Can Greece Survive?

Readers will know that I love Greece (even if Greece doesn’t always love me).

I can’t crisply explain why, but there’s something about this country that grabbed me up front and never let go. Which is why I found a recent report out of the International Monetary Fund so particularly disturbing.

It turns out, if anything, we may have underestimated the scope of the Greek Debt Crisis.

Greek debt has slipped from the news, driven out by other world events and the slow-motion nature of economic tragedy. The last time most Americans would have read about it was in 2015, during a country-wide election that largely decided whether a small nation at the tip of Southern Europe would stay in the European Union.

Greece will continue to struggle with high unemployment rates for decades to come.

Since then Greek debt has disappeared from the national consciousness, only to reappear every now and again when some right-wing politician needs a punching bag for the American budget. But the monstrous debt is still there, along with all its concurrent misery, and it keeps getting worse.

Let’s not mince words. This is a tragedy of national scope.

By now Athenian finances feel like that old Greek myth of the hydra, which sprouted two new heads for each one that Hercules cut off. No matter how many deals or negotiations pass through Brussels, this problem keeps getting worse. With every relief package Greek domestic product seems to fall, unemployment worsen and the country’s ability to pay even renegotiated debt gets farther away until we get to passages like this one from the IMF’s report:

Greece will continue to struggle with high unemployment rates for decades to come. Its current unemployment rate is around 25 percent, the highest in the OECD, and, after seven years of recession, its structural component is estimated at around 20 percent. Consequently, it will take significant time for unemployment to come down. Staff expects it to reach 18 percent by 2022, 12 percent by 2040, and 6 percent only by 2060; labor force participation is expected to increase gradually from 68 to around 73 percent, in line with the overall euro area trends. This suggests that the contribution of labor to long-run growth would be around -0.3 percent (derived as the change in employment growth, -0.6 percent per year, on average, times the share of labor in total income, which is around a half).

By way of comparison, in the Great Depression unemployment peaked at 24.75 percent.

On several occasions I’ve tried to sit down and write about the experience of visiting Greece over these past eight years. Words keep coming up short. The transformation of this country has been near total from its heyday in the summer of 2008, when business was booming and every street seemed to host a new construction project. Today that’s given way to ghost towns and half-finished buildings, abandoned when the financing ran out. It’s heartbreaking.

Or take the train from Thessaloniki to Athens. The Plywood Express travels down the east coast through town after town pockmarked by empty platforms and boarded up windows. When I took this trip in 2012 I saw no one from my car window, even though we were traveling between two of the busiest cities in all of Greece.

Now the IMF has come out with numbers to tell the story I keep failing at, and they’re ghastly. America still has the scars of its own Depression, and it only lasted for the 1930’s. Greece is being sentenced to decades of joblessness, 40 years of unemployment (and even then, a 6 percent rate which we would still consider high). For today’s young people this is a life sentence.

For today’s young people this is a life sentence.

All the while Greece will continue shoveling money at its creditors. Over the next 20 years the IMF expects that debt and interest payments will cost the country a third of its wealth. By 2060 debt and financing will come to 60 percent of the country’s GDP.

There is a body of fairly well known research which indicates that children who come of age in a weak economy face permanent consequences to their earnings, confidence and overall financial well being. When we take this into consideration, this report means nearly a century of economic malaise. A few questions for Greece’s creditors:

Can 100 years of suffering possibly be a reasonable response to taking out bad loans?

After eight years of poverty, unemployment and widespread misery, is there no point at which anyone has suffered enough?

What do they think interest rates are for, if not to compensate lenders for assuming the risks of bad debt?

Perhaps more importantly to those who live outside of Greece, what exactly does this mean for the European experiment?

The E.U. was supposed to be the great guarantor of peace for a continent that has hosted some of the bloodiest wars in history. In part it was about helping to firm up these nations against outside threats and create a vibrant economic zone, but mostly it’s about stability and peace.

Greece Kalambaka Town

The Greek town of Kalambaka seen from its hills.

These days, sitting on the rooftop of an Athenian bar with backpackers from across the world, it’s hard to imagine that France and Germany ever fought one another. It’s almost inconceivable they’d do it again.

Yet the E.U., one of the great experiments in pan-nationalism of our era, is now willing to watch one of its member states die a very slow, very public death. Public opinion in much of northern Europe encourages letting the spendthrift Greeks lay in the bed they made and has turned sharply against any kind of debt forgiveness or bailout. German Chancellor Angela Merkell is well known for this kind of language and has drawn a hard line, forcing Greece to choose between bankruptcy and exiting the E.U., or finding a way to pay these debts.

There’s no grand experiment here, just a bright sign that Europe is a union of convenience. While America works because Massachusetts doesn’t rebel over subsidizing Alabama, E.U. membership appears to mean support and solidarity… right up to the point of sacrificing for one another.

For a continent facing an aggressive Russia, economic malaise and a staggering refugee crisis, not to mention increasing concerns over terrorism, this is the worst of all messages to send. When the time comes for member states to make sacrifices or stand up for the common good, particularly the weaker ones farther from the Paris-Berlin core, who doubts that someone will say “remember Athens”?

While back in Plato’s homeland, exactly how much longer can we expect the Greeks to endure? This is still a sovereign nation after all, one which can choose to simply stop paying its debts any time it wants. The consequences for that would be dire, but sooner or later any pain will seem (maybe rightly) worthwhile for a chance to rebuild. Our only hope is that Athens can pull it off without electing any more neo-Nazis.

If that day comes, the decision makers in Brussels, Paris and Berlin will have transformed Europe’s grand experiment into little more than a trading association.


Eric Reed may be the only living travel writer who's afraid to fly. A freelance journalist, reformed lawyer and accidental expert on economic policy, he launched Things Dangerous as a place to tell the ups and downs of a beat writer's life on the road.

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