When Greek leaders began a shift in policy last year to ease themselves out from under the tutelage of foreign creditors, they hoped it would bring economic as well as political gains.
Nine months on, falling output and a slump in asset values have racked up costs to the economy that by one measure stand at over €60 billion, or a third of national income, while EU states and the IMF may have to lend Athens three times more than they had planned to bail out Greece for a third time.
With difficult negotiations about to start and capital controls still in force, further missteps and uncertainty mean the bill is likely to rise even further throughout the summer.
Adding together unrealised potential GDP, lost asset value on listed equities and the shrinking capital base of Greek banks, produces a figure of €63 billion, based on forecasts and data published by the creditors and others.
That number, calculated by Reuters, does not reflect the loss of value by other Greek assets or less tangible or future damage due, for example, to lost trust among investors and lenders, and to increased doubts that Greece can remain in the eurozone.
“The fact that Grexit was so clearly an option in the debate will continue to make foreign investment complicated,” said Mark Wall, chief eurozone economist at Deutsche Bank in London.
Last week, the IMF and European Commission published analyses of Greece’s financial position pointing to a rapid deterioration since the end of 2014 and especially this month, when Athens imposed capital controls to prevent a bank run after it rejected a loans-for-reforms deal.
“The figures show that the huge downturn has purely political reasons – insecurity,” one EU official said, adding that growth elsewhere in Europe should have boosted the economy.
The Commission in early November expected the Greek economy to expand by 2.9 per cent this year, up from one per cent growth in 2014. In 2016, growth was seen accelerating to 3.7 per cent.
Creditors now expect GDP to contract by up to four per cent this year, even assuming the smooth implementation of a new bailout.
That difference in growth translates into €12.6 billion in 2015, economists estimate. Another €9.8 billion will be lost in expected growth differences in 2016.
“Varoufakis was the most expensive finance minister in history,” the senior EU official said, reflecting the bitterness many feel towards the Marxist economist Tsipras fired last week.
Athens stock market capitalisation was €64 billion in December when Antonis Samaras called the election he went on to lose.
By June 25, just before capital controls were imposed, the stock exchange had lost a quarter of its value.
Greek banks have suffered. Last year, they attracted €8 billion in private capital and issued unsecured bonds. Now creditors estimate the sector may need €25 billion in additional capital. The banks only survive thanks to €89 billion of ECB emergency liquidity assistance (ELA).
The number of non-performing loans in Greece rose to 36 per cent at the end of the first quarter, and eight per cent is classified as restructured against 31 per cent at the end of September.
Greece sold five-year bonds at a yield of 4.95 per cent in April 2014, with 93 per cent of the demand from international investors. But it was cut off from viable market borrowing again this year and the yield on that bond maturing in 2019 bond is now 19.7 per cent.
“If you add up all the aid that the eurozone has given Greece, it is some half a trillion euros, transferred to an economy of €180 billion annual GDP. That is an enormous transfer of wealth,” a senior EU official said, echoing the frustration among creditor governments, many of them poorer than Greece.