The U.S. Department of State Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world.  They analyze a variety of economies that are or could be markets for U.S. businesses.

Topics include Openness to Investment, Legal and Regulatory systems, Dispute Resolution, Intellectual Property Rights, Transparency, Performance Requirements, State-Owned Enterprises, Responsible Business Conduct, and Corruption.

These statements highlight persistent barriers to further U.S. investment.  Addressing these barriers would expand high-quality, private sector-led investment in infrastructure, further women’s economic empowerment, and facilitate a healthy business environment for the digital economy. 

Executive Summary

The Greek economy has come a long way since the age of the “Memoranda.”  In early 2020, COVID-19 held the potential to permanently scar an economy that still suffered from legacy issues, including high debt and non-performing loans, limited credit growth, near zero capacity for fiscal expansion, and a hollowed-out healthcare system.  While continuing its aggressive reform agenda, the Mitsotakis government rose to meet the pandemic challenge, as European institutions effectively welcomed Greek debt back into the Euro system, the IMF and EU evaluated the country’s public debt as sustainable, Moody’s upgraded Greek sovereign debt, the country began borrowing at historically low cost, and strategic investors returned, favorably considering Greece’s current and long-term value proposition.  Meanwhile, over the past several years, our bilateral relationship has deepened significantly via our defense and strategic partnerships, and Greece ambitiously seeks now to bring our economic ties to similar, historic heights.  Far from being the problem child of Europe or the international financial system, Greece is increasingly a source of solutions – not just in the fields of energy diplomacy and defense, but in high-tech innovation, healthcare, and green energy, lending prospects for solid economic growth and stability here and in the wider region.

The Mitsotakis government was elected in July 2019 on an aggressive investment and economic reform agenda which has plowed forward despite the pandemic.  During its first nine months in power, Mitostakis’s team pushed market-friendly reforms and Parliament voted through dozens of economic-related bills, including a key investment law in October 2019, designed to cut red tape, help achieve full employment, and adopt best international practices – including by digitizing government services.  GDP growth reached 1.9% in 2019, a major leap forward following a period that saw the loss of a quarter of the economy.  Facing COVID-19 lockdowns, the economy contracted by 8.2% in 2020, according to the Hellenic Statistical Authority, although the contraction was one of the smallest in the eurozone.  

Greece maintains a liquidity buffer, estimated at  EUR 30 billion, but is intent on boosting its coffers as the economic fallout from the COVID-19 pandemic is larger than expected.  So far untouched, the buffer should be sufficient to cover the country’s financing needs until at least the end of 2022, and the country’s leadership maintains its intention to reserve the European Stability Mechanism (ESM) tranche solely for sovereign debt interest payments.  While capital controls were completely lifted in September 2019, Greece remains subject to enhanced supervision by Eurozone creditors.  

Greece’s banking system, despite three recapitalizations as part of the August 2015 ESM agreement, remains saddled with the largest ratio of non-performing loans in the EU, which constrains the domestic financial sector’s ability to finance the national economy.  As a result, businesses, particularly small and medium enterprises, still struggle to obtain domestic financing to support operations due to inflated risk premiums in the sector.  To tackle the issue, and as a requirement of the agreement with the ESM, Greece has established a secondary market for its non-performing loans (NPLs).  According to the Bank of Greece, non-performing loans (NPLs) came, on a solo basis, to EUR58.7 billion at end-September 2020, down by EUR9.8 billion from December 2019 and by EUR48.5 billion from their March 2016 peak.  The NPL-to-total loan ratio remained high in September 2020 at 35.8%. It should be noted that the high percentage of performing loans benefiting from moratoria until December 31, 2020 contained the inflow of new NPLs. Non-performing private debt remains high, irrespective of the reduction in NPLs on bank balance sheets via transfer to non-bank entities. 2020 saw substantial reforms aimed at resolving the issue of NPLs.  These involved the securitization of NPLs through the activation of the “Hercules” scheme and the enactment of Law No. 4738/2020 which improves several aspects of insolvency law.  Nevertheless, NPLs will remain high, and considering that there will be a new inflow of NPLs due to the pandemic, other solutions complementary to the “Hercules” scheme need to be implemented.  In addition to sales of securitized loan packages, the banks have exploited other ways to manage bad loans.  For example, nearly all of Greece’s systemic banks employ loan servicing firms to manage non-performing exposures.  Greece’s secondary market for NPL servicers now includes 24 companies including: Sepal (an Alpha Bank-Aktua joint venture), FPS (a Eurobank subsidiary), Pillarstone, Independent Portfolio Management, B2Kapital, UCI Hellas, Resolute Asset Management, Thea Artemis, PQH, Qquant Master Servicer, and DV01 Asset Management.    

Greece’s return to economic growth has generated new investor interest in the country.  Pfizer, Cisco, Deloitte, and Microsoft, to name a few, have all announced major investments in the past few years, due in part to improved protection of intellectual property rights and Greece’s delisting from the U.S. Trade Representatives Special 301 Watch List in 2020.  In March 2021, Greece successfully raised EUR2.5 billion from its first 30-year bond sale in more than a decade, with the issue more than 10 times oversubscribed.  The bond, which has so far received investor demand of more than EUR26.1 billion, will price at 150 basis points over the mid-swap level, resulting in a yield of 1.93%.  

In January 2021, Fitch ratings agency upgraded Greece’s credit rating to BB and noted the country’s outlook as ‘stable’ due to the financial impact of COVID-19.  On April 1, 2021, Moody’s improved its outlook of the Greek banking system from “stable” to “positive.”   Standard & Poor’s affirmed its credit rating for Greece at BB-in October 2020 and also kept its outlook to “stable.”  The European Central Bank (ECB) included Greek government bonds in its quantitative easing program, with EUR12 billion worth of Greek government debt earmarked for purchase under the ECB’s EUR750 billion Pandemic Emergency Purchase Program in 2020.   

 Although Greece has seen positive developments in the past few years, investors worry about where Greece will be once COVID-19 subsides.  The Greek government has been given strong marks for its initial response in limiting the spread of the pandemic and has implemented several innovative digital reforms to its economy during COVID-19.  The Bank of Greece, EU, IMF, and others estimated the Greek economy contracted by 10% in 2020.  The tourism sector fared no better with a loss of EUR 13.9 billion.  The unemployment rate was 15.47% in 2020, down from 16.9% at the end of 2019 as government pandemic support helped avoid extensive layoffs.  (The unemployment rate was 19.3% in 2018, for comparison.)  As 2021 progresses and the pandemic continues, the resiliency of the Greek economy will be tested, with uncertain impacts on the investment climate.  

To access the ICS, visit the U.S. Department of State Investment Climate Statements website.