One year after Greece agreed the economic adjustment programme and €110bn loan with the European Union and International Monetary Fund, it is back in the spotlight – and conventional wisdom is more pessimistic than ever on overcoming the crisis. What went wrong? And can it be fixed?

To answer, it is important to recall what has happened since May 2010: the biggest fiscal consolidation yet achieved in one year by a eurozone country. And it was done the hard way: to reduce the deficit by 5 percentage points, public sector nominal wages were cut by 15 per cent, pensions by 10 per cent, public sector employee rolls by 10 per cent, operational and military spending was slashed, value added tax raised by 4 percentage points, and excise taxes increased 30 per cent.

Fiscal consolidation was accompanied by long overdue structural reforms. A comprehensive pension reform raised the retirement age and linked pension benefits to lifetime contributions. Labour market reform reduced severance payments and cut overtime remuneration. The statistical authority was granted full independence, while fiscal management was strengthened. Tax reform shortened judicial procedures for tax cases, and included a determined – but as yet incomplete – effort to combat tax evasion. Local administration reform reduced the number of municipalities from 1,034 to 325. The start-up of businesses was simplified; a “fast track” process for large investments was legislated; the road haulage sector was liberalised; cabotage was abolished; closed professions were opened.