Is Greek Debt at Risk Again?

The question posed in today’s Oikonomiklathstika might seem rhetorical due to the debt restructuring facilitated by the three memoranda. A simple answer could be a strong ‘no.’ However, a realistic and data-driven response requires closer attention, highlighting existing risks and opportunities. Let’s start with the obvious factors shaping Greece’s debt profile and its servicing guarantees before delving deeper into recent developments. With the majority of public debt secured in European Stability Mechanism (ESM/EFSF) funds, the debt-to-GDP ratio has significantly decreased historically from 177% in 2022 to 163.9% in 2023, and further to 153.6% in 2024, with projections for continued decline to around 142%-143% this year. This trend is supported by fiscal discipline generating record primary surpluses and GDP growth exceeding 2% annually through EU recovery funds. Despite these positive indicators, challenges loom on the horizon as economic slowdowns within the Eurozone, geopolitical tensions, and rising defense expenditures threaten fiscal balances. The critical period begins post-2030 when ESM loans come due, yet markets remain distant until then. The real concern lies in sustaining current fiscal policies beyond 2026, given dwindling resources like the Recovery Fund and mounting external pressures such as trade wars, unresolved energy costs, and NATO’s increased military spending requirements. These factors could jeopardize Greece’s progress unless managed carefully.