Dec. to Dec. (YoY) improvement in IOBE’s economic sentiment indicator
Government’s parliamentary majority (out of 300) in the first single-party government in the last decade
yield on 10-yr bond in Feb. 2020
quarters of consecutive growth published to Q3 2019
Finance Minister Christos Staikouras says measures have been taken to restart the real economy, attract investments, and fuel future growth.
The time is ripe for a plethora of investments as a new,
brighter economic landscape takes shape in Greece. After
an economic and political odyssey that took Greece to the
edge of the abyss, the country is finally returning to
growth and normality, while economic prospects are the
best that they have been in more than a decade. Foreign
direct investment (FDI) continues to rise, and unemployment is falling as the economy emerges from a
deep recessionary tunnel.
After a crippling crisis saw economic output contract by an
unprecedented 25% and unemployment skyrocket, the
country’s economy is now recovering strongly, and the
jobless numbers are declining steadily – though they are
still the highest in Europe.
Greece is back on a growth path, while key credibility and
confidence factors are also on the up. And, markets have
so far taken a shine to the more market-friendly, pro-
growth policies and initial reforms of the new centre-right
government of Prime Minister Kyriakos Mitsotakis.
The important tourism and shipping sectors – two of the
main drivers of the Greek economy – continue to power
ahead. Meanwhile investments have been increasing in an
array of sectors, ranging from renewable energy to real
estate, as the political environment shows growing signs
of stability. This is all helping improve sentiment in the
country: talk has changed from how to get your money
out of the country during the crisis years to how to get it
back into the economy as the sentiment pendulum swings
the other way.
Prime Minister Kyriakos Mitsotakis says Greece has embarked on a sustained boom that will surprise analysts with its durability and strength, and his message to the investment community is clear: “Don’t miss the chance to be part of a successful growth story.”
According to the latest figures from the Bank of Greece,
FDI inflows in 2018 reached a historic high of €3.3 billion,
a 13.8% increase from 2017. Overall, FDI has tripled
between 2015 and 2018 and is on track for a new record
Economic output is expanding, fiscal goals are being met,
and business activity is up, reflecting the country’s new
growth phase. The upturn is reflected in the economic
mood that spiked further upwards after the last elections
in the summer of 2019.
Annual economic output is expected to reach the 2%
mark in 2019, expanding for the third year in a row,
according to forecasts, while the government predicts an
ambitious economic growth rate of 2.8% in 2020.
Business sentiment is the highest since early 2008, while
soaring investor sentiment is also evident on the Athens
bourse, which – hard to believe a few years ago – was a
world-beater in 2019. The Athens Stock Exchange was the
best-performing market in Europe in 2019, with the
General Index gaining nearly 50% that year.
Another indicator of confidence, felt by people on the
streets of Athens and elsewhere around Greece, is
reflected in bank deposit levels. Bank of Greece data
shows that deposits from businesses and households rose
to €143 billion in December 2019, versus €126 billion in
2017, and €121 billion in 2016 – though they are still way
off their pre-crisis peak of €238 billion in September 2009.
Klaus Regling, Managing Director of the European Stability
Mechanism (ESM), says Greece’s fiscal efforts are bearing
fruit; but reforms must continue, and challenges remain.
“The Greek government is reaping the fruits of a
favourable market perception, the results of reforms
implemented during the ESM programme and continued
reforms,” he said. But he also added: “In the ESM’s view,
growth-friendly initiatives are much needed since Greece’s
economy is still vulnerable. It is particularly important
that these initiatives give special weight to strengthening
the institutional quality in Greece, as this has enormous
influence on long-term growth.”
Looking at today’s conditions, it is important to
differentiate between what is transpiring at present and
the false start Greece’s economy experienced in 2014.
Then, the country looked like it was exiting the crisis amid
rising investments and a growing gross domestic product.
And yet, snap elections were held in January 2015. Six
months later the country experienced a dramatic summer
that nearly resulted in a ‘Grexit’ and Greece flying out of
This time round, however, there are several key
differences. Firstly, the recovery is now at a much more
advanced stage; and secondly, the political situation in
Greece boasts much greater stability.
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U.S. investment bank Lehman Brothers collapses; within days the financial crisis
spreads to Europe.
