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Don’t write-off Greece – or Europe

Neat Greek graphics side by side

Never trust experts. It was experts who said the Titanic couldn’t sink. It sunk.

Two years ago experts said that Greece would sink and would have to leave the Euro.  It hasn’t – and it didn’t.

In July 2012 Ireland’s ‘Independent’ newspaper reported that experts predicted a 90% chance that Greece would leave the Eurozone within 18 months.  Yesterday the same newspaper reported that the Greek tragedy was over: the country had pulled out of the worst recession of half-a-century.

Yesterday the Financial Times reported:

“After years as Europe’s economic basket case, Greece has found itself in an unfamiliar position: star performer”.

After six horrible years, the Greek economy has finally exited recession and returned to growth. From a year earlier, Greece’s economy expanded 1.7%.   It is now the Eurozone’s top performer.  In the European Union, Greece’s growth rate is only bettered by Romania and matched by the UK.

The Eurozone economy also grew better than expected.  The 18-country currency bloc grew by 0.2% in the third quarter.  Not as good as the UK or the USA, but still not the recession experts predicted.  What’s more, the countries of east and central Europe are now among the fastest growing in the EU. Romania’s economy grew 1.9% in the quarter, Hungary and Bulgaria added 0.5% each and Poland gained 0.9% 

Following the world-wide economic crisis of 2008, Greece was the first of five Eurozone countries to require a massive bailout in 2010 – and Greece needed two bailouts.  Its budget deficit had plummeted to 15.7% in 2009, more than five times the European Union limit.

What happened to the other four countries that also needed bailouts?  Three of them – Ireland, Spain and Portugal – are also now among the strongest growing economies of the Eurozone.  Unfortunately, Cyprus is not and is still stuck in recession. 

It would also be naïve to underestimate Greece’s enormous ongoing problems.  Its unemployment rate remains eye-watering high at 25.9% – with youth unemployment almost double that. The government’s debt burden still equals about 176% of its GDP.   After years of savage austerity measures, the fabric of Greek society remains fragile, with riot police out in force only last Thursday to control students protesting in Athens.  It may take many years before the Greek economy returns to what it was before the crisis.

However, the latest news that Greece is now officially out of recession is an important turning point.  As Greek economist Nicholas Spiro commented, “There is now light at the end of the tunnel.”

Is this now a time for the UK to consider leaving the European Union, just as Europe is recovering?  How will we feel if we abandon what we thought was a sinking ship, only to look on with nostalgic eyes to see the ship bounce back, buoyed by the treasures of economic success, and realise we’re no longer on board, but out at sea?

If we’re not careful, that’s exactly what could happen.  (Trust me.  I’m not an expert).


Other articles by Jon Danzig:

2 Responses to Don’t write-off Greece – or Europe

  1. avatar Travis Zly says:

    I think you have been rather harsh on Cyprus. It is a much bigger success story than Greece, Ireland or Spain. The country was bailed out in March 2013. By April 2014, the country had returned to the bond markets, borrowing €950 million medium term – 7 years – with a 4% coupon. By Q3 2014, the state recorded a €200 million surplus. Cyprus is expected to record a primary budget surplus in 2014, in only its 2nd year of its austerity programme. In 2013, the state deficit fell to 2% after the adjustment programme called for 4.2%. The country’s largest bank was able to raise €1.1 billion from the markets a little over a year after it was restructured following the notorious bail-in. In November 2014 Moodys upgraded the sovereign from Caa3 to B3 with a stable outlook. Unemployment peaked at 11% in mid-2014 and is already on a downward trajectory.
    I believe no other Eurozone country has shown such a swift economic turnaround as Cyprus.

  2. avatar Jon Danzig says:

    Thank you Travis, that’s good news about Cyprus and I hope it can be sustained. The newspaper reports I read stated that the economy of Cyprus had shrunk in the third quarter. This is how the situation was reported by

    “Cyprus’s recession-hit economy contracted by 0.4 percent in the third quarter, matching the drop of the previous three months, official figures showed on Friday.

    “It was the 13th successive negative quarter for the Mediterranean island’s battered economy, according to a flash estimate from the state statistical service, which also revised the second-quarter drop to 0.4 percent from its initial estimate of 0.3 percent.”

    I also quoted from RTT News in my article, which reported, “Cyprus Remains Stuck In Recession In Q3”.

    If you have an alternative source of good news (i.e. a reliable link) about the Cyprus economy, I shall be grateful if you will post it here. Best wishes, Jon Danzig

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