Throughout a distinguished career that spans over four decades, esteemed economist Dr. Yannis Stournaras has been instrumental in shaping Greece’s economic landscape, from guiding the country through turbulent waters as Minister of Finance, to introducing major reforms of the banking sector as Governor of the Bank of Greece, and influencing critical monetary policies as part of the European Central Bank’s Governing Council. He has also served as Director General of the Foundation for Economic and Industrial Research (IOBE) and taught at the University of Oxford and the University of Athens. Since 2014, has been Governor of the Bank of Greece.
In this interview to AmCham Greece VP John D. Saracakis, Dr. Stournaras talks about Greece’s economic outlook, the vital role of investments, and what Greece can do to build a strong and future-ready economy.
John D. Saracakis: Looking at the Greek economy, what can you tell us about its current state and its growth prospects over the coming years?
Yannis Stournaras: The Greek economy has continued growing throughout 2024 at a rate considerably higher than the eurozone average. The labor market has maintained its momentum, fiscal figures are improving, and inflation remains below 2023 levels. In terms of structural competitiveness, while Greece’s standing on composite indicators has improved in 2024, it remains low compared to other EU member states.
Over the coming years, the Greek economy is expected to grow at higher rates than the rest of the eurozone. This is a particularly significant development as it will reinforce the convergence of the country’s real per capita GDP with the EU average, a process that was interrupted during the sovereign debt crisis. The primary drivers of economic activity will continue to be investment spending, thanks in part to European funds and particularly the Recovery and Resilience Facility (RRF), and consumer spending, due to the increase in real disposable income resulting from increased employment and lower inflation.
How exactly are investments contributing to driving the country’s economy?
Investments play a decisive role in shaping the future course of the economy, as well as in transforming the growth model with an emphasis on boosting productivity, driving innovation, increasing production of internationally tradable goods and services, effectively dealing with climate change, and facilitating the green transition. Increased production of internationally tradable goods and services leads to increased exports and import substitution and thus to a reduction in the current account deficit.
Investment spending can underpin economic growth, whether through improvements in infrastructure, education, and health or investments in manufacturing equipment, machinery, or even intangible assets and cutting edge technologies, including those that promote the green transition of the energy sector. There are considerable synergies between investments in tangible and intangible capital, and these should be fully utilized. Simultaneously investing in new technologies and digitally skilled human capital results in the largest possible longterm increase in productivity. The government’s recent announcements regarding transforming the country’s production model constitute a move in the right direction.
Investments as a percentage of GDP have increased in recent years, owing to particularly strong investment activity in the three years 2021–2023. Business investments have fully recovered to pre-2010 levels. On the other hand, residential investment is low, but rapidly growing in response to strong demand from both domestic and foreign investors, including investors from EU countries as well as countries further afield in the context of the Golden Visa program. Nonetheless, total investments as a percentage of GDP remain below the EU average, at 15.2% compared to the EU’s 22% in 2023.
In your assessment, what are some of the key things that need to change to further boost investments in Greece?
For one, RRF funds must be absorbed and disbursed to the private sector promptly. To date, the absorption rate for RRF funds is satisfactory (51% of a total €36 billion) and Greece is fifth in the relevant country ranking. Satisfactory progress has also been made in terms of signing loan agreements. However, the disbursement of grants to businesses is moving at a slower rate, holding back investment spending.
It is also essential to implement a broad range of ambitious reforms, aiming at eliminating structural weaknesses such as delays in the administration of justice, bureaucratic public administration, and the lack of digital skills. At the same time, it is crucial to eliminate any remaining restrictive practices preventing markets from being competitive, by removing barriers to entry and opening up trades and services markets to competition. These reforms will help attract foreign direct investments as well as facilitate the participation of Greek companies in global value chains, in turn leading to the adoption of new technologies and innovative production methods that will allow Greek companies to offer high added value products and knowledge intensive services.
How do the banking sector and financing factor into this?
A healthy banking sector capable of financing businesses and households is essential. There has been significant progress in Greek banking over the past decade: Profitability, liquidity, capital adequacy, and loan portfolio quality have all improved, while the Financial Stability Fund has also moved forward with disinvesting from systemic banks’ equity capital. Still, the sector’s resilience must be further strengthened, including through quantitative and qualitative improvements of the capital base of Greek banks and by further reducing the non-performing loan (NPL) burden closer to the EU average, allowing the sector to contribute to financing the real economy. Bank financing of business investment needs can be further bolstered by utilizing the full range of national and European financing mechanisms, such as the RRF, the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD), and the Hellenic Development Bank (HDB).
Crucially, financing sources must be diversified. Beyond bank financing, it is important to explore possibilities for utilizing private financing, of all kinds, for investments, including access to capital markets. Venture capital, private equity crowdfunding, business angels, startup accelerators, and microfinancing can be used to cover the investment needs of small and medium enterprises that lack sufficient fixed assets to use as collateral for securing bank loans.
In summary, what do you think should be our priority, today, in order to enhance Greece’s economic outlook?
Implementing the reforms and changes outlined above can boost the economy’s growth rate and support the transition toward a sustainable and competitive production model focused on entrepreneurship, competitiveness, and extroversion. The priority must be the timely utilization of available EU funds, particularly RRF funds, to strengthen investments in human capital, green energy, and digital technologies, which will in turn facilitate the country’s green and digital transformation. At the same time, economic policy must continue on the same path of reforms and fiscal responsibility. It’s the only road to prosperity.
AmCham Greece recognizes that when it comes to charting the path toward a prosperous and sustainable future, we are only stronger together. What shape might a collaboration between the Chamber and the Bank of Greece take in this area?
The Bank of Greece recognizes the work of the American-Hellenic Chamber of Commerce in promoting robust business practices and fostering economic development across the country, building on its extensive network and strong ties with the business community to effectively communicate insights and recommendations and help businesses navigate challenges and capitalize on growth opportunities.
A collaboration between the two organizations could involve the Bank of Greece providing AmCham Greece with detailed analyses and findings related to Greece’s economic outlook, financial stability, and key challenges that lie ahead. The Chamber could tap into the Bank’s research and data insights to address emerging economic trends and sectoral opportunities, particularly in areas such as green energy and digital transformation.