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Four more decades of austerity for Greece

Greece has been one of the biggest economic failures one normally sees in countries hit by war of revolution. After eight years of bailouts, brinkmanship and even more bailouts, Greece’s economy is finally ready to stand on its own again. Well, what’s left of it, writes an analyst on Washington Post.

The good news is that Greece really is about to wrap up its latest bailout program and won’t need any more financial assistance for now. But the bad news, as the International Monetary Fund points out, is that even with the lower interest rates and longer repayment periods that Greece has been given, it still has too much debt, too little growth and too fragile a private sector to be able to say that it won’t need more help for long.

Which brings us to the worst news of all: Europe might be celebrating this as a success story now, but Greece has been one of the biggest economic failures you’ll ever see short of a war or revolution.

It’s worth pointing out what isn’t here: the Great Depression. That wasn’t quite as bad in Europe as it was in the United States — at its nadir in 1933, the U.S. 10-year decline was actually comparable to Greece’s today — partly due to the fact that most European countries were quicker to leave the gold standard when things did start to get more dire. That allowed them to inject enough monetary stimulus into their economies to jump-start almost immediate recoveries.

The problem, of course, is that it’s a lot harder for Greece to do the equivalent of that right now. The gold standard and the euro are similar in that they are both fixed-exchange rate systems that can get countries into trouble if they are hit by a big enough shock that their economy “needs” a cheaper currency than it has under the system. But they’re different in that it’s a lot simpler to say your currency won’t be worth as much gold as it used to than to replace all of your currency with a new one.

So instead of stimulus, Greece has gotten austerity — and a lot of it. Under the terms of its just-about-to-be-completed bailout agreement, Greece is actually supposed to keep running primary budget surpluses of at least 2.2 percent of GDP until 2060. That’s right: four more decades of austerity. It’s no wonder, then, that Greece’s economy might not get back to where it was in 2008 until 2030.

This is what Europe calls a success: an economy that has shrunk so much it looks war-torn. full article WashingtonPost.

 

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2 comments

  1. Steve Pinder-Banthorpe

    “This is what Europe calls a success: an economy that has shrunk so much it looks war-torn.” The success was rescuing a politically and domestically corrupt bankrupt country from an even worse fate. The people of Greece can blame their politicians to a certain extent for the mess their country is in, but the Greeks themselves wanted everything, pensions, well-paid governments jobs, etc without paying their fair share of their taxes. Even now I get handwritten bills at tavernas when it is the law that till receipts should be provided.

  2. The double-edged sword of Greece’s misfortune is the Troika’s hunger for extracting every last bit of currency from Greece’s already-bare coffers combined with Greek corruption and blind devotion to political parties. When combined with the additional danger of a bloodthirsty imperialist neighbor like Turkey threatening it daily, and there may well be no Greece in the future. The best thing that can happen to Greece is for a group of leaders previously unaffiliated with the country to fight both the internal and external corruption that threatens its existence. Whatever the case, the status quo cannot be maintained.