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Home » Economic » Bailed-Out Euro Nations Expect Painful Challenges to Remain – Bloomberg

Bailed-Out Euro Nations Expect Painful Challenges to Remain – Bloomberg

Bailed-Out Euro Nations Expect Painful Challenges to Remain – Bloomberg.

Photographer: Krisztian Bocsi/Bloomberg
Adjustment in Greece, after four years of cuts and efforts to make the economy more competitive, has come at “an extremely high socioeconomic cost,” Greek Finance Minister Yannis Stournaras said.

Bailed-out euro-area countries are facing “painful” challenges with worse-than-anticipated consequences of economic adjustment, including high unemployment and slow growth, central banks and finance ministries said.

Officials and ministers from Greece, Ireland, Portugal and Cyprus, in responses to European Union lawmaker questions published yesterday, described how their countries’ emergency aid had been followed by social hardship and continuing economic difficulties.

The bailout program had a “worse-than-expected impact on both output and employment,” Portugal’s finance ministry said. The program in Cyprus was “rigorous and painful,” according to the island’s central bank. Adjustment in Greece, after four years of cuts and efforts to make the economy more competitive, has come at “an extremely high socioeconomic cost,” Greek Finance Minister Yannis Stournaras said.

The testimonies come three-and-a-half years after Greece became the first euro-area country to be bailed out, using EU and International Monetary Fund loans. Since then the German-led path of aid in return for reforms and debt cuts has seen 396 billion euros ($538 billion) committed to the region’s four most fragile economies, with an additional 100 billion euros pledged for Spain’s banking sector. The bloc has endured the longest recession in its history and unemployment has reached record levels.

Bond Rally

Government bonds in the euro-area’s most indebted nations have rallied this year, pushing Portugal and Ireland’s 10-year yields to the lowest since 2010 and 2006 respectively, as recovery sign’s in the region have boosted demand for higher-yielding debt.

Portugal expects to restart bond auctions in the first half of 2014, its debt agency said yesterday, after selling one-year bills at the lowest yield since November 2009. Greece’s Stournaras said last week that the government may sell five-year notes in the second half of the year, for the first time since being shut out of the bond markets in 2010. It would follow Ireland, which sold bonds last week for the first time since completing its bailout program.

Greek 10-year yields have dropped 68 basis points this year to 7.74 percent, after touching 7.53 percent on Jan. 13, the lowest since May 2010. The yield on similar-maturity Portuguese securities reached the lowest since August 2010 at 5.07 percent yesterday.

More Accountability

EU lawmakers questioned whether the so-called troika, comprising the European Commission,European Central Bank and IMF, which sets conditions for the countries receiving bailouts and monitors their progress, should have been more accountable and could have prevented the most painful effects of austerity. The European Parliament’s economic and monetary affairs committee is today discussing the responses received about the troika’s work.

European lawmakers will continue to work to make the troika more accountable, EU Parliament President Martin Schulz said on Twitter yesterday. Schulz is a member of Germany’s Social Democrats, the junior partner in the country’s coalition government.

While finance ministries and central bankers said that the hardships associated with the bailout conditions could not be ignored, they said they backed the process.

Inevitable Program

“The program, although rigorous and painful, is the only way that will enable the country’s exit from the crisis,” Cyprus’s central bank said in its letter to the 28-nation European Parliament.

Portugal’s finance ministry said that it “remained convinced” a bailout program had been inevitable and that “on the whole it remains a suitable and rational response to the crisis of credibility threatening our country.”

Ireland’s bailout-program exit last month and its return to financial markets “confirms that our strategy of providing assistance to euro-area countries that requested it in return for strict conditionality is working,” Jeroen Dijsselbloem, the Dutch finance minister who chairs meetings of his 17 euro-area counterparts, said in his letter to EU lawmakers.

He said that while growth is returning to the euro area and the economic outlook is improving “a number of important challenges remain, most importantly unacceptably high levels of unemployment.”

Ireland’s bailout program can be considered a success, Michael Noonan, Ireland’s finance minister, said in his response to the parliament. Even so, unemployment is still high, economic growth has returned more slowly than predicted and the country’s overall level of debt remains elevated, with a peak of slightly over 120 percent of gross domestic product expected this year.

To contact the reporters on this story: Ian Wishart in Brussels at iwishart@bloomberg.net;Rebecca Christie in Brussels at rchristie4@bloomberg.net


  1. Translated into English,
    The rich will stay rich, the poor will stay destitute.
    The governments won’t as they are no longer allowed to.
    Sounds about right. Glad we got that sorted out.

    Funny bit about it the US still want to enter into trade deals with the EU. That should finish you guys off and kill the USD by Christmas. Wonder if the Chinese will be ready by then to step in?

    • And the Canadian government just ballyhooed as a great move forward for our economy a trade deal with the EU as well (see this: http://www.theglobeandmail.com/news/politics/eu-harper/article14924915/).

      You have to wonder sometimes if those who fear that the New World Order has been working towards destroying Western economies so that they may either ride in to the rescue are correct, or if the elite are just consolidating their wealth knowing that it all will implode on its own. Exponential growth, the mother blood of economics, is not possible on a finite world so the party can’t continue forever…

  2. I totally blame globalization.
    When countries stood on their own feet there were poor countries and rich ones yet it worked. Independent currencies, cultures, trade, religions, and finances all worked. The world was largely at peace.

    Now the rich and poor have been forced together and it just doesn’t work culturally, religiously, or financially YET even more people WANT even DEMAND to enter the melting pot.

    As a result currency is confused, trade no longer viable, cultures and religions fight.

    Problem is the Western world is being governed by muppets and the financially ignorant. Or is it?

    After all for the NWO to win, they have to destroy the old order and what better means than economic ruin. When the EU fails the fall out is going to be EPIC. Europe, Canada, the US. All destroyed because they were stupid.

    At that point I’m guessing the NWO will come out of the shadows and I’m further guessing they will all speak Chinese.

    In the mean time the third world are sat back laughing at the Western world and rightly so. They are growing, the West is sinking.

    What I can’t work out is will the NWO crush the Third world to ensure trade and financial dominance? After all there is nothing like a good World War to make money is there?

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