Greece heading for permanent depression


So Greece’s stock market has crashed after reopening this week. It’s been dragged down by bank shares. Clearly people there are not confident that the banks there are safe.

What makes it worse is the report from the National Institute of Economic and Social Research showing that Greece needs a debt write-down of almost €100 billion  if the country is to stand a chance of clawing its way out of a “prolonged and severe depression” By the end of 2016, the economy is forecast to be 30pc smaller than at its peak in 2007 and 7 per cent smaller than before it joined the euro in 2001.The means it will stay in recession until at least the second half of 2016. More likely, it means the place is heading for permanent depression

What that means is that Greece is likely to leave the Eurozone.

Given the way it’s panning out now, things are bound to end badly.

Macroeconomic forecasts show that Greece’s debt-to-GDP ratio will keep heading north. This was known two years ago, but now for the first time the geniuses at IMF publicly acknowledge so.

In the medium term fiscal surpluses will be achieved at the cost of lower growth.

The program imposes “quasi-automatic spending cuts” if the fiscal surpluses fall below ambitious targets.

Assuming Greece puts itself through the wringer for three years, we’re likely to see 2018 debt climbing north of 200 per cent of GDP.

And therein lies the problem. Greece will still be unable to borrow in the market, and a fourth bailout will be needed.

And by then, Greeks might stop caring for the euro.


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