SEVERE WX : Fire Weather Watch View Alerts

Greece is finally done with its epic bailout binge

After eight years and roughly $330 billion in loans, Greece is putting bailouts behind it.The country...

Posted: Aug 20, 2018 10:38 AM
Updated: Aug 20, 2018 10:38 AM

After eight years and roughly $330 billion in loans, Greece is putting bailouts behind it.

The country on Monday officially exited the last of the three enormous rescue programs that saved it from going bust and abandoning the euro. But the bailouts from the International Monetary Fund, the European Central Bank and the European Commission came at a huge cost that will still be felt for years to come.

In exchange for the money, Greece agreed to drastically cut spending and implement painful economic reforms. Government employees had their salaries slashed, their pensions frozen, and their retirement age pushed higher. Consumer spending plummeted, unemployment spiked and many businesses shut down.

The Greek economy is now three-quarters of the size it was in 2007, before the crisis started. And it still faces a range of challenges.

On paper, the government, whose runaway spending fueled the financial meltdown, has put its house in order. It went from a 15% budget deficit in 2009 to a 1% surplus in 2017.

"Greece is ready to exit. It has done most of the hard adjustment work [and] its economy is finally expanding again at a half-satisfactory pace," said Holger Schmieding, chief economist at Berenberg Bank.

The Greek economy is expected to grow 2% this year and 2.4% next year, after shrinking for eight out of the past 10 years. Public debt is forecast to peak this year at over 188% of GDP before declining to 151% by 2023, the year Greece is due for another review and possible debt relief.

Economic health remains elusive

Crucially, the cost of borrowing has come down.

"The bailouts have achieved their objective — to restore a degree of investor confidence and market access," said Mujtaba Rahman, Eurasia Group's managing director for Europe. "Greece can access capital markets and raise money itself."

The country's creditors have also agreed to restructure its debts, making it possible for the government to manage future payments.

But plenty of problems remain.

"There's a range of structural economic issues that haven't been resolved through the program, despite the supervision during the past eight years," Rahman said. "I think it's a stretch to call the program a success. It hasn't restored economic health."

IMF Managing Director Christine Lagarde cautioned last month that "greater reform efforts remain key to an economic recovery and lasting growth."

She said the Greek government still needs to improve how it collects taxes, do a better job of clearing out unqualified civil servants and urgently revamp its privatization program.

"Public debt is projected to remain high well into the next decade," Lagarde said, adding that the promise of continued support from Greece's main European creditors "remains essential."

A decade of pain

Greece was hit hard by the global financial crisis in 2008. The country was already heavily indebted after years of government overspending, but the credit crunch made its finances unsustainable.

Because Greece uses the euro as its currency, the spiraling debt crisis put the whole eurozone at risk. If Greece were to drop out of the single currency bloc, it would undermine investors' confidence in the entire project.

The euro was hit by the uncertainty, and Europe was forced to act. The first bailout came in 2010. The IMF, the ECB and the European Commission announced a three-year aid package, designed to rescue Greece.

The second package came in 2012.

The pain was made worse in 2015 after the populist Syriza party won national elections on the promise to end the austerity. The party's leader, Alexis Tsipras, became prime minister and went on the offensive against the country's creditors.

Related: What happens next in Turkey? It probably won't be good

Tsipras alarmed investors by calling a referendum on the austerity measures, in which voters rejected more reforms. But just a few weeks later, he was forced to capitulate and ask Europe for more money.

A third bailout package was agreed, but the IMF did not contribute funds. The total loans dispersed over three bailouts was €288 billion ($330 billion).

California Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 793065

Reported Deaths: 15189
CountyConfirmedDeaths
Los Angeles2621336401
Riverside574821172
San Bernardino52873908
Orange523821150
San Diego45147765
Kern31572354
Fresno27843362
Sacramento21628383
Alameda20748390
Santa Clara20587299
San Joaquin20019421
Stanislaus16398339
Contra Costa16056201
Tulare15687256
Ventura12477146
Imperial11606314
San Francisco1086599
San Mateo9625144
Monterey956869
Santa Barbara8930110
Merced8820137
Kings753477
Sonoma7160120
Marin6613113
Solano619457
Madera442465
Placer350742
San Luis Obispo343827
Butte276940
Yolo276554
Santa Cruz22768
Sutter167910
Napa164113
San Benito131211
Yuba11307
El Dorado10744
Mendocino87518
Lassen7350
Shasta72414
Glenn5633
Nevada5246
Colusa5196
Tehama5134
Lake51211
Humboldt4896
Calaveras31114
Amador28616
Tuolumne2264
Inyo18714
Mono1652
Siskiyou1630
Del Norte1381
Mariposa752
Plumas500
Modoc250
Trinity150
Sierra60
Alpine20
Unassigned00
Chico
Scattered Clouds
84° wxIcon
Hi: 87° Lo: 59°
Feels Like: 84°
Oroville
Clear
62° wxIcon
Hi: 88° Lo: 60°
Feels Like: 62°
Paradise
Scattered Clouds
84° wxIcon
Hi: 82° Lo: 58°
Feels Like: 84°
Chester
Clear
42° wxIcon
Hi: 76° Lo: 45°
Feels Like: 42°
Red Bluff
Clear
58° wxIcon
Hi: 88° Lo: 58°
Feels Like: 58°
Willows
Scattered Clouds
84° wxIcon
Hi: 90° Lo: 55°
Feels Like: 84°
Mild temperatures, breezy south winds, and improved air quality are ahead for your Wednesday. Coastal showers will be possible on Thursday, and then hot temperatures and high fire danger return for your weekend.
KHSL Severe
KHSL Radar
KHSL Temperatures

Community Events