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Greece: Still Festering

Walter Russell Mead

As new problems accumulate, Europe’s dysfunctional institutions have failed to deal with the old ones. Greece, where the euro crisis was born, is still sinking after years of reform and hundreds of billions in so-called bailouts. The Guardian:

Against a backdrop of monumental debt – €320bn, or 180% of GDP, the accumulation of decades of profligacy – fatalism is fast replacing pessimism on the streets. “Our country is doomed,” sighs Savvas Tzironis, summing up the mood. “Everything goes from bad to worse.”

Close to half a million Greeks are believed to have migrated since the crisis begun, thanks to the searing effect of persistent unemployment (at just under 24%, the highest in Europe) and an economy that has shed more than a third of its total output over the past six years. The nation has been assigned some €326bn in bailout loans since May 2010 – the biggest rescue programme in global financial history. Yet the fear that it is locked in an economic death spiral was given further credence last week when Eurobank analysts announced that consumption and exports had also fallen, by 6.4% and 7.2%, in the second quarter of the year.

The duration and depth of the recession is such that the World Bank now compares it to the slumps seen in eastern European countries in the early 1990s. The poorest 20% of Greece’s 11 million people have suffered a 42% drop in disposable income since 2009.

Italy and Portugal are edging toward new crises and while Spain seems in better shape, even Ireland, the strongest performer among the PIIGS, may face both a new housing bubble and the high costs of Brexit.

With a hostile Russia to the east, a dangerously troubled Turkey to the southeast, and chaos and civil war in much of the neighboring Arab world, Europe now faces the most serious set of problems in the history of the EU.

Greece was and continues to be a relatively small problem; that all the wisdom and resources of the EU have only produced a series of disasters becomes truly alarming when one reflects that the EU now faces many problems that are larger, more consequential and much harder to solve than Greek debt.

One must hope that a Clinton administration will bring a focus and intensity to European policy that has been largely absent in the Obama years. When historians get around to cataloging the long list of American challenges that grew deeper on President Obama’s list, the decay of Europe will stand near the head of a long list.

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