Early parliamentary elections result in a victory for centre-left PASOK’s George
Papandreou. Several weeks later he reveals that Greece’s budget deficit is 12.7% of
GDP, almost double the figure reported by the previous government. It is later verified
that the shortfall is actually 15.6% of GDP.
Eurozone members and the International Monetary Fund (IMF) agree to provide Greece
with a €110 bn rescue package in exchange for stringent austerity measures.
Amid mass protests, the Hellenic Parliament approves a €28 bn package of budget cuts
and tax hikes.
George Papandreou resigns as prime minister; Lucas Papademos takes the helm as a
caretaker prime minister through a coalition government comprised of PASOK, centre-
right New Democracy, and right-wing LAOS.
Through the PSI, also known as the private sector haircut, an estimated 97% of
privately held Greek bonds (about €197 billion) took a 53.5% cut off their face value,
resulting in approximately a €107 billion reduction in Greece’s debt stock. A second
bailout package of €130 bn was approved, including a bank recapitalisation worth €48 bn.
Greece holds parliamentary elections in June after attempts to form a government fail,
following previous elections in May. A new coalition government is formed on 20 June,
comprising New Democracy, PASOK, and left-wing DIMAR, under the leadership of
Antonis Samaras as Prime Minister.
Eurozone members and the IMF agree to slash an estimated €40 bn from
A snap general election brings about the first ever victory of far-left party
Syriza, winning just shy of an overall majority. Alexis Tsipras is sworn is as prime
minister after reaching a coalition with right-wing ANEL and vows to put an end to
The European Central Bank (ECB) halts emergency funding, capital
controls are imposed, banks close for three weeks, and Greece defaults on repayment of
an IMF loan. While a third bailout is unanimously rejected by Greek voters in a
referendum, a third rescue package worth €86 bn is accepted.
Tsipras wins a snap election after losing his majority in parliament, and
commits to move ahead with difficult reforms.
Greece’s economy enters its fifth quarter of positive growth,
while outperforming budget surplus targets. In August, Greece exits the third bailout
After a 10-year hiatus, Greece returns to international capital
markets raising €2.5 billion in January with a 5-year bond sale, and €2.5 billion with its
first 10-year bond in nine years. Greece raised an additional €2.5 billion at a reoffer
yield of 3.9%.
New Democracy’s Kyriakos Mitsotakis wins a snap election, with an
outright majority, forming the first non-coalition government in a decade.
Greece sells a 7-year bond raising €2.5 billion, at a yield of 1.9%.
All remaining capital controls are lifted.
Greece sells an additional €1.5 billion of the March 10-year issue. The
reoffer yield, however, was a demonstrably lower 1.5%.
Following an upgrade of Greece’s rating by credit ratings agency Fitch to
BB, Athens issues its longest-dated bond since the financial crisis. The 15-year bond
sale was received with calls for the €2.5 billion bond exceeding €18.8 billion.
Yields on Greece’s 10-year bond reached a new record low, falling to 0.9%.
After winning re-election in September 2015, the leader of
left-wing political party Syriza, Alexis Tsipras, just about
exhausted his four-year term in office – an unusual
development in Greece, where snap elections are more
the norm than the exception.
During this period of relative stability, street
demonstrations largely dissipated, and the economic
recovery gained traction.
And after July 2019’s general elections, conservative party
New Democracy was chosen to govern the country under
the helm of Kyriakos Mitsotakis. The Harvard-educated,
former financial consultant is a person seen by many –
especially the markets – as the reformist who can deliver,
and the leader who can create jobs, a key demand among
With a 158-seat majority in Greece’s 300-seat legislature,
Mitsotakis has the luxury of being able to govern without
a coalition partner. It is important to note that this is the
first single-party government that has been elected in
Greece since 2009.
Apart from this majority helping Mitsotakis make decisions
he can implement, it also means that the stability of the
government is not reliant on a fragile political partnership.
Furthermore, parliament’s election of Katerina
Sakellaropoulou as the country’s first female President of
the Republic reinforces political stability going forward, as
well as helping to close the still-too-large gender gap for
senior posts in Greece.
