“In spite of personal appeals from the International Monetary Fund’s euro-supporting managing director Christine Lagarde to forgive Greece its debt burden and allow the country to be given a fresh start, the eurofanatics have been unrelenting in their determination to keep the debt anvil hanging around its neck.
Greece is in an armlock it cannot escape because of a combination of its debt burden and the fact that its membership of the eurozone means it can no longer devalue its currency. And the EU and Germans are determined to keep it that way to save their precious euro.
So despite the joyous news bulletins about the bailout yesterday morning, be in no doubt that this Greek tragedy is very far from over.”
“Greek output is now 3.7 per cent higher than its trough in mid-2015, which makes it 25 per cent below 2007 levels. Despite strong growth expectations, Greece’s economic output in 2023 is forecast to be 17 per cent below 2007 levels, according to International Monetary Fund data. […]
Though more than 300,000 new jobs have been added since March 2015, many are temporary or part-time positions, and average wages in real terms are 22 per cent below 2009 levels. In Spain, Italy and Portugal, average wages in real terms have recovered to between 4 and 6 per cent below pre-crisis peaks.
In 2007, Greeks were better off than people in half of the countries that now form the EU. After adjusting for price differences — so-called purchasing power parity — Greece had a similar per capita output to Spain, was 21 per cent more well off than Portugal and 71 per cent richer than Poland. Now, Greeks are almost 9 per cent worse off than Portuguese and Poles, while Spaniards are almost 40 per cent better off. Greece has become the fourth-poorest EU country, after Bulgaria, Croatia and Romania.”
“The Greek people have just lived through a Depression as deep as the Great Depression and considerably longer. It is now the greatest recorded peacetime Depression. […]
Despite all the pain the Greeks have endured to fix their country’s finances, Greece’s fiscal situation remains extremely precarious. The IMF staff predictions show absolutely no room for fiscal expansion, even though it is desperately needed, not least to relieve extremely high poverty levels. One in four people in Greece is living below the poverty line.
Greece’s government is critically hampered by ridiculously tight fiscal targets not of its own making. […]
In a few years’ time, when Greece once again faces debt default and Euro exit, what will the price of debt relief be? Well, unless there is a change of heart among Eurozone governments by then, the price will be yet more harsh spending cuts and tax rises, and perhaps another Depression. Greece does indeed have more pain to come.”
“Though Greece’s economy is growing, it is still only three-quarters of its precrisis size. Gross domestic product has expanded since the middle of last year, buoyed by an apparent renewal in exports. But much of the export growth comes from refining imported oil and exporting the final product — an activity that sustains tens of thousands of jobs, but does not filter through to the broader economy.
Unemployment, which has fallen from a peak of 28 percent, is still stuck above 20 percent, the highest in the eurozone. Over half a million Greeks left during the crisis in a brain drain that has hampered a recovery. Worryingly, poverty has ‘risen dramatically,’ according to the Organization for Economic Cooperation and Development, a group of rich nations. […]
[The IMF] also suggested reducing tax rates that in some cases reach as high as 70 percent of a person’s income. The Greek government jacked rates up so sharply in the last couple of years that the country’s notorious black market has grown again.”
“‘As a member of the eurozone, Greece has lost the ability to implement an independent monetary policy. The fiscal constraints mean that there are very few tools left with which to boost economic activity,’ [Peter Dolman] said.
Referring to the 2.2 percent primary surplus target after 2022, Dolman said it will be very challenging to meet the forecasts of the European Commission’s Compliance Report in this fiscal environment. ‘At this time, we consider the realistic forecast for real growth in Greece is 1 percent annually. Our own research, based on the historical record, shows that a country cannot maintain a positive primary balance above 1.5 of GDP for such a long period.’”
“Greece is scheduled to exit its marathon bailout this summer after hitting the tough fiscal targets set by its creditors. But the country has done so by raising taxes so high that they are strangling the small businesses that form the backbone of its economy.”
“At a time of mounting uncertainty in Europe, Portugal has defied critics who have insisted on austerity as the answer to the Continent’s economic and financial crisis. While countries from Greece to Ireland — and for a stretch, Portugal itself — toed the line, Lisbon resisted, helping to stoke a revival that drove economic growth last year to its highest level in a decade. […]
Voters ushered Mr. [António] Costa, a center-left leader, into power in late 2015 after he promised to reverse cuts to their income, which the previous government had approved to reduce Portugal’s high deficit under the terms of an international bailout of 78 billion euros, or $90 billion. Mr. Costa formed an unusual alliance with Communist and radical-left parties, which had been shut out of power since the end of Portugal’s dictatorship in 1974. They united with the goal of beating back some of the toughest aspects of austerity, while balancing the books to meet eurozone rules.
The government raised public sector salaries, the minimum wage and pensions and even restored the amount of vacation days to prebailout levels over objections from creditors like Germany and the International Monetary Fund. […]
The economic about-face had a remarkable impact on Portugal’s collective psyche. While discouragement lingers in Greece after a decade of spending cuts, Portugal’s recovery has pivoted around restoring confidence to get people and businesses motivated again.”