Log inGreece exits Eurozone bailout programme
Today marked a significant milestone for the Eurozone, with Greece exiting an emergency loan programme which started in 2010. The Greek economy had weakened since adopting the Euro in 2001 due to a substantial trade deficit, but it struggled significantly in the wake of the global financial crisis of 2007/08. Government revenues from taxation were significantly lower, but government spending was not adjusted accordingly. With concerns around the Greek government defaulting on their debts looming, the debt crisis which ensued was arguably the single most concerning issue when considering the Eurozone’s ability to continue. The possibility of an end to the Euro as a single currency seemed very real.
Greece’s debt problem was substantial and required the largest bailout in global financial history, with a touch under €300 billion being lent to the struggling nation in total over the past 8 years. Other European nations, in conjunction with the IMF, provided Greece with loans to help stabilise its economy. With these loans came conditions which saw Greece adopt strict austerity measures to help reduce government spending. As the bailout programme has progressed, political unrest in Greece has grown due to the unpopularity of the austerity measures imposed upon the country.
The final tranche of the bailout programme, an amount of €61.9 billion, has left Greece with total government debt amounting to around 180% of GDP. Whilst many peripheral European states underwent bailout programmes and now have substantial amounts of debt, Greece is still some way above the next largest debtor, Portugal, who have debts of around 120% of GDP. Whilst the bailout payments have helped Greece to stabilise its economy, which has started to grow slowly in recent years, it is still around 25% smaller than before the crisis in 2010 commenced. The Greek population are still feeling as though this is the case, with the unemployment rate sitting at 19.5% and youth unemployment at nearly 45%.
Many feel that the economy will not be able to grow at a faster rate until Greek Banks begin to finance expansion, but with non-performing loans in the Greek banking system amounting to 48% of total outstanding loans, it is hard to make a case for the banks changing their behaviour in the short term. Greece is forecast to be repaying government loans until 2060, with a requirement to run a budget surplus ongoing, and so state investment is likely to be very minimal. So whilst today may signify that the worst has been and gone for Greece and that the future of the Eurozone is more stable than it was in 2010, the general consensus is that growth in Greece will be slow and subdued, with living standards for the Greek population remaining at pre crisis levels for some time. As a result, political unrest and negative sentiment towards the Eurozone is not likely to disappear any time soon.