Greece at a Glance
Last Updated: 21-05-2021
€97.3 bnEU and EU backed funding earmarked to Greece over next 6 years
Green and Digital InvestmentsTwin drivers of Greece 2.0
7%Greece 2.0’s forecasted contribution to GDP growth
7bnInward investments channeled into Greece over past 18 months*
Greece 2.0: A Blueprint for Sustainable Growth
The transition to a zero-carbon economy, digital transformation, extroversion, and innovation are Greece’s national priorities in a bid to reboot and transform the country’s economic model.
When the COVID-19 pandemic struck, Greece was only beginning to recover from a decade-long economic crisis that had wiped a quarter off its GDP. The pandemic may have dented the country’s recovery, but it has also focussed the minds of the country’s top policy makers on how to put the economy on track for a post-COVID rebound with a stronger, more sustainable footing.
The response to this challenge is the National Recovery and Resilience Plan dubbed Greece 2.0, an ambitious package of investments and reforms across key sectors of the economy.
The Economic Challenge
Before the onset of the pandemic, in January 2020, the task of devising a plan to transform the Greek economy was given to a committee of experts chaired by Nobel Laureate economist Sir Christopher Pissarides. The committee concluded that the project was nothing short of transformative. Kick-starting sustainable growth would require boosting low productivity and reversing years of underinvestment through sweeping economic and institutional reforms.
The coordinated European response to the pandemic, NextGenerationEU, in tandem with the bloc’s long-term budget offer a once-in-a-generation opportunity to pursue this agenda
Supported by new funding tools, the stimulus package will channel over €70 billion of EU funds, over the next six years, towards investments in Greece. European funding is set to be matched by a reform push. More importantly, Greece plans to use public spending as a springboard to attract much-needed private investment into the country. When leveraged resources are considered, including bank loans and private investment, earmarked funding totals €97.3 billion.
The National Recovery and Resilience Plan, says Finance Minister Christos Staikouras, “will act as a catalyst for the reorientation of our economy towards a new, innovative, competitive, and socially just productivity model.”
The Greek government estimates that the Greece 2.0 package could add 7 percentage points to the country’s economic growth over the next six years and create 200,000 new jobs, while it targets a 20% increase in investment levels.
Fostering Partnerships to Spur Investments
These figures may seem ambitious for a mature economy, but it is easy to see the scale of the untapped potential.
Greece’s “investment gap” – the amount by which the country has underspent on investment over the last 10 years compared to the EU average – stands at 9% of the country’s GDP, annually. This translates into over €160 billion in investments waiting to be materialised.
We are living a critical time, says Professor Nikos Vettas, Director General of Greece’s Foundation for Economic & Industrial Research IOBE, who co-authored the Pissarides report. “Following a decade of depressed economic activity, now – to a significant extent – price competitiveness has been restored, political risk is low, while the momentum of policy reform has gained traction.”
The national recovery plan consists of more than 170 actions, which include construction works, investments, and reforms spread across Greece, grouped into four pillars: green transition; digital transformation; supporting employment, skills and social cohesion; and promoting investments through economic and institutional transformation.
Each of the pillars represents significant investment opportunities.
To give one example: For the “green transition,” which aims to decarbonise the economy by 2050, Greece’s National Energy and Climate Plan calls for greenhouse gas emissions to be slashed by 55% from 2005 levels by 2030.
The national renewable energy targets will require more than doubling the country’s solar and wind power capacity. In total, investments associated with the transformation of Greece’s energy system –from increasing RES capacity to new energy infrastructure to waste management – will amount to an estimated €44 billion over a 10-year horizon, the majority of which will come from the private sector.
More opportunities await in other sectors, too.
Encouraging extroversion and innovation are key to the success of Greece 2.0.
When compared to European countries of a similar size, Greece has the potential to double the contribution of its export sector to the economy, by tilting its export mix towards value-added goods and services, and creating economies of scale.
