Page 8 - ARUBA TODAY

A8 WORLD NEWS
Saturday 18 auguSt 2018
Greek bailout ends, but Europe's debt problems grind on

By DAVID McHUGH League have made com-
Associated Press ments about leaving the
FRANKFURT, Germany (AP) euro and criticized the Eu-
— Greece officially com- ropean Union's rules limiting
pletes its bailout program debt and deficits. That has
on Monday, after eight raised fears of a new debt
years of cutbacks enforced crisis.
in return for massive loans Eurozone officials have set
and following an econom- up ways to protect the cur-
ic collapse on the scale of rency union in a crisis. One
the Great Depression. is to have the European
The exit is a welcome mile- Central Bank offer to buy
stone. But it offers little as- bonds of countries with ex-
surance that the 19-coun- cessive borrowing costs. But
try euro currency union that requires signing up for
has left behind its problems a plan to reduce the public
with debt. deficit, and that appears
The huge debt pile in to be the last thing the cur-
Greece and an even big- rent government would do.
ger one in Italy will remain The most drastic alternative
a lurking financial threat to would be for Italy to leave
Europe that could take a the euro.
generation to defuse. Guntram Wolff, director of
Europe's debt problems the Bruegel research insti-
have repeatedly raised tute in Brussels, says Italy's
fears over the past decade debt situation is different
of a break-up in the euro, from Greece's, in that most
a worst-case scenario that Italian bonds are in the
would cause severe eco- hands of Italians.
nomic damage in the re- That means the govern-
gion and shake world fi- In this file photo dated Friday, June 22, 2018, people walk past the Bank of Greece headquarters ments' debt payments stay
nancial markets and trade. as workers repair the facade of the building in central Athens. at home to support spend-
In Greece, successive gov- Associated Press ing and investment by Ital-
ernments had borrowed ians.
heavily for three decades tional Monetary Fund. In man Chancellor Angela end the country's creditors "In Italy, the debt problem is
to fund generous spending 2012, about 107 billion eu- Merkel. may have to lower their ex- essentially an internal ques-
on pensions and jobs given ros in debt was lopped off The IMF and prominent pectations for how much tion," he said.
to political supporters, while by inflicting losses on pri- economists say that if part Greece can save. Italy's progess will be de-
tolerating widespread tax vate bondholders. of Greece's loans are not He thinks lower surplus- cided by a mix of three
evasion and covering up Monday is the day the written off, its debt loan will es plus better economic factors: rising interest rates,
budget shortfalls. All that third and last bailout pro- eventually start to rise out growth from the pro-busi- economic growth, and the
blew up mightily in Octo- gram expires, meaning no of control again. Greece ness reforms could be the political willingness to mak-
ber 2009, when Greece more money is available. is meant to run exception- key to make debt sustain- ing savings in public financ-
admitted its budget deficit Greece will remain subject ally large budget surpluses able. es over a number of years,
was much bigger than pre- to quarterly visits by techni- before interest payments "It doesn't mean that tax that is, to forgo spending
viously reported. Shocked cal experts to make sure it — so-called primary sur- evasion has been eradi- on things likes schools and
investors no longer would is meeting agreed targets pluses of 3.5 percent of cated or that governments pensions in order to pay
risk loaning Greece money for public finances until the GDP through 2023, and 2.2 will no longer do favors for debt. The recent political
at affordable rates, forcing last bailout loan is repaid, in percent thereafter. The IMF their supporters," Pagoula- turmoil has unnerved inves-
the government to turn to 2060. says very few countries his- tos said. But the degree of tors, who raised the cost
rescue loans from the oth- The other eurozone coun- torically have been able to reform should not be un- for Italy to borrow on bond
er eurozone countries and tries gave Greece enough do that. derestimated. The chang- markets.
the International Monetary cash to cover 22 months It says countries often es over eight years "have "Whether Italy will be able
Fund. of financing needs and quickly undo cuts, as been very significant and to do this politically and
The loans came with tough significantly eased its debt people get fed up over they must have an impact economically, that is the 2
conditions: closing deficits, repayment terms. Greece lost services. Spending on productivity." trillion euro question," said
which led to aggressive tax needs to pass the quarterly on state health care in Italy's slow growth since Wolff, referring to the size
increases and spending reviews to activate that Greece, for instance, has joining the euro has meant of Italy's public debt. He
cuts; and a raft of reforms debt relief. But Greece will been squeezed to one of that the eurozone's third- believes politicians' deter-
aimed at improving tax col- get no new reform require- the lowest levels in the eu- largest member has failed mination to keep public fi-
lection and the business cli- ments. rozone, with the poorest to work down the huge nances in check is eroding.
mate in general. The econ- Some experts say that the 20 percent of Greeks say- debt burden it carried into "So I would say the picture
omy, hit hard by spending best way to help Greece ing they spend 44 percent the currency union when it looks grimmer than it did six
cuts, shrank by a quarter. would be for eurozone of household income on joined as a founding mem- months ago."
All told, Greece now owes countries to write off a part out-of-pocket medical ex- ber in 1999. It remains at Ultimately Wolff thinks that
total debt of 322 billion eu- of the loans altogether. But penses and many report- an elevated 133.4 percent the disruption from leaving
ros ($366 billion), or over governments have balked ing they have simply done of GDP, the second high- the euro would be so great
180 percent of annual at that. The bailouts were without medical care. est after Greece. Officials that the government would
economic output. Of that, unpopular, particularly in George Pagoulatos, a pro- associated with the coali- change course.
256.6 billion euros is owed Germany, and loan for- fessor at the Athens Uni- tion between the popu- The losses "would be so
to eurozone creditors and giveness would be a tough versity of Economics and list 5 Star Movement party massive, people would say,
32.1 billion to the Interna- sell for leaders such Ger- Business, says that in the and the anti-immigration no, no let's not do that."q