AFP, Paris :
Every sign that stricken eurozone countries, such as Portugal, are on the road to recovery is held up as evidence that the debt crisis is fading, but wishful thinking is also at work.
On Saturday, Portugal is due to emerge from a rescue programme funded by the International Monetary Fund and European Union, without the back-up of a safety credit net.
But Portugal still faces a steep climb, including the enforcement of the latest round of belt-tightening measures.
Greece is being praised for achieving a budget surplus before interest payments, but still has a huge mountain of debt to pay off.
And Spain, in common with the other high-profile rescued eurozone countries, can now borrow at extremely low interest rates, even though its economy is in a fragile recovery from recession and is burdened by extremely high unemployment. “The eurozone is bathing in a post-crisis climate and everyone wants to see the bright side,” commented economist Ludovic Subran at French insurance company Euler Hermes.
An example was the announcement by Greece on April 23 that the country, the eurozone member where the crisis began and which set the precedent for eurozone rescues, had achieved a primary surplus.
And in a coincidence of good fortune, on the same day Portugal sailed though its first regular long-term bond issue since 2011, demonstrating that it had won back the confidence of investors.
The European Commission welcomed the Greek primary budget surplus by praising what it termed the “considerable efforts” made to enact reforms imposed by the IMF, the Commission and the European Central Bank.
In the same breath, the Commission judged that the country’s debt, amounting to 175 percent of annual economic output, was “sustainable”.
This wave of optimism has obscured questions about the calculation of a “primary surplus” which excludes the cost of paying interest on the debt. There is also the additional cost of supporting the Greek banking sector.
The EU’s statistics agency Eurostat noted that the primary surplus figure best reflected the underlying structural state of the budget, meaning that revenues were now higher than expenditure, excluding interest payments. The overall public deficit, as calculated under the eurozone Maastricht criteria, including debt interest and bank support, was 12.7 percent of gross domestic product last year.
But for Agnes Benassy-Quere, economics professor at Paris I University, the achievement of a primary surplus amounts to “a strong political signal” because “it means that Greece no longer needs to borrow to pay for medicines or to pay its professors, but only to pay for the interest on the debt.”
