No cause for celebration

Greek prime minister Alexis Tsipras hailed it as a ‘day of liberation ‘ and the ‘end of a modern day Odyssey’: after about nine years of unbearable austerity, Greece has exited the bailout program.

“Greece has managed to stand on her feet again,” the prime minister’s office announced last week, describing receipt of a final €15bn bailout loan as “The last act in the drama. Now a new page of progress, justice and growth can be turned.”

However, celebrations are premature: not only in my opinion, but according to several experts, the bailout was a disaster for Greece, since the loans were designed to help Northern European banks, not the Greek government, nor the Greek people.

 

Photo from Benaki Museum Archives

 

If their purpose was to support the Greek economy, the emergency loans must be considered a failure. Greece is now the fourth poorest country in the EU behind Bulgaria, Croatia and Romania. In an economy that has contracted by 26%, a fifth of the working population – two-fifths of young people – have been left unemployed, while about 500,000 people have fled, mostly to EU member states in Europe’s wealthier north.

Although Greece might be now able, after many years, to borrow again at market rates, and Tsipras is at pains to play down outside supervision, we will still be subject to a regime of enhanced surveillance. Further pension cuts are in store.

Also, a return to borrowing has been made much more difficult because of market turbulence caused by financial problems in both Italy and Turkey. In the midst of his triumphant pronouncements, Tsipras has nevertheless warned of “fresh battles ahead” as the country prepares its first budget measures following the end of its international bailout.

The country faces decades of austerity since, contrary to widely held beliefs, less than €10 billion or a fraction of less than 5% of the overall programme went to the Greek fiscal budget. In contrast, the vast majority of the money went to existing creditors in the form of debt repayments and interest payments. Athens will be repaying a €322bn debt mountain for next 42 years.

Scary? If you talk to Greeks who’ve had to sell their house, whose kids have left for a better life abroad, whose businesses have gone bankrupt, who have zero faith in their leaders, I can assure you not many of them will be opening the champagne just yet.