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.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2020||59 of 180||https://www.transparency.org/country/GRC
|World Bank’s Doing Business Report||2020||79 of 190||https://www.doingbusiness.org/en/data/exploreeconomies/greece|
|Global Innovation Index||2020||43 of 131||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2019||$938 million||https://apps.bea.gov/international/factsheet/factsheet.cfm?Area=310|
|World Bank GNI per capita||2019||$19,750||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Toward Foreign Direct Investment
The Greek government continues to take steps to increase foreign investment, implementing economic reforms and taking steps to mitigate the impact of the pandemic. Greece completed its EU bailout program in 2018, allowing it to borrow once again at market rates, reflected in a rising economic sentiment since 2017. Heavy bureaucracy and a slow judicial system continue to create challenges for both foreign and domestic investors.
There are no laws or practices known to Post that discriminate against foreign investors. The country has investment promotion agencies to facilitate foreign investments, with “Enterprise Greece” as the official agency of the Greek state. Under the supervision of the Ministry of Foreign Affairs, Enterprise Greece is responsible for promoting investment in Greece and exports from Greece, and with making Greece more attractive as an international business partner. Enterprise Greece provides the full spectrum of services related to international business relationships and domestic business development for the international market, including an Investor Ombudsman program for investment projects exceeding EUR 2 million. The Ombudsman is available to assist with specific bureaucratic obstacles, delays, disputes, or other difficulties that impede an investment project.
The General Secretariat for Strategic and Private Investments streamlines the licensing procedure for strategic investments, aiming to make the process easier and more attractive to investors.
Greece has adopted the following EU definitions regarding micro, small, and medium size enterprises:
- Micro Enterprises: Fewer than 10 employees and an annual turnover or balance sheet below EUR 2 million.
- Small Enterprises: Fewer than 50 employees and an annual turnover or balance sheet below EUR 10 million.
- Medium-Sized Enterprises: Fewer than 250 employees and annual turnover below EUR 50 million or balance sheet below EUR 43 million.
Numerous structural reforms, undertaken as part of the country’s 2015-2018 international bailout program as well as a part of the current New Democracy administration’s efforts to lower taxes and reduce bureaucracy, aim to welcome and facilitate foreign investment, and the government has publicly messaged its dedication to attracting foreign investment. The 2019 investment law simplified licensing procedures in order to facilitate investment. In December 2020, parliament passed a new law allowing non-residents who relocate their jobs to Greece to benefit from half their salary being free of income tax for up to seven years. The scheme is open to any type of job, any income level and complements other tax incentive schemes put in place, including a non-dom program for wealthy investors and a low flat tax rate for pensioners. The Trans Adriatic Pipeline (TAP) is another example of the government’s commitment in this area. In November 2015, the Greek government and TAP investors agreed on measures and began construction on the largest investment project since the start of the financial crisis. The pipeline began operations in December 2020 and in March 2021, TAP announced that a total of 1 billion cubic meters (bcm) of natural gas from Azerbaijan entered Europe via the Greek interconnection point of Kipoi. Law 4710/2020 gave a strong push for electro-mobility, with several incentives and subsidies to those interested in acquiring an electric vehicle. The law has paved the way for greater U.S. investment. For example, Tesla has installed the first pop-up stand along with three electric vehicle (EV) charges at a major Greek shopping mall, while Blink expanded its EV network in Greece. Additionally, there are directives that have eased the bureaucracy regarding renewable energy source (RES) projects, including establishing a deadline for the issuance of Environmental Terms Approvals (ETAs) of 120 days and limiting the environmental licensing stages to three stages instead of the previous six or seven stages required for companies to abide by.
In the past decade, the country underwent one of the most significant fiscal consolidations in modern history, with broad and deep cuts to public expenditures and significant increases in labor and social security tax rates, which have offset improved labor market competitiveness achieved through significant wage devaluation. While there has been notable progress, corruption and burdensome bureaucracy continue to create barriers to market entry for new firms, permitting incumbents to maintain oligopolies in different sectors, and creating scope for arbitrary decisions and rent seeking by public servants.
