Greece has a Private Debt Crisis and We Can Blame the Troika

The Greek public debt debacle and the bailout received by the government from the European Central Bank (ECB), the European Commission (EC), and the International Monetary Fund (IMF) – referred to collectively as the “troika” – has been making headlines for years. However, very little attention has been paid to the debt crisis in the Greek private sector. An alarmingly high portion of private sector borrowers is behind on their debt payments, and the Greek banking system currently has one of the highest ratios of delinquent loans in the European Union.

Illustration by Heske van Doornen

This collapse of debt prepayments is a direct result the policies imposed by the Troika and threatens the future of Greek economic growth. After the Greek government required financial assistance from international creditors, it was forced to introduce draconic austerity measures to repay its debt. Cutbacks to state services, collapses in incomes, and an increasingly unstable economic environment contracted spending, therefore, eliminating future cash flows that private entities expected to use to repay their debt. The result has been a spiral of collapsing demand and shrinking growth.   

Greece’s accession to the Eurozone was followed by a largely ignored, rapid, and unsustainable build-up in private sector debt. Once the Greek government was forced to impose severe austerity measures and the economy collapsed, the private debt crisis followed. Now, the large ratio of delinquent loans held by Greek banks is adding to the factors hampering economic growth. For Greece to recover, its private debt problems need to urgently be addressed with an approach that offers relief to both borrowers and lenders.


This article was originally published by the Private Debt Project. Read the entire article here.


The full article highlights how the mismanagement of the Greek sovereign debt problems triggered the current private debt crisis. We show the rapid growth in private debt, document the macroeconomic context that pushed to Greece into a depression, and explain how these factors created a private debt crisis. Then, we discuss some of the existing proposals for addressing a large number of loan delinquencies and their limitations, and finally, propose other approaches to tackle this pressing problem.