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22 June 2018

As Greece’s bailout nears end, is the eurozone better equipped to handle future crises?

Unless the internal politics of the 19 member states line up with one another, necessary reforms will always hit the buffers.

By Stephen Bush

Crisis over? After six hours of talks, an accord has been reached between the eurozone nations to bring Greece’s bailout programme to a close. Greece’s financial rescue package will come to an end on 20 August.

While the crisis might be over, Greeks will be living with the consequences for decades. The government will have to run a day-to-day surplus at 3.5 per cent of GDP until 2020 and at 2 per cent until 2060 to avoid slipping back into crisis. And for all the sounds of relief coming from the eurozone’s finance ministers, it’s not at all clear that the eurozone is now in a position to manage future crises better.

That these final talks, expected to be a formality, became a fraught six-hour affair due to the domestic weakness of Angela Merkel is an illustration of the underlying problem: that unless the internal politics of the 19 states in the eurozone line up with one another, the necessary reforms will always hit the buffers. As it stands, although the creation of a banking union for the Euro area is an important step, creating a eurozone in which countries have options in a crisis other than hair-shirt austerity is another, as yet untaken. And bluntly, barring a sea change in the politics of the Netherlands and Germany, it will remain that way.

It’s one of those strange days when you remember that the word “Brexit” was originally a tongue-in-cheek riff of “Grexit”, the supposedly imminent exit of Greece from the eurozone. Now Grexit is a distant prospect and Brexit is the United Kingdom’s national project for the foreseeable future.

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