The Impact of the Financial Crisis on Greece

1. The Banking System

The banking system in Greece was under pressure even before the financial crisis. In 2007, the country’s four largest banks – National Bank of Greece, Alpha Bank, Eurobank and Piraeus Bank – had a Tier 1 capital ratio of just 7.6%, which is below the 8% regulatory minimum.

The crisis hit Greece hard. By 2012, the country’sbanks had lost 60% of their value and deposits had fallen by a third. Non-performing loans (NPLs) rose to 28% of the total, and the government was forced to bail out the banks with European Union (EU) and International Monetary Fund (IMF) loans.

Since then, Greek banks have been through two rounds of recapitalisation, totalling €50 billion. They have also reduced their NPLs to 15% of the total through write-downs, sales and securitisations. As a result, the banking system is now much healthier and well-capitalised.

2. The Impact on Local Consumers and Investors

The financial crisis has had a profound impact on Greek consumers and investors. Household incomes have fallen sharply, while unemployment has risen to 27%. This has put severe pressure on household budgets and spending power.

In addition, Greeks have seen the value of their investments plummet. Many have lost their life savings as a result of the stock market crash and the collapse of bank shares.

3. The Budget Deficit

Greece ran up large budget deficits in the years leading up to the financial crisis. In 2009, the deficit reached 15% of GDP, one of the highest levels in Europe. This was caused by a combination of overspending and low tax revenues.

The financial crisis made things worse. As tax revenues fell and unemployment rose, spending on social welfare benefits increased. As a result, the deficit ballooned to over 10% of GDP in 2010-2011.

In response to this, the Greek government introduced a series of austerity measures, including spending cuts and tax increases. These measures helped to bring the deficit down to 3% of GDP by 2013-2014.

4. The Public’s Response

The Greek public has responded angrily to the austerity measures imposed by the government in response to the financial crisis. In 2010-2012, there were regular protests against spending cuts and tax increases. These protests sometimes turned violent, with clashes between demonstrators and police.

In 2015, the Syriza party was elected on a promise to end austerity and negotiate a better deal with Greece’s creditors. However, after months of negotiations, Syriza was forced to agree to an even tougher austerity package in order to avoid a default on Greece’s debt repayments. This led to another wave of protests against austerity in 2016-2017.
Despite the public’s anger, polls show that a majority of Greeks still support membership of the eurozone. This is because they believe that leaving the euro would be even worse for the economy.


The primary causes of the financial crisis in Greece were a combination of high government spending, low tax revenue, and structural problems within the Greek economy.

The financial crisis manifested itself in Greece through high levels of government debt, rising borrowing costs, and ultimately a sovereign debt crisis.

The consequences of the financial crisis for Greece have been severe, including high levels of unemployment, poverty, and emigration.

Greece's debt restructuring has been partially effective in addressing the financial crisis, but further reforms are needed to improve the country's long-term fiscal sustainability.

International assistance has played a role in mitigating the effects of the Greek financial crisis, but more needs to be done to help support economic growth and jobs in Greece.

The lessons that can be learned from Greece's experience with fiscal and economic crises include the importance of sound economic management and fiscal discipline