“Will she, or won’t she?” That is, will Greece, with a population of eleven million, abandon the Euro and strike out on her own, or will she just strike out? Will she default? Would there be collateral damage? It is not as though Greece is critical to Europe’s economy (her GDP represents less than 1.5% of the Eurozone’s GDP), but her exit could start a precedent – contagion is the word preferred by the cognoscenti. But the most important question: Why has this happened? Are Europe and the West also vulnerable?
Europe, along with much of the world, suffered a protracted recession in the wake of the 2008 credit crisis. Other than a brief interlude of little over a year, Europe’s recession lasted five years, from early 2008 through early 2013. (Greece’s GDP is still 30% below where it was in 2008.) But the troubles in Europe are more pestiferous than simply the aftershocks of a damaging recession. According to Eurostat, for the twenty years ending 2014 Europe’s GDP growth has compounded annually at a mere 0.35%. Europe’s problem is (and has been) a lack of economic growth.