Even though the period of Greece’s sovereign debt crisis is now long gone, one of the most difficult consequences, the huge amount of bad loans, keeps affecting the economic development of the European country.
Almost a decade after the crisis period between 2009 and 2018, when the country was on the brink of being forced out of the eurozone, millions of individuals and small firms have been barred from getting credit, thus unable to recover fully and grow economically. According to the International Monetary Fund (IMF), around 2.4 million people in Greece are suffering from approximately three million non-performing loans (NPLs).
Weight of legacy debt
Borrowers who have not made interest or principal payments on a loan for 90 days or more are considered to have a non performing loan. At the peak of the Greek financial crisis, nearly half of the bank loan portfolios were non-performing, a figure that reflects the severity of the recession in Greece and the subsequent decline in incomes and employment.
Even as headline NPL ratios have fallen sharply in recent years (for example, non performing loans represented less than 6% of total gross loans in 2023, World Bank data show), the sheer size of the previous banking and economic turmoil has left a huge volume of bad debt, leaving many people unable to access credit markets again.
IMF financial markets advisor Charles Cohen stated that the massive number of unresolved loans is a “legacy stock” of bad debt that is overwhelming the Greek financial system and has kept many people from borrowing again.
Bad loans still matter
Greece has millions of citizens saddled with loans they cannot repay in full. As long as these loans remain on bank balance sheets or in secondary bad loan markets, lenders are unwilling to lend more money to the same borrowers, limiting mortgage activity and consumption growth, especially among younger households trying to buy homes.
SMEs, which have traditionally been seen as drivers of employment and economic growth, have been unable to access traditional lending channels, as banks continue to focus on managing legacy debt and have instead concentrated lending among a few large corporate clients, exposing the banking system to international shocks and limiting the potential for broad based economic growth in Greece.
While Greece put in place instruments such as a secondary bad loan market and securitisation mechanisms to enable banks to transfer toxic assets (amounting to about €60 billion in bad loans), progress has been slow. The Greek courts are overburdened and do not have specialised judges to resolve disputes between banks, servicers, and borrowers that may linger for years. While headline NPL ratios are now low enough to place Greece closer to European averages, this does not mean that the shadow of unresolved private debt has disappeared.
According to a European Central Bank blog, although Greek banks have become more liquid, capitalised, and profitable, a significant amount of private debt remains outside the traditional banking system due to securitisation and bad loan transfers, which continue to limit access to new lending for households and businesses.
The human impact
These statistics represent families and businesses whose economic hardship is prolonged, many of whom saw wage and pension cuts during the austerity years, and are unable to restore financial security due to the inability to resolve legacy debt.
When borrowing is blocked until past loans are repaid, especially if many loans are concentrated in the hands of a few large corporate clients, then younger generations are locked out of the ability to purchase homes, start businesses, or invest in education and skills.
Banks are not willing to extend working capital to small business owners, particularly in service sectors such as tourism and retail, which they consider higher risk. According to the IMF, banks and regulators should be encouraged to promote reforms that re-diversify credit away from a few large corporate clients and toward households and SMEs.
Although earnings and capital levels improved at Greece’s four largest banks in recent years, they remain behind their European counterparts in lending, and data in late 2025 showed that Greek banks had a loan-to-deposit ratio of only 62.37%, versus a eurozone average of about 102.16%.
Banks also face structural challenges, related to the historical dynamics of the crisis, that compound the weakness of credit growth: Greek banks suffered large losses on government bond holdings and saw deposits shrink as households withdrew funds during the worst of the crisis; these shocks led banks to tighten lending standards even as the economy has recovered.
Progress and remaining challenges
A reduction in the headline burden of bad loans has been achieved; the extent to which secondary bad loan markets and asset protection schemes have reduced the exposure of banks to bad loans has reduced headline NPL ratios below shock levels seen in the early 2010s, and overall economic conditions have stabilised, passing Greek banks stress tests and allowing them to resume paying dividends for the first time in years.
While headline NPL ratios have continued to fall (broad data show the percentage of non performing loans dropped further in the first half of 2025 from earlier in the year), these headline improvements mask some of the ongoing challenges that nudge the economy closer to a chronic credit trap.
The debt crisis in Greece is perhaps the most well-known economic episode of the eurozone era: Greek government debt reached unsustainably high levels as a share of GDP, which led to three international bailouts of about €260 billion between 2010 and 2018 to keep Greece in the eurozone.
However, more recently, there have been some more encouraging signs of broader economic improvement. According to reports, Greece is scheduled to return to the MSCI developed markets index in 2027, based on economic performance, corporate dividends, and bank health.
Yet the persistent burden of unresolved private debt remains one of the most significant legacies of the crisis. Houses, small businesses, and families who suffered through protracted austerity now watch growth constrained by risk averse lenders and backlogged legal processes.
The task of building a financial system that enables the dreams of ordinary Greeks, whether owning a home or starting a business, will be key to making Greece’s recovery complete and ensuring that the long shadow of the long crisis can be left behind.
Greece may look like it has moved on, but the reality on the ground says otherwise. The numbers have improved, yet millions are still stuck with debts they can’t escape, and that keeps the economy from breathing properly. Banks are safer, but also more cautious, and that caution is hurting the very people who need support the most. Until these old loans are properly dealt with, growth will stay uneven and unfair. Real recovery is about giving ordinary people a fair chance to start again. Right now, that still feels out of reach.