Greece should, according to our proposal, to get rid of this burden in these difficult times. It should pay part of the interests and only in times when growth is recorded in the country".
‘’This is a form of relief for as long Greece is having difficulties but when its economy records dynamic growth, it should pay 1/5 or 1/4 or its growth to interests to its lenders, he claimed noting that this way there will not be any arguments with the lenders as the one with this small Christmas bonus which destroy the trust and are bad for all. Both sides should be smarter in such matters" said Fratzcher.
