After eight years of bailouts, brinkmanship and even more bailouts, Greece’s economy is finally ready to stand on its own again. Well, what’s left of it.
The good news is Greece really is about to wrap up its latest bailout program and won’t need any more financial assistance for now. But the bad news, as the International Monetary Fund points out, is that even with the lower interest rates and longer repayment periods that Greece has been given, it still has too much debt, too little growth and too fragile a private sector to be able to say that it won’t need more help for long.
Which brings us to the worst news of all: Europe might be celebrating this as a success story now, but Greece has been one of the biggest economic failures you’ll ever see short of a war or revolution.
Indeed, excluding microstates such as San Marino, there are only four countries that have grown less — or, more accurately, shrunk more — than Greece has in the past 10 years: Libya, Yemen, Venezuela and Equatorial Guinea. (The IMF doesn’t have numbers for Syria since the start of its conflict, otherwise it would probably be on this list as well).
The first two are countries that have been beset by civil war for most of this time, and the last two are petro-dictatorships that have been so corrupt and even more inept that they’ve made the oil crash worse than it needed to be. Even Ukraine, which was one of the hardest-hit economies in 2009 and has been embroiled in a proxy war with Russia since 2014, has done better than Greece during this time. As you can see below, Ukraine’s economy has shrunk “only” 17.8 percent since 2008, compared to 23.6 percent for Greece.
The point is that this kind of economic collapse is usually the symptom of a broader state collapse, which is why it seldom happens in rich countries. That’s clear enough if you look at the late Angus Maddison’s historical GDP per capita numbers. Going back to 1900, there have been only three general times when European economies have shrunk over a 10-year period as much as Greece’s has since 2008: after World War I, after World War II and after the fall of communism. Most of the exceptions to this involve other wars — in particular, the Balkan wars of the 1910s, the Spanish Civil War, the Greek Civil War and the Yugoslav wars of the 1990s — but there is one that largely took place during peacetime. That was Weimar Germany’s hyperinflation.
It’s worth pointing out what isn’t here: the Great Depression. That wasn’t quite as bad in Europe as it was in the United States — at its nadir in 1933, the U.S. 10-year decline was actually comparable to Greece’s today — partly due to the fact that most European countries were quicker to leave the gold standard when things did start to get more dire. That allowed them to inject enough monetary stimulus into their economies to jump-start almost immediate recoveries.
The problem, of course, is that it’s a lot harder for Greece to do the equivalent of that right now. The gold standard and the euro are similar in that they are both fixed-exchange rate systems that can get countries into trouble if they are hit by a big enough shock that their economy “needs” a cheaper currency than it has under the system. But they’re different in that it’s a lot simpler to say your currency won’t be worth as much gold as it used to than to replace all of your currency with a new one.
So instead of stimulus, Greece has gotten austerity — and a lot of it. Under the terms of its just-about-to-be-completed bailout agreement, Greece is actually supposed to keep running primary budget surpluses of at least 2.2 percent of GDP until 2060. That’s right: four more decades of austerity. It’s no wonder, then, that Greece’s economy might not get back to where it was in 2008 until 2030.
This is what Europe calls a success: an economy that has shrunk so much it looks war-torn.