On Monday of this week, we technically closed the book on one of the biggest stories of the last decade or so. The bailout program structured by European governments for Greece, which started in 2010, finally came to an end, and no more payments will be made to Greece going forward. Greece still has to pay back the loans it was given, however, the payback period has been extended 10 years with the average loan maturity going 40 years into the future. Any further investment into Greece will have to come from private sources. And Greece still has to abide by certain conditions regarding fiscal policy to avoid going back into default again.
While Greece has come a long way from the brink of bankruptcy, two current numbers in particular stand out. Unemployment is at 20 percent — twice the level that it was before the crisis — and half of all loans on banks' books are non-performing, meaning debtors are not able to service interest and principal payments.
This clearly portends a continuing difficult road ahead as the economy is simply not functioning as it needs to on its own. It might be able to get there, but Prime Minister Alexis Tsipras has a big job on his hands.
As to whether or not the bailout program itself was the right thing to do, that is a debate that will rage on for decades. The severity of the austerity measures required of Greece no doubt made the situation worse by limiting consumption (which in many ways was needed), but the alternative was politically unviable in Germany and other countries. In the end, massive public policy changes had to be made in Greece that were never going to be easy under any circumstances.
My View: It is poignant that celebrations that were planned for the end of the bailout program were curtailed, at least partly due to the deadly fires in Greece this summer. It is still appropriate though, as the end of the program does not mean the end of Greece's troubles. The effects of the last eight years — lost productivity, the hallowing out of financial institutions, a heavy tax load — will still be with Greece in many ways for decades. It is just the beginning of a new road that will be difficult for many years to come.
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