Experts warn of more crises for euro zone
BRUSSELS Greece will formally turn the page on its debt saga this week, but the euro zone remains vulnerable to further crises, with economists particularly worried about the situation in Italy.
After eight long years and three austerity-heavy bailouts, Athens will today formally leave the financial rescue umbrella of its creditors from the European Union and International Monetary Fund (IMF).
While both European and Greek politicians have hailed its return to the markets as "historic" good news, serious challenges remain for the 19 countries that use the single currency.
"The Greek crisis has not been solved, it has just been postponed," said international economics professor Charles Wyplosz at the Graduate Institute of International and Development Studies in Geneva.
Athens will not even start to repay until 2032 the bulk of its huge debt, which remains at a colossal 180 per cent of Greece's gross domestic product. In the meantime it is impossible to say where the country will be politically and economically.
The IMF has in recent months issued a series of warnings about the long-term sustainability of Greek debt despite the euro zone's latest arrangements to reduce it.
Prof Wyplosz criticised the EU's "spectacular cynicism" during the crisis.
"The problems weren't solved but they pretended to believe they were. One way or another it will explode. Greece will be in crisis again well before 2032."
Warned Ms Anne-Laure Delatte, deputy director of the French global economy research body CEPII: "We have in no way resolved the problem of public debt, which remains large in Italy, Greece and Portugal, despite their efforts."
European heavyweights France and Spain also have significant debt, which could further weigh down the euro zone.
"Debt is a factor in vulnerability, which can be so violent that it passes onto the markets," added Ms Delatte.
But other countries that have adopted the euro have seen their debt fall and so the single currency area is increasingly polarised between the "good students" and the others, with diverging interests.
The first group back budgetary rigour and spending controls - the second call for more solidarity.
Italy is becoming a serious risk for the euro zone because of its debt, its fragile banks and above all because of a populist government that seems bent on confrontation with Brussels, said economists.
Prof Wyplosz said: "You've got a country with debt at 130 per cent of gross domestic product, serious internal problems, a dirty banking system, and now it is led by people who don't know what they're going to do. The threat is very clear."
The debt crisis has allowed the euro zone to strengthen itself, particularly with the creation of the European Stability Mechanism, the bloc's bailout fund, and the reinforcement of so-called banking union, which sees the same rules for all banks.
But the reforms remain unfinished and a push by French President Emmanuel Macron for further steps - including a dedicated budget for the euro zone - still face hostility from the austerity-minded north, which fears paying for the debt-ridden south. - AFP
Get The New Paper on your phone with the free TNP app. Download from the Apple App Store or Google Play Store now
