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A decade after the global financial crisis, Europe has largely recovered from the economic damage that forced five countries to seek bailouts. Greece, however, has a long way to go.

Expand chart
Data: World Bank national accounts data, and OECD National Accounts data files; Chart: Harry Stevens/Axios

The big picture: Greece is set to graduate its third and final bailout package this month, an exit that will officially cap the largest sovereign debt restructuring in global history. Its creditors seem to believe that like the other hard-hit countries — Spain, Ireland, Cyprus and Portugal — Greece is now "capable of moving on its own two feet." But with an economy that continues to sputter after eight years of financial assistance, there's still reason to worry.

The European economies hit hardest by the financial crisis still carry the vestiges of their massive debts, to varying degrees. But the reforms they adopted, along with improved economic conditions, have started to help them see consecutive years of growth.

  • Spain: Driven by record exports and labor market reforms, Spain's economy surpassed its pre-crisis GDP in early 2017 and continues to grow at nearly twice the rate of the average euro country, per the IMF. But Spain still holds a government debt of nearly 100% of its GDP and the second-highest unemployment rate in the eurozone (15.3%).
  • Ireland: Its skyrocketing GDP is heavily skewed by "leprechaun economics," a term used to describe the tax inversion practices of corporations like Apple that base subsidiaries in Ireland. Nonetheless, the IMF views rising employment, subdued inflation and improved public finances as signs of a strong economic recovery, though uncertainty over Brexit poses a looming threat.
  • Portugal: Nearly 500,000 people emigrated from Portugal during the height of its financial crisis. But after exiting its $85.6 billion bailout program in 2014, Portugal's economy has returned to steady growth, buoyed by a spike in tourism.
  • Cyprus: The island of Cyprus was praised upon graduating its bailout in 2016 for sticking to the harsh economic reforms that came with its $10.9 billion package. The "austerity" policies, which included unpopular measures like raising taxes and slashing spending, seem to have paid dividends, as the Cypriot economy is projected by the IMF to grow by more than 4% in each of the next two years.

So where did Greece go wrong?

  • Reckless government spending, weak GDP growth, data mismanagement and rampant tax evasion dug Greece into a hole far greater than any of its debt-riddled partners.
  • After the crisis, Greece's three bailout packages totaled $360 billion, dwarfing every other debt restructuring program in history. The stringent austerity measures that followed crushed the Greek economy, causing GDP to shrink by 26% and unemployment to skyrocket to a peak of 27.9%.
  • The crisis revealed fundamental inefficiencies in the Greek economy that the country will be forced to reconcile. Bailout reforms have slashed jobs in the overinflated public sector and have driven small businesses, which comprise 95% of the private sector, to turn to exports to survive, according to Greece's deputy investment minister.

The bottom line: Europe as a whole is in a better place. But even if Greece undergoes an economic and cultural overhaul, it still faces an uphill climb along with the new challenges confronting all of Europe, including Brexit and strained trade relations with the U.S.

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