Limits on Foreign Control and Right to Private Ownership and Establishment
As a member of the EU and the European Monetary Union (the “Eurozone”), Greece is required to meet EU and eurozone investment regulations. Foreign and domestic private entities have the legal right to establish and own businesses in Greece; however, the country places restrictions on foreign equity ownership higher than those imposed on average in the other 17 high-income OECD economies, such as equity restrictions on airport operations and limits on foreign ownership in electricity and media. The government has undertaken EU-mandated reforms in its energy sector, opening much of it to foreign equity ownership. Restrictions exist on land purchases in border regions and on certain islands because of national security considerations. Foreign investors can buy or sell shares on the Athens Stock Exchange on the same basis as local investors. Greece does not maintain an investment screening mechanism.
Other Investment Policy Reviews
The government has not undergone an investment policy review by the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), or United Nations Committee on Trade and Development (UNCTAD) or worked with any other international institution to produce a public report on the general investment climate in the past three years. However, in July 2020, the OECD published a periodic economic survey describing the state of the economy and addressing foreign direct investment concerns, especially regarding needed reforms in the public sector and judicial system. In particular, the OECD report lauds the Ministry of Digital Governance’s progress in instituting digital and public administration reforms, and recommends continued effort in this area.
In 2020, Greece eased processes for starting a business by reducing the time to register a company and removing the requirement to obtain a tax clearance. Accessing industrial land in Greece is relatively quick, with only three weeks required to lease land from the government. Private land can be leased in 15 days. Arbitrating commercial disputes, however, can take almost a year. Establishing a limited liability company takes approximately four days with three procedures involved, including registering the business, making a company seal, and registering with the Unified Social Security Institution. Greece’s Ease of Doing Business score in 2020 is 96, for a rank of 11 for starting a business and rank of 79 overall. Greece is not one of the 37 countries listed on www.businessfacilitation.org.
Greece’s business registration entity GEMI (General Commercial Register) has the basic responsibility for digitizing and automating the registration and monitoring procedures of commercial enterprises. More information about GEMI can be found at http://www.businessportal.gr/home/index_en. The online business registration process is relatively clear, and although foreign companies can use it, the registration steps are currently available only in Greek. In general, a company must register with the business chamber, tax registry, social security, and local municipality. Business creation without a notary can be done for specific cases (small/personal businesses, etc.). For the establishment of larger companies, a notary is mandatory.
The Greek government does not have any known outward investment incentive programs. Capital controls were eliminated in September 2019.
Enterprise Greece supports the international expansion of Greek companies. While no incentives are offered, Enterprise Greece has been supportive of Greek companies attending the U.S. Government’s Annual SelectUSA Investment Summit, which promotes inbound investment to the United States, and similar industry trade events internationally.
5. Protection of Property Rights
Greek laws extend the protection of property rights to both foreign and Greek nationals, and the legal system protects and facilitates acquisition and disposition of all property rights.
Multiple layers of authority in Greece are involved in the issuance or approval of land use and zoning permits, creating disincentives to real property investment. Secured interests in property are movable and real, recognized and enforced. The concept of mortgage does exist in the market and can be recorded through the banks. The government is working to create a comprehensive electronic land registry which is expected to increase the transparency of real estate management. However, the land registry is behind schedule and is not expected to be completed until 2022, two years after its initial estimate of completion. Greece ranks 156 out of 190 countries for Ease of Registering Property in the World Bank’s Doing Business 2020 Report, down from 153 last year.
Foreign nationals can acquire real estate property in Greece, though they first need to be issued a tax authentication number. However, for the border areas, foreign nationals first require a license from the Greek state (Law 3978/2011). In another effort to boost investment, the government passed Law 4146/2013, which allows foreign nationals who buy property in Greece worth over EUR 250,000 ( USD 285,000) to obtain a five-year residence permit for themselves and their families. The “Golden Visa” program has been extended to buyers of various types of Greek securities, including stocks, bonds, and bank accounts, with a value of at least EUR 400,000. The permit can be extended for an additional five years and allows travel to other EU and Schengen countries without a visa.
