bay Liz Alderman
As Greece prepares to emerge from one of the region’s most wrenching economic periods, its creditors are drawing up plans to ensure it is never a problem for the rest of Europe again.
European Union officials will unveil a blueprint in Brussels on Thursday to help the beleaguered country stand on its own once it comes off its third financial bailout in August. They have heralded Greece’s revival, and pointed to the closing of its bailout as a symbolic end to a ruinous financial crisis.
Although European leaders are marking the country’s apparent success, new problems are lurking elsewhere in the region, putting pressure on Greece’s still fragile economy. Britain is plowing ahead with its withdrawal from the European Union. A trade war with the United States appears in the offing. The election of an anti-austerity government in Italy has revived fears about the euro, and jittery financial markets are again starting to target the currency union’s weakest links.
“The eurozone is most definitely not out of danger,” said Simon Tilford, chief economist for the Tony Blair Institute for Global Change in London. European governments still have not agreed to reforms that would insulate the eurozone economy if a new crisis arises, whether in Italy, Greece or over other issues like trade. “If the recovery peters out or there is shock of some kind,” he said, “the outlook will be much darker.”
Few places know tumult better than Greece. It had to impose capital controls in 2015, as millions of people protested in the streets. Twice, it nearly crashed out of the euro. The economy shrank significantly, joblessness skyrocketed and many were driven into poverty. The country has had to rely on three bailouts since 2010, totaling 320 billion euros, or about $375 billion, overall.
European officials are now eager to paint Greece as a comeback story. The economy is growing again, albeit slowly. Unemployment has fallen from record highs, and investors are cautiously exploring whether to return. Prime Minister Alexis Tsipras has laid out a plan for growth, and is refusing the offer of a precautionary credit line, a financial safety net that would come with new austerity terms after years of belt-tightening.
Creditors will look to capitalize on that momentum. They are expected to announce an agreement on Thursday to ease the terms for Greece to repay its mountain of debt. Mr. Tsipras, who rose to power vowing to reverse austerity, is angling to be the leader who finally extracts Greece from its last bailout, which he agreed to in 2015.
While Athens will no longer officially depend on other people’s money, it faces an uphill battle to revive credibility in financial markets and restore growth.
Greece’s debt has ballooned to 180 percent of economic output — the largest in the eurozone. Though the economy is expanding, it is still only three-quarters of its pre-crisis size. And the governments, banks and institutions to whom Greece still owes staggering sums are bent on getting their money back, a feat that they say will require them to look over Athens’ shoulder for years to come.