“We see enormous opportunities in a variety of sectors, whether logistics, or tourism, or real estate, or infrastructure, or services or other,” says Alex Patelis, Chief Economic Advisor to Prime Minister Mitsotakis. “Greece has a huge pool of labour talent to offer, its unique geographic position, strong institutional and political stability, as well as being blessed with beautiful nature.”
The “blue economy” of coastal and maritime activities, MICE and medical tourism, high-tech agriculture, food processing and manufacturing, research and development, but also education, health and culture, are all seen as areas where Greece can build on its strengths.
While national and EU funds can help to prime the pump, Greece’s recovery plan anticipates a major role for private sector investment. Around two thirds of the total “investment gap” are due to lack of business investment, and the government recognises that this must change.
To achieve this, Greece has developed an innovative scheme to leverage €12.7 billion of loans from the EU into over €57 billion of investment through partnerships with banks and the private sector.
In addition, attracting inward investment will be key to meeting Greece’s strategic goals. Despite a series of successful foreign ventures in recent years, such as Fraport’s 40-year concession of 14 regional airports, COSCO’s emblematic investment in the Piraeus Port, or the Greek section of the Trans Adriatic Pipeline (TAP) undertaken by a consortium of European and Asian companies, Greece has only recently matched the European FDI average of around 2% of GDP. For Patelis, this suggests that for Greece and potential foreign investors, “there are significant win-win mutual opportunities to explore.”
Private Sector and Reforms: Cornerstones of Greece 2.0
The government is keenly aware that the key to attracting investors is creating a better business environment.
What is required, according to Professor Vettas, is “simplicity, transparency and some minimum stability.” “Judicial processes have to become faster, while aiming to enhance investor protection and property rights,” he adds. “Public administration has to simplify its licensing procedures, accelerating setting up the cadastre and minimising red tape. Finally, the taxation system needs to become simpler and more stable.”
A key part of the national growth strategy is to measurably improve the country’s standing in international measures of competitiveness, such as the World Bank’s “Doing Business” scorecard, where Greece currently ranks 79th among 190 countries.
The funding available through Greece 2.0 provides a once-in-a-generation opportunity for reform.
“To support investors, the government has rolled out hundreds of new online government services in the past year to make public services more efficient,” says Deputy Foreign Affairs Minister for Economic Diplomacy and Extroversion, Konstantinos Fragkogiannis. “We have steadily cut taxes – including corporate tax rates – and streamlined hundreds of regulations and licensing procedures.”
Devising a Plan for the Future
Strengthening the insolvency code and reforming education are two recent successful initiatives, while next on the agenda are digitising the courts and the tax system, reforming the land use framework and completing the property register.
The government has also rolled out a series of incentives to attract investments. “These incentives can take the form of cash grants, leasing subsidies, labour cost subsidies, tax breaks, and R&D grants for new productive, value-added investment projects in almost all sectors of the economy,” says Fragkogiannis.
Over the past 18 months the country’s trade and investment promotion agency, Enterprise Greece, has helped to channel inward investments valued at a total €7 billion into Greece – a flow the government hopes to accelerate in the coming years.
Investment and residence-linked incentives
Since 2014, Greece has been offering residence permits to real estate investors in Greece through the Golden Visa programme. Third party nationals who purchase property with a minimum value of €250,000 can acquire a 5-year renewable residence permit in Greece for themselves and their immediate family. In 2018, the scheme was extended to cover the purchase of securities, regulated investments, or bank deposits with a value of over €400,000. The programme provides holders with the right to visa-free travel within the EU’s Schengen area, and does not carry a requirement to reside in Greece.
Greece has also introduced incentives for foreign nationals moving their tax residence to Greece. Investors of more than €500,000 and Golden Visa holders can opt for an annual lump-sum flat tax rate of €100,000. Additional initiatives include the creation of a non-dom framework for workers and retired persons, and tax incentives for the establishment of Family Offices In Greece.