The European bailout programmes are over. On 20 August 2018, after almost eight years and hundreds of billions of euros, Greece was the last EU Member State to leave its financial assistance programme. Athens can now borrow from financial markets like other countries, and the Greek economy grew by 1.4% last year. Surely the worst is over?
Not so fast. For one thing, the impact of the crisis has been so severe that it calls into question the long-term health of Greece: the Greek economy has shrunk by a staggering 25% since 2008, unemployment is still much higher than the Eurozone average at 20% (and youth unemployment is closer to 40%), and Greece still has debts totalling roughly 180% of its annual GDP. The country may have left its bailout programme, but creditors have nevertheless forced Greece to cut spending and run a budget surplus until at least 2060, which some economists (including from the IMF) warn is unsustainable.
The situation is better elsewhere in the Eurozone, but not drastically so. Italy has debts over 130% of its GDP, and investors seem jittery about a populist-led government that has pledged to slash taxes and raise public spending. The ECB is ending its quantitative easing programme in December 2018, but that will still leave it holding over €2.5 trillion of Eurozone government debt on its balance sheet (more than twice the €1 trillion the programme was originally supposed to run to).
Is the European debt crisis finally over? Or has Europe failed to enact the reforms needed to provide long-term sustainability? Let us know your thoughts and comments in the form below and we’ll take them to policymakers and experts for their reactions!