From Ithaca (Greece exits largest bailout)

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From Ithaca (Greece exits largest bailout)

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Read more on - Polity | Economy | Schemes | S&T | Environment

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• Financial collapse of Greece, 2010: The nation took $330 b of bailout aid from the troika of IMF, EC and ECB, and finally exited its bailout phase in August 2018.
• In return: Greece had to undertake one of the most massive structural reform, including huge austerity (spending cuts). Economy shrunk by 25%, unemployment was very high, 33% of nation turned poor, and lacs of Greeks left the nation
• A long road ahead: Since Greece owes 180% of GDP in debt, the problem will not end soon. A condition of bailout was to maintain 3.5% primary surplus (budget surplus before interest payments) until 2022, and then 2% until 2060. Note that Greece has an ageing population, and a decade of economic strife.
• Maintaining Surplus will harm: Experts warn that trying to do it will reduce Greece’s ability to grow fast, and pay off its debts.  [ Why? ]  
• Problems ahead:

1. Greater flexibility in labour markets
2. Simplified licensing processes for companies
3. Banking reforms for eliminating the NPAs  (50% in banks)
4. Reform of tax base, to broaden it beyond the middle classes

• Eurozone versus the IMF: The two from eurozone (EC and ECB) softened the debt repayment terms, but the IMF has warned Greece could fall in a debt trap (due to surplus rules, etc.) Finally, the mountain of debt itself may need to be cut first. CONCEPT
• Summary : Even as Greece emerged officially from a long bailout period, the road ahead is very tricky, and a debt trap awaits.

Read more on - Polity | Economy | Schemes | S&T | Environment

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