In an extensive report examining the transformation of the Greek economy following its decade-long debt crisis, the Wall Street Journal presents Greece as an example of fiscal responsibility for the rest of Europe, which is grappling with rising debt, ageing populations and growing pressure to rein in public spending.

In its analysis, the American newspaper points out that a country once on the brink of bankruptcy, having endured one of the deepest financial crises in the modern history of developed economies, is now managing to contain deficits, repay its loans ahead of schedule and approach its fiscal commitments with greater caution.

The article, entitled “What Greece Learned From Going Broke – and Others in Europe Still Haven’t”, carries a striking subheading: “The most fiscally responsible country in Europe is the one you wouldn’t expect.”

The Wall Street Journal seeks to explain how Greece, which became the epicentre of Europe’s sovereign debt crisis approximately 16 years ago, is now setting an example for countries that continue to rely on borrowing, run substantial budget deficits and struggle to bring public spending into line with their financial means.

From protests in Athens to social unrest across Europe

The article opens by looking back at recent demonstrations in Paris, Milan and other European cities, where protesters set rubbish bins alight, looted shops and clashed with police over the rising cost of living and deteriorating public services.

These scenes, the newspaper observes, are strongly reminiscent of Athens in 2010, when Greeks took to the streets in large numbers to protest against austerity, cuts to public spending and dramatic tax increases. This was the heavy price of the bailout programmes that prevented an uncontrolled Greek default and the spread of the crisis across the rest of Europe.

The economic collapse that followed represented, according to the American newspaper, the deepest peacetime recession experienced by a developed economy since the Great Depression of the 1930s, leaving Greece poorer even today. The Greek crisis also served as a warning to the rest of Europe, fuelling opposition to the European Union. In Britain, it even contributed to the political climate that ultimately led to Brexit.

How Greece’s fiscal policy changed

One of the analysis’s central arguments is that the economic crisis brought about a profound change in the way Greece manages its public finances.

Before 2010, the country accumulated large deficits, relied on continuous borrowing to finance government spending and struggled with widespread tax evasion, while pension costs continued to rise.

The crisis led to the implementation of painful adjustment measures. Wages and pensions were cut, the retirement age was raised and unemployment soared, as the Greek economy lost approximately a quarter of its size.

Nevertheless, that experience also left behind a different understanding of the limits of government spending.

The Wall Street Journal points out that Greece has managed to maintain budget surpluses, apart from during the pandemic, improve tax collection and keep expenditure under control.

At the same time, borrowing costs have fallen, while the country has even begun repaying its obligations to creditors ahead of schedule, a development that would have seemed extraordinarily difficult during the worst years of the crisis.

The change in attitudes among politicians and voters

The WSJ attaches particular importance to the political consequences of the economic crisis.

According to the analysis, fiscal responsibility is no longer a position confined to a single political party but has gained broader acceptance across Greece’s political system.

The experience of the bailout programmes, spending cuts and lost incomes has created greater awareness of the consequences of economic promises that are not backed by sufficient resources.

Similarly, voters appear less receptive to pledges of benefits that cannot be financed.

The newspaper identifies this shift as one of the most important lessons of the Greek crisis, at a time when other European governments face strong social and political resistance to reforms involving pensions, taxation and public services.

Despite its positive assessment of Greece’s fiscal performance, the Wall Street Journal does not overlook the substantial social and economic costs that continue to accompany the country’s recovery.

The newspaper notes that Greek GDP remains approximately 20% below its pre-crisis level, while wages remain low and Greece ranks among the poorest countries in the European Union.

The return to fiscal stability has therefore not translated into a full restoration of the living standards lost during the recession.

This is one of the central contradictions highlighted in the report: Greece may now be an example of more prudent management of public finances, but it continues to struggle with the long-term consequences of its economic collapse.

Maintaining fiscal stability, therefore, is not sufficient on its own to guarantee prosperity. Stronger economic growth is also essential to bring about meaningful improvements in incomes.

The Greek experience is particularly relevant to the rest of Europe, as several countries face fiscal pressures that are expected to intensify in the coming years.

Ageing populations are driving up pension and healthcare costs, while already high levels of public debt are limiting governments’ ability to finance new spending.

At the same time, public resistance to cuts in social benefits or changes to pension systems makes reform politically difficult.

According to the Wall Street Journal’s analysis, the central lesson from Greece is that governments must address long-term fiscal imbalances in good time, rather than postponing necessary decisions until they are confronted with a crisis.

The newspaper also emphasises the importance of faster growth, arguing that without improvements in productivity and economic activity, fiscal adjustment alone cannot resolve the challenges facing European economies.

The conclusion is that Greece had to endure an exceptionally painful economic crisis before changing its fiscal trajectory. For the rest of Europe, the question is whether it can learn the same lessons without having to undergo a similar ordeal.