But beyond the numbers, the economy has emerged from
the crisis in a different shape. Many argue that this may
well partly be a result of the crisis years forcing many
businesses to rethink their strategies in a more
extroverted way and spawning a spate of new start-ups.
Exports and foreign markets are top on the priority list of
Greek businesses, many of which had previously focused
on domestic consumption.
Real estate prices are recovering and the flagship
Hellinikon urban development at the site of the former
Athens airport finally appears to be ready for take-off. The
long-awaited €8 billion mega-project is expected to add
2.4% to the country’s economy and create 75,000 jobs
during its construction phase alone.
And when Hellinikon does begin, it will likely act as a
magnet for a host of other potential investments, both
domestic and international, at a time when a number of
privatisations are in the pipeline and Greece’s banks are
tackling their NPL and liquidity demons.
According to Pierre Moscovici, the former European
Commissioner for Economic and Financial Affairs, Taxation
and Customs, investor confidence in Greece has
dramatically increased and can continue to do so provided
the reform momentum is maintained. “I am very
optimistic about the prospects for the Greek economy. I
am encouraged that the authorities have made clear their
commitment to continue with a number of key reforms
and measures to boost growth and jobs in Greece (…)
investor confidence in Greece has already increased quite
markedly and can continue on that trajectory provided the
reform momentum is maintained,” he said.
The government’s pro-investment policies have so far had a positive impact as far as markets are concerned.
And the message going forward to investors is clear: “the country has turned the page”, says Prime Minister Mitsotakis,
adding that his government will “continue to do whatever it takes to restore credibility in the Greek economy”.
Greece returned to international capital markets with a
string of successful bond issues in 2019 and early 2020,
reflecting rising confidence in the country and supported
by a series of upgrades by international credit ratings
With an eye on the favourable conditions in Europe and an
improving domestic economic environment, Greece
pounced on the moment and has so far made four
successful bond issues, helping the country beat funding
targets, while Greek bond yields dropped dramatically,
with the benchmark 10-year bond yield falling to a historic
low below 1% in early 2020.
An added boost is the type of investors attracted to
Greece: European asset managers and pension funds
(investors with more of a long-term strategy) largely
replaced speculative hedge funds as buyers of Greek
On the downside, Greek bonds are still some way off from
investment grade. It is not known when, or if, they will
regain investment status and become eligible to
potentially attract a much bigger pool of available funding
managed by international pension and investment funds.
But for the first time, speculation has emerged as to when
this could occur, with the prime minister hinting that it
could happen in the first half of 2021 – a landmark year
for Greece as it also marks the bicentenary of the start of
the Greek Revolution of 1821, an event that led to the
formation of the modern Greek state.
Sentiment has also been bolstered after an outstanding
obstacle for investors was overcome, the removal of
capital controls. Introduced in the summer of 2015, the
controls were finally fully lifted in September 2019,
removing another burden from the shoulders of the
Greece’s recovering banks are also helping to provide
stability to the economy and country.
An ambitious plan to further reduce bad loans by the
country’s top four lenders is helping the financial system
get stronger and play a more active and supportive role in
“The efficient management of non-performing loans is of
utmost importance for banking sector stability, economic
development, and social cohesion, since it not only
improves the financial soundness of banks but also frees
up funds and resources to be directed to other, more
productive sectors of the economy, resulting in higher
productivity and output growth,” says Bank of Greece
Deputy Governor Theodoros Mitrakos.
Pierre Moscovici, the outgoing European Commissioner for Economic and Financial Affairs, Taxation and Customs, says investor confidence in Greece has dramatically increased and can continue to do so provided the reform momentum is maintained.
Klaus Regling, Managing Director of the European Stability Mechanism (ESM), says Greece’s fiscal efforts are bearing fruit; but reforms must continue, and challenges remain.
Prime Minister Mitsotakis certainly hit the ground running,
but he and his government need to keep up the pace if
they are to maintain New Democracy’s pledge to change
the fiscal mix, bring more tax cuts, and implement
investor-friendly policies to help boost liquidity in the real
economy, with the aim of strong growth and the creation
of lots of good jobs.
