## NATIONAL PERSPECTIVE: GREECE — REMARKABLE RECOVERY

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**Canonical URL:** [NATIONAL PERSPECTIVE: GREECE — REMARKABLE RECOVERY](https://www.imf.org/-/media/files/publications/fandd/article/2025/06/hatzidakis.pdf)

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### Economic turnaround and performance
- Greece has moved from being described as "Europe’s economic Achilles’ heel" to "an unlikely success story."
- Growth rates are outpacing the European Union average.
- Notable drivers include a significant rebound in investment, historically high exports, and a decline in unemployment to levels unseen in over a decade.
- Public debt has decreased almost 55 percentage points of GDP, described as "one of the steepest declines Europe has ever seen."

### Fiscal performance and debt management
- Primary surplus reached 4.8 percent of GDP in 2024.
- Overall budget surplus was 1.3 percent in 2024.
- Tax-evasion efforts are credited with increased revenues, which the government "estimate increased revenues by almost 3 percent last year."
- The government anticipates maintaining primary surpluses close to 2.5 percent of GDP over the next few years.
- Debt-to-GDP ratio is projected to decline by an additional 20 percentage points by 2028.
- Strategy includes potential strategic use of substantial cash buffers for early debt repayments as part of debt management.

### Banking sector and financial stability
- Bank balance sheets have been cleaned up and nonperforming loans curtailed.
- These improvements "enabled Greek lenders to fully regain their essential role in financing the real economy."
- Deposits have increased steadily and strong profitability has strengthened capital adequacy ratios.
- The Hellenic Financial Stability Fund sold holdings in local banks to reputable long-term foreign investors, presented as a tangible vote of confidence.

### Structural reforms and competitiveness
- Tax and social security contribution reductions to ease burdens on businesses and consumers.
- Licensing procedures simplified and labor legislation modernized.
- One of the most competitive incentive frameworks for research and innovation introduced, including amortizations of up to 315 percent for R&D expenses.
- Privatizations proceeded at record pace, generating public revenue and unlocking investment and jobs.
- A state-of-the-art insolvency framework—classified by the Organisation for Economic Co-operation and Development as meeting best international practice—has contributed to a decline in the stock of private debt in absolute terms and relative to GDP.
- Reforms implemented across digitalization, justice, education, upskilling and reskilling, the pension system, and transparency standards.
- Restructuring of the GrowthFund to improve management of public assets.

### Remaining challenges and structural gaps
- Debt-to-GDP remains high, though with favorable structure and interest-rate provisions.
- Inflation is declining but remains "sticky, particularly in the services sector."
- Investment is improving but "still lags the EU average," highlighting the need for further capital mobilization.
- Productivity is rising but remains below the EU average.
- Labor market participation, particularly among women, remains below desired levels.
- Need to strengthen resilience to external challenges including the green and digital transitions and global economic fragmentation.

### Future agenda and policy recommendations
- Maintain fiscal prudence and sustain primary surpluses near 2.5 percent of GDP in the coming years.
- Continue strengthening tax compliance; where fiscal space emerges, implement growth-friendly tax reductions for labor and businesses to boost disposable incomes and competitiveness.
- Further simplify business regulation and improve state administrative capacity.
- Remove remaining market entry barriers, especially in the services sector, to foster competition and business dynamism.
- Enhance legal certainty for investors by speeding up delivery of justice through legal reforms and expanded use of advanced technologies.
- Fully implement the National Cadastre and complete local and regional urban plans to delineate land uses clearly and transparently.
- Strengthen competition in the banking system and expand financing options beyond traditional bank lending, including developing the Greek capital market and fostering venture capital and private equity activity.
- Optimize the use of EU funds to unlock new investment.
- Invest in renewable energy and electricity grids to reduce energy costs and improve competitiveness.
- Continue upskilling initiatives to ensure the workforce meets demands of a rapidly evolving economy.

### Outlook
- Greece "has staged a remarkable economic recovery over the past five years" with substantial potential for further improvement.
- Given current momentum and attributes—access to the European single market, low economic and institutional uncertainty, strong political stability, and clear geopolitical orientation—growth is expected to "continue outperforming the European average for the foreseeable future."
- The reform agenda and improved investment climate are presented as making Greece "an increasingly attractive option for investment" that will benefit living standards and welfare.

*konstantinos hatzidakis is vice president of the government of Greece and a former minister of economy and finance.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2025/06/hatzidakis.pdf_