Greece is finally starting to deliver on its IMF reform programme, but it will need help to ease the official debt burden.

In a report released in June 2013, the International Monetary Fund came about as close as any large, politicised organisation ever does to admitting it has made mistakes. The report on the Greek bail-out of 2010 acknowledged that there should probably have been deeper debt restructuring, rather than simply switching the embattled sovereign’s excessive burden from private to official creditors.

That failing may well have prolonged fiscal austerity and the resulting recession. But in 2013, even the greatest sceptic would have to recognise that Greece has made progress. The country is finally reporting a primary budget surplus excluding debt repayments – a vital prerequisite to reducing its debt burden. Against all odds, Greece has avoided nationalising three of its largest banks. In fact, their rights offering received an enthusiastic reception from those investors with sufficient risk appetite.

Northern Europe’s favourite stereotypes about Mediterranean working practices are gradually being challenged. Tourism is performing strongly, helped by political instability in rival destinations in the Middle East. Foreign direct investment is picking up, epitomised by Chinese freight giant Cosco’s ongoing investments in the Port of Piraeus, while the tender for the sale of the Astir Palace luxury resort outside Athens has apparently received 13 bids from as far afield as the US, the UK, Russia, Asia and the Middle East.

What Greece needs is growth. Unemployment, especially among the young, is destructively high, but society has so far been surprisingly cohesive. Recent violence by right-wing extremists suggests that cohesion cannot be taken for granted. International official lenders will not talk about writing down the money they are owed before they have even finished disbursing the current loan programme.

But there is precedent for a more generous line after that. In January this year, EU officials allowed the Irish government’s €28bn debt generated by the bail-out of Anglo Irish Bank (which later had to be liquidated) to be extended over 34 years, while slashing the interest rate payable by more than a half. The Irish debt to the EU will be inflated away. True, the Irish government did not run an unsustainable fiscal deficit, but it did preside over an unsustainable banking boom – a mistake that Greece avoided. Greeks have already paid a very high price to satisfy international qualms about moral hazard. It is time to start showing the country some light at the end of the tunnel.

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