The initial results are promising. However, despite the
good news, Greece has many hurdles ahead and a
number of challenges remain. These range from still-high
taxes and bureaucracy to risks from a slowing global trade
environment and an uncertain geopolitical climate. The
longer-term impact of the Novel Coronavirus outbreak is
another serious concern for the global economy, with
fears that Greece’s tourism and other key sectors could
also be affected by the potential global economic fallout.
On the international front, Greece has strengthened its
ties with a number of countries, including the U.S. and
China, which has made significant investments in Greece’s
port and transport infrastructure. However, tense
relations with neighbouring Turkey have become more
strained than ever as the regional geopolitical sands shift,
bringing more uncertainty into an already complex
And all this at a time when we are soon to find out wha
that infamous phrase uttered by former British Prime
Minister Theresa May – “Brexit means Brexit” – really
means, not just for the UK, but also for the rest of Europe
and Greece. Meanwhile, the result of U.S. elections later
in 2020 will also have a significant impact on how the
global geopolitical map will unfold in the coming years.
Additionally, despite the fiscal improvements and a string
of upgrades by international credit ratings agencies,
Greece’s public debt remains too high and is probably
unsustainable in the long-term.
Furthermore, the slowdown in the global economy comes
just as Greece’s recovery picks up, which could put
damper on growth. The country has also had a tough time
pushing through certain reforms, opposed by vested
interests that have been present in the economy for
And despite a host of tax cuts already announced by th
new government, taxes on businesses and individuals
remain too high and are a threat to growth, while
asphyxiating fiscal goals imposed by the country’s
creditors still remain in place. However, it is hoped that
Brussels will soften the punitive primary surplus targets to
which Greece is tied in the not-too-distant future. It is
also hoped that Greek bonds may eventually benefit from
the quantitative easing program, if positive noises from
new European Central Bank President, Christine Lagarde,
in Frankfurt come to fruition.
But even if Mitsotakis finds a sympathetic ear in Brussel
in his bid to secure softer fiscal targets, these changes will
probably have to be taken to the parliaments of those
eurozone countries that funded Greece’s bailout loans – a
task every finance minister in the eurozone still dreads.
“In 2020 the [primary surplus] target of 3.5% will be fully
respected. From 2021 onward there needs to be a
transition towards lower primary surpluses. As we do that,
there will also be more fiscal space that will facilitate
growth enhancing policies. We are a government
dedicated to reform and as our initiatives unfold in 2020,
we will discuss with our partners the extent to which we
can smooth the 2021 and 2022 targets,” says the prime
Perhaps the biggest challenge for Greece has less to do with the economy, and more to do with the country’s social fabric. Spending on health, welfare, and education – areas tragically hit by the crisis – will play a large role in maintaining social cohesion and support for the government. These long term challenges must be met even, while the ever-worsening migration crisis threatens to boil over and the country’s demographics deteriorate further, with the population ageing and birth rates falling.
All these issues, along with the need for greater meritocracy and transparency, will need to be addressed if Greece wants to reverse the so-called ‘brain drain’, which saw an estimated half a million, mainly young, well-educated Greeks leave the country during the crisis years for a better life abroad. Greece must attract them back to tap into their expertise and help drive future growth and innovation, as well as boost social security and tax contributions and also help bridge the growing demographic divide.
“We believe that our commitment to the promotion of
innovation and to the creation of an investment-friendly
environment will contribute substantially to reversing the
brain drain, if not converting it into a brain gain,” says
Prime Minister Mitsotakis.
Bank of Greece Governor Yannis Stournaras says Greece is ready to exploit its growth potential, yet remaining structural deficiencies must be addressed to help bolster foreign direct investment.
There is still much work ahead to maintain a sustained
recovery and reverse the brain drain, but prospects are
the brightest they have been for many years.
“Greece has now much better economic fundamentals and
a government which believes in fiscal responsibility
structural reforms and privatisations. The country has
significant upside potential, with a negative output gap,
with a skilled labour force, improved labour cost
competitiveness, and an appetite for FDI,” says Bank of
Greece Governor Yannis Stournaras.
Prime Minister Mitsotakis summed up by saying: “My
message to the investment community is clear: don’t miss
the chance to be part of a successful growth story.”
One thing is for sure: a new investment landscape is
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