The European Union’s experiment with a single currency was almost derailed seven years ago when its weakest member, Greece, was caught lying about what turned out to be a mountain of debt. Now with the 19 countries in the eurozone finally experiencing a robust recovery, Greece is once again in the spotlight.
This time, however, it is for Greece’s return to the global financial markets for the first time in years.
Once close to bankruptcy, Greece was able to raise €3 billion ($3.5 billion) in a bond sale on July 25. International investors gave a clear sign of confidence that Greeks may be learning some lessons and making progress on reforms. The economy grew in the first quarter, the jobless rate is falling, and the government has shown discipline in budgets, including pensions. Ratings agency Standard & Poor’s has raised its outlook for Greece from “stable” to “positive.”
A high debt burden still looms over Greece’s economic future. But Greeks are now accustomed to economic sacrifices, or what Prime Minister Alexis Tsipras calls “this unpleasant adventure.” His leftist government promises deep pro-market reforms, such as selling off state-run enterprises. And it plans to retrain some 50,000 people for new jobs.
The shift in mood among Greeks was captured in recent polling by the Dianeosis think tank. In a poll two years ago, half of Greeks favored high taxes and a robust welfare state. Now only a third believe that. And more than half believe that “taxes should be low even if there is less state coverage.”
Nearly two-thirds now say the financial crisis was caused mainly by “our own weaknesses.” An even higher percentage said Greeks “grew accustomed to borrowing in order to consume more than we produce.”
Returning to the debt markets, in other words, has required a good deal of soul-searching. “One could argue that today, after several years of crisis, Greek society demonstrates a high degree of collective self-knowledge,” says University of Macedonia professor Nikos Marantzidis.
Europe’s economy has rebounded for many reasons. But a big one is that the EU did not let Greece fail. And the Greeks themselves are slowly reforming themselves.