Greece exits the last of its three bailouts on August 20 and hopes to be able to borrow again in international markets after a nearly nine-year debt crisis that shrank the economy by a quarter and forced it to implement painful austerity measures.
The crisis has proven deeply traumatic for Greeks who had enthusiastically swapped drachmas for euros in 2001. Adoption of the single currency ushered in an era of cheap credit that funded a splurge in private consumption and public spending that sent Greece’s budget and current deficits ballooning.
Since the debt crisis exploded in early 2010, four successive governments have fought to keep bankruptcy at bay, relying on the biggest bailout in economic history, more than EUR 260 billion lent by Greece’s euro zone partners and the IMF.
As Athens now eyes a return to normality and reclaiming its economic sovereignty, the scars remain - banks are saddled with huge bad loan portfolios and Greece’s public debt load is still the highest in the euro zone, at 180 per cent of national output.
But sunshine is breaking through the clouds. The economy, which shrank by 26 per cent in the crisis years, has started to grow, tourism is booming and unemployment is slowly coming down — to 19.5 per cent from a peak of almost 28 per cent.
“If there is a lesson that we learned from the crisis it is that, under any circumstances, you must try to protect macroeconomic stability,” said Panos Tsakloglou, chief economist of the previous coalition government. “Populist policies that may win some votes today and have disastrous effects some years down the road must be avoided at all costs. Otherwise, sooner or later we will end up in the situation we are in now.”