Growth resumed in the second half of 2016 thanks to renewed confidence generated by the easing of tensions with the international financial community (conclusion of the 1st review of the 3rd bailout plan granted to Greece in the summer of 2015 by The European Stability Mechanism (ESM). European disbursements have resumed but confidence remains low. The low level of bank deposits (which are not rebuilt yet and are half as high as they were in 2009) didn’t enable to lift the capital controls introduced in late June 2015. Even if the restrictions have been eased over recent months, transactions with foreign companies, in particular, are still capped and subject to approval. Business was driven by investment, the latter however remaining at a low level (70% less than its peak level in 2007). Moreover, export revenues from the maritime shipping industry have worsened as a result of being affected by capital controls and the performance of the tourism sector, which must cope with the refugee crisis. The activity should improve in 2017 if the situation in the banking sector is normalised and relations with creditors remain confident. This could lead to the lifting of capital controls. Moreover, exports are expected to recover due to improved competitiveness and increased investment in this sector. However, the high level of nonperforming loans (more than one third of loans) weighs on the recovery of credit. Furthermore, although seeing a marginal decline, the unemployment rate remains at a very high level (23%). The austerity policy hinders the growth of private demand but some of the measures of the bailout plan enable the State to pay its arrears and to thereby re-inject liquidity in the economy.

The 3rd bailout plan provides for the provision of €86 billion (almost half of the GDP) in exchange for major reforms. The Greek Parliament approved a number of these reforms between summer and the end of 2015, including the regulation of foreclosures. In May 2016, the controversial pension and taxation reforms as well as new austerity measures were adopted. Additional measures were also implemented in June 2016 (including the privatisation of an energy operator and the lifting of restrictions on the sale of non-performing loans secured by the State). In October 2016, the Eurogroup discussed the effective implementation of certain measures, including privatisation. These reforms enabled the release, in instalments, of the first two tranches of the plan. A new review is ongoing (December 2016), to monitor the implementation of new measures (budget targets, reforms to the labour and energy markets).

Achieving a new primary surplus (excluding interest expense), thanks to the VAT reform, better tax collection and improved market conditions, helped to reduce the budget deficit in 2016 . This surplus is expected to increase in 2017 and 2018 due to the measures put in place, including broadening the tax base and spending cuts. If it continues to meet its commitments, Greece could benefit in late 2018 from a major debt relief taking the form of a restructuring of European loans. The Eurogroup has already agreed, in December 2016, on implementation of the first steps of lengthening credit terms and limiting the interest burden. However, these measures have been temporarily suspended in response to announcements by the Greek Prime Minister on pensions and the VAT. The IMF, however, in its belief that the budgetary targets set by the European creditors in the medium term are not achievable and that the proposed debt management is insufficient, is still holding back its participation in the 3rd bailout plan.

In recent years the country has experienced a strong government instability (five elections and a referendum in seven years). All governments were torn between the demands of donors and the need to prevent a social explosion in a country where the poverty rate nearly tripled between 2007 and 2013. Early elections held in September 2015 gave a majority to the radical left Syriza party, allied with the nationalist right. However, the coalition government holds only a three seats majority. With only small leeway with the country's creditors, the Prime Minister redirected his cabinet in November 2016 in a direction that is more favourable to the reform policy. It remains fragile and the risk of early elections cannot be discounted. Since early 2016, the main opposition party, New Democracy, almost always surpasses Syriza in the polls.