February 27, 2014 08:23
The European Union has revised upward its forecasts for economic growth. The news comes as Greece aims to secure another slice of its bailout money after posting a budget surplus. And in Italy, the new government has pledged to turn around the stagnant economy.
So is this the beginning of the end of the euro crisis? Many analysts think not.
The welcome was hostile in Athens as bailout inspectors from the so-called troika of international lenders -- the European Union, the International Monetary Fund and the European Central Bank -- arrived for talks at Greece’s Finance Ministry.
Greece desperately needs its next tranche of bailout money to fund debt payments in May that will total $12.8 billion. Talks have stalled for months over claims that Greece is dragging its feet over labor reforms.
Protesters shouted at the inspectors: "We are talking about human lives, you are talking about profits and losses."
Since 2008, Greece's economy has shrunk by nearly a quarter; unemployment is at 28 percent.
The country has just posted a budget surplus of 1.5 percent of GDP -- good news after years of brutal austerity. But there's a long way to go, says analyst Simon Tilford with the London-based Cen0ter for European Reform.
"Certainly no developed or even second-world country has ever pulled off a fiscal adjustment of the scale that the Greeks have managed. But they don't just need a surplus; they need a huge surplus in order to service their debt burden," said Tilford.
The EU issued revised growth forecasts this week -- suggesting the eurozone will grow by 1.2 percent this year and 1.8 percent in 2015.
Olli Rehn is EU commissioner for economic and monetary affairs.
"Recovery in the European Union is gaining ground and spreading across countries, although it remains still modest. It is good news that economic activity has also started to strengthen in the vulnerable countries," said Rehn.
Italy is seen as one such vulnerable eurozone member. The former mayor of Florence, 39-year-old Matteo Renzi, became the country's youngest-ever prime minister this week after ousting his party rival. In a speech to the lower house, he pledged to slash spending and taxes and "revolutionize" Italy's economy.
"Outside of this parliament, nobody believes any longer that politicians can get things done," Renzi said. "Therefore, at great risk, we have pledged to accelerate a process to implement reforms within precise deadlines."
With political change in Italy -- and green shoots of recovery in the eurozone -- some EU politicians believe this is the beginning of the end of the euro crisis, says the Center for European Reform's Simon Tilford.
"I think there is a risk of complacency that a return to growth and relative calm on the financial markets is encouraging European policymakers to believe that they can get away without any significant institutional reforms of the Eurozone -- i.e., without any pooling of risk or any fiscal mutualization," he said.
Without those changes, many analysts fear Europe will fail to solve the inherent problems at the core of the eurozone. But news that even the weaker economies are showing signs of life has been warmly welcomed after seven years of austerity and stagnation.
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