PARIS — For all the struggles that Greece has gone through to satisfy its demanding lenders, Europe’s troubles are not going away.
Because of the various, often incremental, steps European officials have taken during the nearly three-year debt difficulties that began in Greece, the crisis fever has cooled considerably in recent months — including fears that the euro currency union might suddenly fall apart.
But crisis has given way to a grinding reality for Europe: economic stagnation and even, for much of the Continent, the specter of another downturn less than three years after the last recession ended.
Greek leaders on Thursday agreed to a new set of tough austerity measures, in hopes of receiving a new 130 billion-euro bailout package from the European Union and International Monetary Fund, aimed at avoiding a debt default in March. That agreement, though, is in some ways a microcosm of Europe’s broader quandary, as similar measures are being embraced by other debt-saddled countries in the euro currency union, including Portugal and Ireland.
Many analysts say the belt-tightening can only push those and other nations further into recession, sap the economies of their European trading partners and do little to address the systemic weaknesses plaguing Europe’s banks.
“We take one problem off the table for the moment,” Carl B. Weinberg, chief economist at High Frequency Economics in Valhalla, N.Y., said. “That still leaves us having to deal with the dramatic destruction of wealth that has taken place.”
Markets have recently taken a more optimistic view of Italy and Spain — the nations where Greek “contagion” has long been feared to strike next, with even more dire regional consequences. Lately, both governments’ borrowing costs have come down to more sustainable levels.
Under new political leadership, Rome and Madrid are proceeding with restructuring plans intended not just to reduce high debts and deficits but also to lay the foundation for eventually restoring economic growth.
Investors have also been reassured by the European Central Bank’s moves to lower interest rates and open the money taps to protect banks from being pushed to the wall.
“I don’t see what’s on the horizon that would derail this,” said Stefan Schneider, the chief international economist at Deutsche Bank in Frankfurt, Germany. “We are no longer in an environment where markets want to pick off Greece and move onto the next country.”
For Nicolas Veron, senior fellow at the Breugel Economic Research Institute in Brussels, that means Europe may be able to breathe easier, at least for a while. “It doesn’t mean the problems are solved,” he said. “But it removes some of the short-term pressure, and hopefully can create a virtuous circle.”