Economic crises always exact heavy tolls on the societies that they hit through unemployment, loss of earnings and dashed expectations of better living standards. However, economic theory suggests that in the end countries bounce back and can return to their pre-crisis trend growth.
Unless, that is, the country in question is Greece.
Here’s what Greece is facing — despite years of grinding austerity and unprecedented levels of unemployment by 2025, almost two decades since the start of the financial crisis, Greek GDP will still be below its pre-crisis level, let along it’s pre-crisis trend.
Here’s Oxford Economics on what this means (emphasis added):
“In Greece’s case, the adjustment proved to very expensive. Indeed in structural terms, the fiscal consolidation over the four years between 2010 and 2013 amounted to some 18% of GDP, more than the original 2009 fiscal deficit. But the reform programme has been poorly implemented and has nothing like the desired impact on competitiveness and investment. As such, on
the basis of our current forecast, it will still be another 10
years before GDP returns to its pre-crisis peak.”
As the note points out, the problem is not (as some have claimed) simply the fact of austerity but also how it has been implemented by the authorities within Greece. However, there is no doubt that the combination of the design of the country’s structural reform programme and how the cuts have been enacted have cost the country what can best be described as a lost generation.
To put Greece’s woes in perspective, here’s the equivalent chart of the US during the Great Depression — GDP fell by far less and had recovered to its pre-crisis trend after a decade.
Few countries can claim to be envious of one of the worst financial crises in history. One of those unhappy rare exceptions, it seems, is Greece.