Intellectual Property Rights
In April 2020, the U.S. Trade Representative (USTR) removed Greece from its Special 301 Watch List due to progress in addressing concerns regarding intellectual property rights (IPR) protection and enforcement. The widespread use of unlicensed software in the public sector in Greece had been of long-standing concern to rights holders. In December 2019, Greece took clear steps to address this matter by allocating over EUR 39 million for the purchase of software licenses. In December 2020, the agreement to purchase software licenses for government workers was finalized, and the rollout is proceeding well according to government and private sector contacts. In addition, the Committee for Notification of Copyright and Related Rights Infringement on the Internet has been taking steps to address enforcement in the online environment, and Greece introduced a new law imposing fines for possessing counterfeit products. In 2019, the Ministry of Culture developed legislation which would allow for dynamic blocking of domains, in order to improve even further the enforcement of IPR. Parliament passed the bill in 2020.
Greece tracks seizures of counterfeit goods; however, the Ministry of Finance, Coast Guard, and Customs Service all track their data separately. In 2019, the Hellenic Coast Guard arrested 143 people during 110 cases, seizing over 9 million counterfeit cigarettes, 10 vehicles, and over 1,300 pounds of tobacco, all representing EUR1.8 million in attempted tax evasion. The Ministry of Finance’s Economic and Financial Crimes Unit (SDOE) conducts investigations and seizures of counterfeit goods and products. In 2019, the SDOE seized almost 600,000 counterfeit and pirated products, down from 1.1 million in 2018. The Hellenic Customs Service also conducts inspections at exit and entry points into the EU, with over 20 million counterfeit products seized in 2019, the majority of which were cigarettes. Violators can be fined for their actions, and Law 3982/2022 provides police ex officio authority to confiscate and destroy counterfeit goods.
Greece is not currently included in USTR’s Notorious Markets List
Greece is a member of the World Intellectual Property Organization (WIPO) and party to the Paris Convention for the Protection of Industrial Property, the European Patent Convention, the Washington Patent Cooperation Treaty, and the Berne Copyright Convention. As a member of the EU, Greece has harmonized its IPR legislation with EU rules and regulations. The WTO-TRIPS Agreement was incorporated into Greek legislation in February 1995 (Law 2290/1995). The Greek government also signed and ratified the WIPO internet treaties and incorporated them into Greek legislation (Laws 3183 and 3184/2003) in 2003. Greece’s legal framework for copyright protection is found in Law 2121 of 1993 on copyrights and Law 2328 of 1995 on the media.
For additional information about treaty obligations and points of contact at local IPR offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.
Resources for Rights Holders
Embassy Point of Contact:
U.S. Embassy Athens
91 Vas. Sofias Avenue, Athens, Greece 10160
A list of local attorneys is available at gr.usembassy.gov/u-s-citizen-services/attorneys/
American-Hellenic Chamber of Commerce
109-111 Messoghion Avenue, Politia Business Center
Athens, Greece 11526
Phone: +30-210-699-3559, Fax: +30-210-698-5686
6. Financial Sector
Capital Markets and Portfolio Investment
Following EU regulations, Greece is open to foreign portfolio investment. Law 3371/2005 sets an effective legal framework to encourage and facilitate portfolio investment. Law 3283/2004 incorporates the European Council’s Directive 2001/107, setting the legal framework for the operation of mutual funds. The Bank of Greece complies with its IMF Article VIII obligations and does not generally impose restrictions on payments. Transfers for current international transactions are allowed but are subject to specific conditions for approval. The lack of liquidity in the Athens Stock Exchange along with the challenging economic environment have hindered the allocation of credit but is accessible to foreign investors on the local market, who also have access to a variety of credit instruments.
Money and Banking System
Greece’s banking system will not be generally considered “healthy” and able to allocate funding to domestic firms that need it the most until its major banks adequately deal with the large amounts of non-performing loans (NPLs) on their balance sheets.
In November 2015, following an Asset Quality Review and Stress Test conducted by the ECB as a requirement of the 2015 ESM agreement, a third recapitalization of Greece’s four systemic banks (National Bank of Greece, Piraeus Bank, Alpha Bank, and Eurobank) took place. The recapitalization concluded with the banks remaining in private hands, after raising EUR6.5 billion from foreign investors, mostly hedge funds. In September 2020, the ratio of NPLs decreased to 35.8%, down from 40.6% in December 2019. Banks estimate that about 20% of non-performing exposures (NPEs) are owned by so-called “strategic defaulters” – borrowers who refrain from paying their debts to lenders to take advantage of the laws enacted during the financial crisis to protect borrowers from foreclosure or creditors’ collection even though they are able to pay their obligations.
