ADVERTISEMENT

Has the eurozone learned from its Greek odyssey?

After eight long years and three austerity-heavy bailouts, Athens will on Monday formally leave the financial rescue umbrella of its creditors from the EU and International Monetary Fund.

But while both European and Greek politicians have hailed its return to the markets as "historic" good news, serious challenges remain for the 19 countries that use the single currency.

The Greek boomerang

"The Greek crisis has not been solved, it has just been postponed," said Charles Wyplosz, Professor of International Economics at the Graduate Institute of International and Development Studies in Geneva.

ADVERTISEMENT

Athens will not even start to repay until 2032 the bulk of its huge debt, which remains at a colossal 180 percent of Greece's gross domestic product. In the meantime it is impossible to say where the country will be politically and economically.

The IMF has in recent months issued a series of warnings about the long-term sustainability of Greek debt despite the eurozone's latest arrangements to reduce it.

Wyplosz criticised the EU's "spectacular cynicism" during the crisis. "The problems weren't solved but they pretended to believe they were."

"One way or another it will explode. Greece will be in crisis again well before 2032."

Europe's debt mountain

ADVERTISEMENT

"We have in no way resolved the problem of public debt, which remains large in Italy, Greece and Portugal, despite their efforts," warned Anne-Laure Delatte, deputy director of the French global economy research body CEPII.

European heavyweights France and Spain also have significant debt, which could further weigh down the eurozone.

"Debt is a factor in vulnerability, which can be so violent that it passes onto the markets," added Delatte.

But other countries that have adopted the euro have seen their debt fall and so the single currency area is increasingly polarised between the "good students" and the others, with diverging interests.

The first group back budgetary rigour and spending controls -- the second call for more solidarity.

ADVERTISEMENT

Italian threat

Italy is becoming a serious risk for the eurozone because of its debt, its fragile banks, and above all because of a populist government that seems bent on confrontation with Brussels, say economists.

"You've got a country with debt at 130 percent of GDP, serious internal problems, a dirty banking system, and now it's led by people who don't know what they're going to do. The threat is very clear," said Charles Wyplosz.

The new Italian government's economic strategy is still fluid, with contradictory signs coming from Rome.

But the deadly collapse of a motorway bridge in Genoa last week saw clashes between Italy -- especially its far-right interior minister Matteo Salvini -- and the EU over its spending limits.

ADVERTISEMENT

"The eurozone doesn't have the tools or the institutions right now to deal with a serious Italian debt crisis," said Philippe Martin, a professor at the prestigious Sciences Po university in Paris, who is close to French President Emmanuel Macron.

Future of the eurozone

The debt crisis has allowed the eurozone to strengthen itself, particularly with the creation of the European Stability Mechanism, the bloc's bailout fund, and the reinforcement of so-called banking union, which sees the same rules for all banks.

But the reforms remain unfinished and a push by Macron for further steps -- including a dedicated budget for the eurozone -- still face hostility from the austerity-minded north, which fears paying for the debt-ridden south.

"I am not sure there will be agreement on what the euro should be," said Nathalie Janson, from the NEOMA business school in Rouen, France.

ADVERTISEMENT

"The euro has finally become a chaotic currency with permanent turbulence, whereas it was originally designed to guarantee stability."

JOIN OUR PULSE COMMUNITY!

Unblock notifications in browser settings.
ADVERTISEMENT

Eyewitness? Submit your stories now via social or:

Email: eyewitness@pulse.ng

Recommended articles

Lagos VIS seizes 50 unroadworthy vehicles in enforcement operation

Lagos VIS seizes 50 unroadworthy vehicles in enforcement operation

Aiyedatiwa sends 12 commissioner nominees to Ondo Assembly for confirmation

Aiyedatiwa sends 12 commissioner nominees to Ondo Assembly for confirmation

Woman saves animal from the streets — then she finds out it is something else

Woman saves animal from the streets — then she finds out it is something else

Alake calls on Badaru to fish out illegal miners, violators of mining laws

Alake calls on Badaru to fish out illegal miners, violators of mining laws

Divers find bodies of 2 people who drowned after Baltimore bridge collapsed

Divers find bodies of 2 people who drowned after Baltimore bridge collapsed

INEC rejects LP's National convention in Anambra, questions venue change

INEC rejects LP's National convention in Anambra, questions venue change

8 people including professor declared wanted over killing of 17 soldiers

8 people including professor declared wanted over killing of 17 soldiers

INEC to publish credentials of 17 Edo governorship candidates on Saturday

INEC to publish credentials of 17 Edo governorship candidates on Saturday

Hardship: Abiodun to begin sale of rice to Ogun residents at 50% discount

Hardship: Abiodun to begin sale of rice to Ogun residents at 50% discount

Pulse Sports

Nigeria vs Mali: Has Finidi George done enough to land Super Eagles job permanently?

Nigeria vs Mali: Has Finidi George done enough to land Super Eagles job permanently?

I want to emulate Keshi and win the AFCON - Finidi George shares ambitious Super Eagles dream

I want to emulate Keshi and win the AFCON - Finidi George shares ambitious Super Eagles dream

Michelle Alozie: I had to do it because of African referees

Michelle Alozie: I had to do it because of African referees

AC Milan star reveals he was named after Super Eagles legend Tijani Babangida

AC Milan star reveals he was named after Super Eagles legend Tijani Babangida

Give him the job! Super Eagles fans beg NFF to make Finidi George permanent coach after Nigeria's win over Ghana

Give him the job! Super Eagles fans beg NFF to make Finidi George permanent coach after Nigeria's win over Ghana

Super Eagles 2-1 Black Stars: Nigerians praise Iwobi, Lookman, Finidi George after friendly victory against Ghana

Super Eagles 2-1 Black Stars: Nigerians praise Iwobi, Lookman, Finidi George after friendly victory against Ghana

ADVERTISEMENT
ADVERTISEMENT