Rescue, Reform and Recovery

The Cannes summit resulted in significantly more assistance to Greece from the newly established European Support Mechanism (ESM) and led to a new IMF Extended Fund Facility (EFF) program which however, did not calm the markets. The situation improved starting in May 2012, when the newly appointed ECB governor, Mario Draghi uttered the now famous phrase that the ECB will do, ‘Whatever it takes’ to stabilize the markets and save the euro. It actually took over four more years, a third IMF program, several Greek elections and new governments to restore stability and growth. This chapter discusses the rescue plans and their impact on the Greek economy, society and people. The main conclusion is that, while the IMF was also guilty of many mistakes, the Greek crisis resulted mainly from a combined failure of the Eurozone and Greece. The Eurozone rules were inadequate to support a monetary union of countries at different levels of development and the surplus countries, such as Germany and the Netherlands, were not prepared to share in the cost of adjustment. Greece was ill-prepared and unwilling to undertake the necessary policy reforms. The result was an unnecessarily deep and prolonged crisis, with lasting effects on the Greek economy’s future.