Most countries talk about reducing their debt. Very few actually do it. But some have — dramatically and against the odds. Argentina eliminated a 123-year deficit in one year. Greece cut its debt ratio by over 63 percentage points in five years. Ireland went from bailout to one of the lowest debt ratios in Europe. This page looks at how they did it, what it cost, and what lessons — if any — the UK might draw.
When Javier Milei — a libertarian economist who kept five cloned dogs and described himself as an anarchocapitalist — took office in December 2023, Argentina was a case study in fiscal catastrophe. Inflation was running at over 200% annually. The government had not run a surplus in 14 years. Poverty was rising. The peso was collapsing.
Milei's prescription was radical: an immediate 54% devaluation of the peso, a 4.5% of GDP cut in government spending, elimination of subsidies for energy and transport, dissolution of several government ministries, and a freeze on public works. He called it "la motosierra" — the chainsaw. The IMF, which had been bailing out Argentina for years, was sceptical.
The results were genuinely dramatic. Argentina recorded a primary fiscal surplus of 1.8% of GDP in 2024 — the first in 14 years, and by some measures the first full fiscal surplus in 123 years. In 2025, the surplus continued at 1.4% of GDP, even as Milei cut taxes. Inflation fell from 292% at its peak in April 2024 to 39% by end-2024 and continued falling. GDP, after a sharp recession in early 2024, grew 4.4% in 2025. The poverty rate, which spiked to 52.9% in mid-2024, fell back to 32% by mid-2025.
The IMF, which had originally lent Argentina $20bn as part of its stabilisation programme, upgraded its assessment significantly. President Milei won the October 2025 midterm elections with 41% of the vote and doubled his congressional representation — suggesting the population endorsed the reform programme despite its initial pain.
Greece's debt crisis in 2010-2012 was the worst financial collapse of any developed country in modern history. At its peak in 2020, Greek government debt stood at 209.4% of GDP — more than twice the size of its economy. The country had gone through three EU-IMF bailouts, severe austerity programmes that cut public services to the bone, and a restructuring of privately-held debt (the largest sovereign debt restructuring in history at the time).
The recovery since then has been one of the most remarkable fiscal turnarounds in European history. By 2025, Greek debt had fallen to 146.1% — a reduction of over 63 percentage points in five years. According to Alpha Bank analysis, Greece was the only eurozone country to achieve this scale of reduction, and alongside Ireland and Cyprus, one of only a handful to actually reduce its nominal debt outstanding during 2024-2025.
How did it happen? Three main mechanisms: First, Greece has run primary budget surpluses — spending less than it collects in taxes before debt interest — for three consecutive years, with the 2025 surplus reaching 4.9% of GDP. Second, GDP growth has been consistently above the eurozone average, driven by tourism, real estate, shipping and rising employment, which reduces the debt ratio by expanding the denominator. Third, structural improvements in tax collection — reduced evasion and increased digital payments — boosted revenues significantly.
The OBR projects Greece's debt will continue falling to 136.8% by 2026 and 130.3% by 2027. Greece is now cited by European institutions as the model for fiscal recovery — a remarkable reversal from being the continent's fiscal basket case fifteen years ago.
Ireland's banking crisis in 2010 forced it to accept a €67.5bn EU-IMF bailout — one of the largest relative to GDP in history. The country was effectively bankrupt, having guaranteed its entire banking system. Debt peaked at around 123% of GDP in 2013.
By 2025, Irish government debt was 32.9% of GDP — among the lowest in the EU and dramatically below its peak. Ireland has gone from bailout recipient to one of Europe's fiscally strongest economies in just over a decade. In 2025 it ran a budget surplus of 1.8% of GDP.
Three factors explain this remarkable transformation. First, Ireland maintained fiscal discipline through austerity in the early 2010s — cutting spending and raising taxes, which was politically painful but sustained. Second, GDP growth has been exceptionally strong — Ireland has consistently grown faster than the eurozone average, helped by its position as a European hub for US multinationals. Third, and most controversially, Ireland's 12.5% corporation tax rate has attracted enormous inflows of corporate tax revenue from multinationals including Apple, Google, Meta and Pfizer. Corporation tax now represents about 21% of Ireland's total revenue — an extraordinary concentration that creates significant vulnerability.
Germany's approach to debt reduction is the most structural of any major economy. In 2009, Germany embedded a "Schuldenbremse" (debt brake) directly into its constitution, limiting the federal structural deficit to 0.35% of GDP and completely prohibiting deficits at state level.
The result over the following decade was a remarkable period of fiscal consolidation — Germany ran a balanced budget or surplus every year from 2012 to 2019, the only G7 country to do so. By 2019, federal government debt had fallen to around 59% of GDP from 82% in 2010. Germany became the only large economy to genuinely reduce its debt ratio through disciplined fiscal policy rather than GDP growth alone.
Covid broke the debt brake (it has an escape clause for exceptional circumstances), and Germany's debt rose again to around 66-68% of GDP. But it remains far below most European peers. In 2025, however, Germany suspended the debt brake again to finance a major defence and infrastructure investment package — a political decision that illustrated the limits of constitutional fiscal rules when governments decide to override them.
Note: Ireland's GDP figures are distorted by multinational balance sheets — modified GNI (GNI*) gives a more accurate picture of the domestic economy, at roughly double these headline figures. Sources: Eurostat, IMF, ONS.
WHAT CAN THE UK LEARN?
The UK's position — debt at 95% of GDP, rising to 96% before barely falling — is far more manageable than Argentina's hyperinflationary crisis or Greece's 209% peak. But the OBR's own projections show debt reaching 275% by the 2070s without structural reform. The case studies above suggest several lessons:
🇬🇧 THE UK'S POSITION — HONEST ASSESSMENT
The UK is not in the same position as Argentina was (hyperinflation, currency collapse, 14-year deficit) or Greece was (209% debt, bailout dependency, complete loss of market access). It is a large, diverse economy with its own currency, deep financial markets and long debt maturities. These are significant structural advantages.
But the OBR's own analysis is clear: debt is not falling, borrowing remains elevated, and without structural change the long-term trajectory is unsustainable. The government's fiscal headroom against its own rules is thin. Early 2026/27 borrowing is already running above forecast.
The case studies suggest that reduction is possible but requires either: (a) sustained primary surpluses — spending less than you collect before debt interest; (b) faster economic growth than the UK is currently achieving; or (c) both simultaneously. The UK's recent history has delivered neither consistently.