In 2015, as the debt crisis in Greece reached its peak, Carmen Reinhart of Harvard and the NBER, and Christoph Trebesch of the University of Munich and CESifo at the time, published an article on Greece in an academic journal.In that article, titled “The Pitfalls of External Dependence: Greece, 1920–2015,” the authors examined Greece’s debt crises spanning two centuries, from the country’s independence through 2015. They noted that the Greek state went bankrupt four times and was bailed out from abroad on each occasion.
The two economists demonstrated that “cycles of external crises and dependence are recurring themes in modern Greek history—with recurring patterns: prior to the defaults, there is a period of heavy borrowing from foreign private creditors. As repayment difficulties arise, foreign governments intervene to help repay private creditors, demanding budget cuts and adjustment programs as a condition for official bailout loans.”
In that article, Ms. Reinhart and Christoph Trebesch argued, on the one hand, that Greece’s external debt required a “haircut” and, on the other hand, that the political priority should be, to the extent possible, to finance the country’s needs from domestic sources.
There is no doubt that Greece has taken significant steps to reduce its public debt, particularly in recent years, while conditions are being set for its further reduction this year and in the years to come. This is recognized by international organizations, banks, governments, etc., but public debt remains high.
An equally—and perhaps even more—important issue for Greece is its external debt. This is because it reveals the country’s room for maneuver, its capital dependence on foreign sources, and its financial architecture. A related issue is who holds this debt, what the average maturity is, in which currency, and so on.
An even more illuminating statistic would be the net external debt, which is calculated by subtracting the value of the assets held by the Greek government and its citizens from the total external debt. However, we do not have data available on this.
We do, however, have data on the external debt of the Greek government and the private sector from Focus Economics, which projects it to reach 247% of GDP in 2025, compared to 234% in 2024 and 295% in 2021. Cyprus’s corresponding figure stood at 617.23% of GDP last year, compared to 674.18% in 2024.
Bulgaria has a low external debt-to-GDP ratio of 50.5% in 2025, compared to 48.1% in 2024.
Turkey’s external debt is quite low, amounting to just 32.7% of GDP. Germany is projected to have external debt of 152% in 2025 and 147% in 2024, while the UK’s stood at 270% of GDP last year, down from 271% in 2024. The U.S.’s was 95.7% in 2025. Portugal’s external debt stood at 145% of GDP last year, unchanged from 2024.
In general, the largest economies have relatively high external debt-to-GDP ratios, which some attribute to their deep financial markets, global banking systems, and large cross-border flows.
In the case of Greece, the goal should be to reduce external debt to avoid repeating the pattern described in the article by Carmen Reinhart of Harvard and the NBER and Christoph Trebesch of the University of Munich and CESifo.
Obviously, this reduction in external debt should be carried out gradually through a plan that could include tax and other incentives. On the other hand, the government may see its borrowing costs rise.