Developing an effective NPL reduction strategy has been among the most difficult challenges for the Greek economy. Greek banks’ NPL ratio, at 35.8%, remains the highest in the eurozone, well over the European average of around 3%. Under the terms of the ESM agreement, Greece remains obliged to create an NPL market through which the loans could, over time, be sold or transferred for servicing purposes to foreign investors. The Bank of Greece has licensed more than ten servicers, and the sale and securitization environment for non-performing loans continues to mature, with all of Greece’s systemic banks having conducted portfolio sales of secured and unsecured loan tranches since mid-2017. The potential sale and/or transfer of Greek NPLs continues to receive interest by many Greek and foreign companies and funds, signaling a viable market. The Greek state operates an auction platform for collateral and foreclosed assets, although the bulk of auctions still conclude with the selling bank as the purchaser of the assets. The government introduced its “Hercules” asset protection scheme in late 2019, providing guarantees to banks as an incentive to securitize EUR 30 billion more in NPLs. The plan offloads bad debt by wrapping it into asset backed securities via special purpose vehicles that will purchase the NPLs. The sales are financed by notes issued by the special purpose vehicles with a government guarantee for senior tranches, thereby limiting the risk to the Greek state. Since all four systemic banks have availed themselves of the plan, the Greek government submitted an official request for an extension of the Hercules scheme on March 16, 2021 that will permit banks to further reduce non-performing loans (NPLs) in 2021 and 2022.
Poor asset quality inhibits banks’ ability to provide systemic financing, although the situation is slowly improving. The annual growth rate of total deposits increased to 8.5% in 2020. Deposits increased by roughly EUR 9 billion over 2019, up from around EUR 200 billion in early 2019, a significant improvement from the crisis years, when deposits shrunk from their highest level of EUR237 billion in September 2009 to around EUR123 billion in September 2017. Greece’s systemic banks held the following assets at the end of 2020: Piraeus Bank, EUR71.6 billion; National Bank of Greece, EUR64.3 billion; Alpha Bank, EUR70 billion; and Eurobank, EUR67.7 billion.
Few U.S. financial institutions have a retail presence in Greece. In September 2014, Alpha Bank acquired the retail operations of Citibank, including Diners Club. Bank of America serves only companies and some special classes of pensioners.
There are a limited number of cross-shareholding arrangements among Greek businesses. To date, the objective of such arrangements has not been to restrict foreign investment. The same applies to hostile takeovers, a practice which has been recently introduced in the Greek market. The government actively encourages foreign portfolio investment.
Greece has a reasonably efficient capital market that offers the private sector a wide variety of credit instruments. Credit is allocated on market terms prevailing in the eurozone and credit is equally accessible by Greek and foreign investors. An independent regulatory body, the Hellenic Capital Market Commission, supervises brokerage firms, investment firms, mutual fund management companies, portfolio investment companies, real estate investment trusts, financial intermediation firms, clearing houses and their administrators (e.g. the Athens Stock Exchange), and investor indemnity and transaction security schemes (e.g. the Common Guarantee Fund and the Supplementary Fund), and also encourages and facilitates portfolio investments.
Owner-registered bonds and shares are traded on the Athens Stock Exchange (ASE). It is mandatory in Greece for the shares of banking, insurance, and public utility companies to be registered. Greek corporations listed on the ASE that are also state contractors are required to have all their shares registered.
Greece has not announced that it intends to implement or allow the implementation of blockchain technologies in its banking transactions.
Foreign Exchange and Remittances
Greece’s foreign exchange market adheres to EU rules on the free movement of capital. Although the government imposed capital controls in 2015, at the height of the crisis, on September 1, 2019, all capital controls were removed. Greece is a member of the eurozone, which employs a freely floating exchange rate. Greece is not engaged in currency manipulation for the purpose of gaining a competitive advantage.
On September 1, 2019, all capital controls were removed.
Sovereign Wealth Funds
There are no sovereign wealth funds in Greece. Public pension funds may invest up to 20% of their reserves in state or corporate bonds.