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Global Economy

Is Greece threatened with a new debt crisis?

Wolfgang Schäuble didn't feel like laughing. "If we didn't need to negotiate," said the former finance minister exactly ten years ago at the Greek negotiations in Brussels, "we wouldn't need to hold a meeting on Shrove Monday."

It should be. A few weeks later, Greece had to pay off almost 15 billion euros in debt. The deadline? Getting closer and closer. Then: a long night session – with the result: the finance ministers of the euro zone approved the second aid package for Greece and thus averted national bankruptcy for the time being.

Warnings from financial experts

Ten years later, experts are sounding the alarm again. A financial fever curve reports "elevated temperature". Greece has to pay significantly more interest if it wants to get money on the international financial markets. In autumn it was still less than one percent if the country were to borrow money for ten years. Now it's more than two and a half percent.

Because many investors believe that the European Central Bank (ECB) will increase key interest rates in the foreseeable future. That would have clear consequences, says Martin Lück from the world's largest asset manager Blackrock: "Many investors fear that interest rates will then rise disproportionately in regions where money is particularly needed. And that applies in Europe in particular to the south – and especially for Greece."

But that's no reason to panic. Because Greece does not want to borrow a lot of new money this year. And: The country does not need to worry about its old mountain of debt. "80 percent are with the creditors in the European Union, with the ECB – they are very long-term, the interest rates are very low," says Greece expert Alexander Kritikos from the German Institute for Economic Research (DIW) about the country's financial obligations . "So the risk for Greece is reasonably limited."

The country is also heavily committed to reforms. This means better conditions for small entrepreneurs in the country, which is also more attractive for large investors from abroad. It's no longer just hot air, says Kritikos. "One example is that an attempt was made to ensure that everyday processes – tax returns or approval processes – now work digitally, run faster, and contact with bureaucrats could be reduced."

Hard rehabilitation course

But the whole picture also includes: The country had to save heavily, lower pensions, cut wages and raise taxes. This led to protests across the country – which also make financial experts in faraway Frankfurt think: Did the austerity commissioners from Brussels "save down" the Greeks too much during the crisis?

"The answer has to be: yes. Greece has been saved to death," says financial expert Martin Lück. "And people who couldn't run away were grabbed from the poorest parts of the population." Ten years after the second rescue package, the consequences of this radical restructuring program are still being felt. Almost every third person in Greece lives on the edge of poverty.

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