Families jetting off to Greece this summer may have dim memories of a time when coverage of that country centred on bailouts, austerity and bankruptcy fears. The economic narrative around Greece these days is markedly different.

Like the Sophocles play Oedipus at Colonus, written around 409 BC, Greece has emerged from years of exile and hardship to miraculously regain its standing and credibility — in this case, among global investors after its ratio of debt to gross domestic product (GDP) surpassed 120 per cent in 2010.

Of course, famously, what followed was a highly contentious €289 billion EU bailout of the beleaguered Greek economy, underwritten mainly by Germany, as well as significant loans from the International Monetary Fund (IMF). The price of the bailout was severe austerity measures — so severe that, in 2015, the then Greek prime minister ,Alexis Tsipras, described the terms as “blackmail”.

During this period, the Greek economy contracted by a quarter, 400,000 people emigrated and its unemployment rate, in 2013, was 27.5 per cent.

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Fortunately, since 2019, Greece has embraced more pragmatic economic and political stewardship under Kyriakos Mitsotakis. The results include an economy that, in 2024, grew nearly twice as fast as Germany’s. The country has also painstakingly regained its “investment grade” credit rating from S&P and Fitch.

While Greece’s economy remains weak in key areas — unemployment still sits at 10 per cent and GDP is well short of its 2007 peak — the fact that the country’s government recently said it would repay its initial bailout loans ten years early speaks volumes.

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“A prudent fiscal policy to restore market confidence, a sustained effort to heal our banking system, and the completion of growth-enhancing structural reforms” is how Konstantinos Hatzidakis, Greece’s vice-president and former minister for the economy, described his government’s economic strategy. While not the most riveting description, several features of Greece’s turnaround stand out.

First, Greece demonstrates that it’s often the sort of policies rarely seen in political leaflets that help win favour with global investors. These include crucial institutional reforms, acknowledging that many of the country’s institutions, including the judiciary, had played a significant role in its economic decline. This reforming zeal also extends to its banking sector, curbing non-performing loans and cleaning up balance sheets — so unlocking greater investment in the real economy. The country also introduced an insolvency framework, which has helped slash private sector debt.

Crucially, the Greek government recognised that the path back to economic credibility involved showing it could live within its means in terms of public spending, which it combined with a broader crackdown on tax evasion and the shadow economy. It’s this approach that, the IMF notes, has enabled it to reduce taxes, including for businesses, while generating higher tax revenues. Consequently, Greece’s budget surplus was 2.5 per cent of GDP in 2024.

So, despite the international commotion over the bailouts ten years ago, with the most vociferous resistance coming from the Greek government itself, it’s fair to say the EU’s approach has been vindicated after all. And, in retrospect, Greece’s political leadership at the time looks even more unserious.

But, in a slightly ironic turn of events, I believe elements of the Greek turnaround could offer a lesson or two for other European nations.

The importance of long-term thinking in running an economy, and levelling with the public about the path ahead, is a rare commodity in 2025. Too many European leaders are unwilling to confront challenges such as bloated debt head-on, instead deferring them for another day or someone else altogether. In Greece, however, despite the huge toll of austerity on the population, its leaders behaved like grown-ups and treated voters as such. As a result, they were rewarded at the ballot box.

It’s no coincidence that inward investment in Greece is 40 per cent higher than before Covid, or that, according to the most recent European Investment Bank survey, Greek businesses are more bullish than their EU counterparts, thanks to extensive reforms that have supported access to capital. This is also reflected in the fact that the MSCI Greece index is up by more than 70 per cent this year, which is more than double the increase in the broader European index.

While Greece’s dire position between 2010 and 2015 — on the brink of dropping out of the euro — was unique and certainly not remotely comparable to any other country’s present economic situation, the combination of fiscal discipline, an ambitious reform agenda and highly focused economic stimuli make Mitsotakis’s government something of an outlier in today’s Europe.

It’s also worth noting that Italy, France, Belgium and Spain all now have debt-to-GDP ratios of 100 per cent or more. And while the EU has become more in vogue among international investors of late, its member nations would no doubt be rewarded by global investors if just a handful more of their leaders could apply a degree of the serious, pragmatic and ultimately painstaking economic reforms that have enabled Greece’s transition from tragedy to turnaround in fewer than ten years.

Seema Shah is chief global strategist at Principal Asset Management