Monday, January 12, 2015

Greece is broke but questions over new bailout

by Enrico Colombatto

World Review

January 12, 2015

Greece is making headlines again. Its latest political crisis means the country faces new elections on January 25, 2015, while politicians do their best to portray a realistic and not overly-pessimistic picture of the Greek economy, writes World Review expert Enrico Colombatto.

The future role of Greece within the European Union and the eurozone, unsurprisingly, plays a crucial role.

The essence of the Greek economic situation is Greece returned to growth with annual real GDP growth of around 0.6 per cent in 2014. But unemployment remains scary at 27 per cent overall, and 49 per cent among the young.

Its public accounts are heavy - the budget deficit amounted to more than 12 per cent of GDP, and the public-debt-to-GDP ratio to about 175 per cent.

Its public-finance is unsustainable without substantial aid from the troika of the European Commission, the European Central Bank and the International Monetary Fund .

Greece is broke and there are questions whether further bailouts make any sense. Repeated bailouts have been ineffectual and could have weakened the drive for radical change.

Greek policymakers have made little progress in introducing necessary structural reforms.

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