Greece: End of Bailouts and Start of the Path to a New Bankruptcy
— June 25, 2018
By Nicholas Economides
Even though the borrowing is over, EU and the IMF have imposed new long-term austerity conditions on the Greek economy, including additional sharp pension decreases and the requirement that Greece produces a 3.5% of GDP budget surplus. To achieve this, Greece has imposed skyrocketing taxes including a 24% value added tax and plans to increase taxes to those making as low as 6000 euros a year. Taxes suck out all the extra cash businesses and people have. Investment has plummeted, and consumption is 25% lower than a few years ago. Unemployment is at 23%.
With huge taxes and a business-unfriendly bureaucracy, Greece is unlikely to attract investment and will not achieve fast growth. Without growth, Greece will be unable to pay back its debt in full despite a 10-year postponement of maturities on 1/3 of its debt granted by the EU on Thursday.
Originally published in Greek by Kathimerini. Read the full English translation here.
Nicholas Economides is a Professor of Economics at NYU Stern School of Business.