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Europe’s Crisis Treadmill

BERKELEY – This month marks the fourth anniversary of the May 2010 financial rescue of Greece. Previously, the idea that a eurozone member would seek emergency assistance from the International Monetary Fund, along with the European Commission and the European Central Bank, was unthinkable. The rescue thus marked Europe’s descent into full-blown crisis.

Four years later, European officials are assuring everyone that the crisis is over. The IMF has raised its forecast for eurozone growth this year to 1.2%. Even Greece is forecast to grow by a modest but not insignificant 0.6%.

Bond markets, too, are indicating that the crisis is over. Yields on Irish government bonds have fallen below 3%. Last month, Portugal was able to issue ten-year bonds at 3.57%. Even Greece has been able to sell five-year bonds at rates below 5%.

Clearly, the supposed experts who predicted the imminent disintegration of the eurozone have been proved wrong. But it is equally likely that those now declaring that the crisis is over will be proved wrong as well.