The eurozone passed an important milestone on Monday.
The date marks the formal end of the bailout of Greece. It is the final country to be receiving emergency loans in the wake of Europe’s financial crisis.
The last payment has been made and the Greek government will have to finance its spending through taxes or by borrowing in the financial markets, though it will be decades before all is repaid.
Five countries received bailout loans - Greece, Ireland, Portugal, Spain and Cyprus - and at the most intense points of the crisis there were genuine doubts about whether the eurozone would survive, or at the very least whether some countries would drop out.
It has been a long haul for the eurozone, it has been eight years since the first bailout for Greece was agreed. This was a case of government spending running far ahead of what it could raise in taxes, and after a change of government in Athens it was revealed that the deficit was even larger than initially reported.
The origins of the crises were different in other countries. In Spain and Ireland, it was a construction and property market boom that was financed by banks which then suffered heavy losses when the booms ended.
In Portugal it was more a case of weak economic growth that undermined government tax revenue. That same problem has afflicted Italy, a country which didn’t get a bailout but was a recurrent cause of anxiety that if it needed one its debts were so large that the eurozone couldn’t afford to come to the rescue.
Although the roots of the crises varied, there were similarities in the consequences, in particular a poisonous interaction between stressed government finances and stressed banks.
A country’s banks held much of its government debt, so if there were a default it would impose losses on them. Stricken banks would cut off credit to the economy and hit tax revenue and they would lead to extra spending on bailouts. The eurozone responded by creating bailout agencies which borrow money in the financial markets to lend to countries in difficulty. The bailouts involved tough steps to reduce government borrowing - spending cuts and tax increases. The European Commission made a proposal in 2015 but it has not been agreed.
“For this reason, it would be important to create in the longer-term a euro area-wide fiscal stabilisation function.” The eurozone has done some work on reducing its vulnerability to a repeat of the recent traumas though its work is not complete.