The coming months will be trying for Europe's most struggling economy. Greece, in rather extraordinary fashion, agreed to meet a long list of highly punitive reforms after a standoff of more than a week that had forced its banks to close and its economy to shut down. The deal was struck in exchange for a bailout package, which could approach $100 billion, and an extended stay as a member of the euro zone.

The reforms won't be pretty. Greece has already endured far more austerity than any other flailing European economy, swinging from an 18-percent deficit to a 2-percent surplus, more than double what any other country has done. And now it will have to put up with more, but it's not clear whether any of these efforts will ease skepticism about whether the whole affair has done irreparable damage to the euro project. So far, the euro, in its 15th year, has been a symbolic boon to Europe, but it has also seen more than a handful of countries suffer significant economic setbacks.

Indeed, it's worth remembering that there are a number of crisis countries that are in pretty bad shape — but none worse than Greece, for a specific reason.

During the beginnings of the European financial crisis, which exploded in 2009 and 2010, there was particular concern about five countries — Portugal, Ireland, Italy, Greece  and Spain — which were, perhaps, best known in the form of the acronym PIIGS. All of them had accrued  massive debts — some of them public, some of them private — that led their economies to sharply contract when the global financial system froze up after the 2008 crisis that started in the United States. And while growth bounced back in the U.S., these countries had bigger “structural” problems — ingrained in their laws — that hurt growth.

The tipping point, though, came in 2010, when markets realized how much these governments now needed to borrow to make up for their bad economies. Greece was on the extreme end of that spectrum, but even countries that had kept their fiscal houses in order, such as Spain and Ireland, found themselves unable to borrow on anything but the most punitive terms.

To restore market confidence and get help from Europe and the European Central Bank, the countries had little choice but to administer strict austerity measures in the form of budget cuts and tax hikes. Greece, which in 2009 had a budget deficit that was equal to nearly 14 percent of its economy (the largest of the five), has undergone the most. But the others have suffered through significant pullbacks, too.


This fiscal tightening has worked to the extent that it's closed the countries’ deficits, but it hasn't in light of the fact that it's also made the countries’ debt burdens worse.

The only place where this has come close to working is in Ireland, where spending cuts and an export boom — partly boosted by the the falling euro, which has made Irish goods cheaper abroad — have helped turn the country's fate around in the past 18 months. It's enough that Ireland is actually Europe's fastest-growing economy now, though it still has 9.7 percent unemployment.

But in most cases, austerity has often hurt the economy so much that even though countries owe less, they're less able to pay what they do owe because their economies are smaller, and that means they collect less tax revenue.

Italy is perhaps the most glaring example of this. The past five years have been nothing short of a disaster for the country, whose economy is still almost 10 percent smaller than it was in 2008. And in fact, the damage Italy has endured over the past half-decade has wiped out virtually any progress made the previous one. Italy's economy is the exact same size that it was in 2000.


It goes without saying that a decade and a half without any growth is not a very good thing. And it may not be a coincidence that this stagnation started when the euro was introduced in 1999. After all, Italy has had structural challenges, such as making it difficult to fire workers or bust up monopolies, for a long time. It's not like those can explain why Italy can't grow now when it could before.

The reality is that the euro has prevented Italy from covering up its structural problems like it used to be able to when it could at least devalue its way to competitiveness. In other words, the Italian lira could fall in value when it wasn't so hot, making Italian exports cheaper and offering a boost to growth. It doesn't have the luxury of a cheaper lira now, though, so it's been stuck in a no-growth trap that has no sign of turning around soon.

But Spain hasn't been much better. Now, it's true that its economy has looked much better over the past 18 months, but top-level growth hasn't trickled down as much as Spaniards might have hoped. Salaries in Spain remain low, and unemployment remains high — around 24 percent. It is the only country whose labor force woes look anything similar to Greece's (and, for a time, were even worse).


Portugal, meanwhile, is an economic whodunit without an obvious culprit. There wasn't a bubble like there was in Greece or Spain — not in housing or in government spending — but Portugal just kind of fell behind. There was no bust, in other words, because there was no boom. From 2002 onward, the country's economic output per capita, which shows how rich its people are, has essentially been flat.


 

Things are better now, but not much. Portugal is growing, yes, but still very slowly. That last time it posted real growth of more than 3 percent was 15 years ago — in 2000.

The reason why Greece has turned into the worst case of all is that of the five countries that were looking over the figurative economic cliff a few years ago, Greece was both in the most dire shape and has recovered the least. Its budget deficit going into the crisis far exceeded that of any other, so it's had to do much more austerity since. It's not surprising that the country that's cut the most has done the worst.

As economist Branko Milanovic points out, there is a tangible difference between Greece and, say, Portugal, where GDP per capita is roughly the same, but was arrived at differently. Portugal makes about as much money as it did in 2000, and only marginally less than it did just before the recession. Greece's economy, meanwhile, grew rapidly and then evaporated by almost a quarter between 2009 and 2013. The downward adjustment can be very difficult.

And it's not going to be over anytime soon. Greece has just signed up to do more and more austerity for the next three years, its economy has fallen into even more of a hole now that its banks have closed, and it's stuck with a currency that's too expensive for it.

The euro has made hope an unaffordable luxury.