Greece, following eight years and approximately $330 billion worth of loans, is putting foreign bailouts behind it.
On Monday, the country officially exited the final of three huge bailout programs that helped to save it from going broke and leaving the euro. However, the bailouts provided by the International Monetary Fund, the European Commission and the European Central Bank came with a heavy cost that Greeks will feel for years to come.
Greece, in exchange for receiving the bailouts, agreed to dramatically cut its spending as well as implement painful and unpopular economic reforms. Employees of the government had salaries slashed, pension’s frozen and age of retirement push higher. Consumer spending plunged, many businesses shuttered their doors and unemployment skyrocketed.
The economy in Greece is 75% the size it was during 2007, prior to the crisis starting, and still faces several challenges.
On paper, the Greek government, whose excessive spending fueled its meltdown financially, has been put back in order, moving from a budget deficit of 15% in 2009 to a surplus of 1% in 2017.
This year, economists expect the Greek economy to expand by 2% and by 2.4% in 2019, after having shrunk eight of the last 10 years. It has been estimated that public debt would peak in 2018 at more than 188% of the nation’s GDP, prior to falling back to 151 % during 2023.
Greece’s creditors have agreed as well to restructure debt, making it possible for the Greek government to manage future problems.
However, many problems remain. One analyst said there are several structural economic issues that need to be resolved through this program despite being supervised over the last eight years.
Greece was hit very hard in 2008 when the Global financial crisis hit. Greece already was heavily in debt following years of overspending by governments, but the credit crunch helped to make its finances unsustainable.
Because the euro is used by Greece as its currency, the debt crisis put the entire Eurozone into risk. If Greece drops out of the block of common currency, it would hurt investors’ confidence on the full project.
The uncertainty hit the euro hard and European Union and the IMF stepped in.