It seems quite a long time since the doomsayers of the Euro Zone where out in force. The speculation then was not ‘if’ a country would default and crash out of the currency union, but rather ‘when’ and ‘who’. There were predictions that Greece, Ireland, Spain and Portugal where likely candidates but at the moment those predictions look misplaced.
However throughout the hysteria and doom laded forecasts, the fundamental economic data hasn’t really changed. There are still too many European countries literally swamped in debt with little expectation of that changing soon. The problems have moved off the front pages of the financial press but they’re still very much with us.
The European Commission has last week urged Greece to step up it’s efforts to reduce national debt quicker than is currently happening. It is worried that agreed targets for reduction look unlikely to be met despite some swinging austerity measures. There has been an increase in confidence that the worse was over in countries like Greece, yet EU officials don’t all share this optimism.
Figures like debt being more than 170% of the overall economic output of a country, are truly staggering. With this sort of burden on an economy, it’s difficult to see where any increase in prosperity can come from.
These economic targets were strictly linked to the bailout of the Greek economy, one of the conditions for example was that debt should be decreased to 124% of GDP by the year 2020. Latest EU estimates suggest that this target will not be met, in addition further long term goals will also be missed.
However there is hope, and it is expected that both the EU nations and the IMF would react to these problems rather than let Greece stagger towards other defaults and failures which will almost certainly effect growth prospects and confidence. It was agreed that if these targets were not met, then renewed efforts and help may be available. It was a realization that these goals may not be realistically achievable in the current economic climate and that other measures may have to be deployed. One of the important factors that is fundamental to the Greek recovery is the level of interest it pays on it’s debts, lowering this could make a huge impact on the economy in the short term.
The Greek economy will certainly need some more help, it lacks the monetary tools to make significant changes on it’s own. The UK economy is leading the way of recovery but of course it’s not part of the Eurozone currently. There is much talk and several decent documentaries available on UK TV documenting this recovery. To access these you’ll have to be in the UK or have access to a UK IP proxy, try this one.
To end some good news though for the Greek economy. At the beginning of the month, it was able to return to the Bond market. This enabled the country to at least raise finance from private investors after being absent from this sector for nearly five years.