Eurozone finance ministers gather in Bucharest today, with Greece at the top of the agenda.

For many years, the most troubled member of the euro, Greece faced a debt nightmare following the 2009 financial crisis.

Sharp rises in public sector wages combined with a host of problems resulted in a gaping budget deficit of more than 15 per cent.

By 2010, the country's sovereign bonds had been given junk status by credit ratings agencies. The national debt-to-GDP ratio ballooned, from just over 80 per cent to 182 per cent.


In 2015, Greece effectively defaulted on repayments to the lender of last resort, the IMF.

There has been a turnaround since then, but only after the pain of three huge bailouts totalling nearly £270 billion ($522.4b). These loans came with conditions and led to severe austerity to get the public finances into order. A third of Greeks live below the poverty line.

Despite the clear human costs, the change in fortunes has been marked. Greek sovereign bond yields rocketed above 37 per cent in 2012, now they are hovering at around 3.6 per cent, indicating an appetite has returned for Greek risk.

Reports suggest the country may even pay off some IMF loans early. The government outdid its requirements to generate a surplus of 3.5 per cent last year and passed the healthcheck set by eurozone bail-out partners.

Greece even managed to dip its toe back in international money markets recently. It has a cash buffer to meet its financing needs for the next couple of years. Having met the restrictions of its bail-out set by the rest of the eurozone, it is expected to have €1b ($1.6b) worth of debt relief rubber-stamped on Friday.

But the hard-won progress seen in the erstwhile problem child of the currency bloc could suffer a setback if Italy's financial and political troubles worsen and shake the stability of the single currency.

Italy's threat to overspend, and the subsequent row with Brussels, may resurface. It is set to have official projections for growth downgraded from 1 per cent to 0.1 per cent, according to figures seen by Bloomberg.

In the eurozone, the country's debt is second only to Greece at 132 per cent of GDP. Lower growth means less room for borrowing - the trigger for a row between Brussels and Rome, which caused market volatility and a widening spread between Italian and German bonds - a negative sign for investor confidence.


Analysts at Goldman Sachs say that "sizeable fiscal tightening may be needed" to avoid a fight between the Italian populist coalition and European partners.

However, a "fiscal contraction has political costs, which the current government coalition may not be willing to pay", they add. That's partly why the second issue on the financial ministers' list - banking union - is also likely to prove a headache.

Figures including Christine Lagarde, of the IMF, have repeatedly warned that a lack of risk-sharing - such as not having a pan-eurozone deposit insurance scheme - left the bloc vulnerable to economic storms.

Just last week she warned that the bloc's banks were "not safe enough" from another financial crisis.

"Political priorities seem to have moved to other areas [than true monetary, banking union]. I do not view this as acceptable. With the economic slowdown on everyone's minds, let me say this clearly: now is the time to give euro area finance another big push," she added.

Discussion on the banking system will include the issue of non-performing loans. These bad loans are still a hefty share of many members' banks' balance sheets.

The high levels of government bonds held by these institutions, most particularly in Italy, also makes any political turmoil ramp up pressure on banks' borrowing costs in an effect known as the "doom loop".

Without further action to address these bad loans, Berlin is unlikely to sign up to protecting deposits.

Old problems are also likely to be exacerbated by new ones. The outlook for the eurozone has worsened considerably in recent months. Italy faced a recession last year, its third in a decade, but Germany has also seen a sharp slowdown.

Eurozone central bankers say concerns are mounting about the wider global economic backdrop and its impact. Demand from China, a key export market for German goods, has slowed significantly.

Growth in global trade volumes look set to hit a low not seen since 2009, according to analysis from Oxford Economics, which confirms a gloomy assessment from the World Trade Organisation.

The economic slowdown is also having the effect of softer inflation. This means that bets are off for an interest rate hike from the ECB this year.

As a result, banks may find it harder to lend to the real economy, as profits are eroded by negative interest rates.

"When market inflation expectations were last at these levels...[it] was one of the factors behind the ECB ramping up quantitative easing [money printing] in 2016," says Ryan Djajasaputra of Investec.

Greece may have made some headway out of the woods, but the after-effects of the financial crisis are still strong.

As HSBC said in its quarterly outlook for the area: "With trend growth so low, the reality is that Europe will often be close to recession."

That is a tough reality for its finance ministers to grapple with.