Greece - Market OverviewGreece - Market Overview
Greece continues to present a challenging economic climate as it seeks to emerge from the deepest recession in post-World War II history. Previous governments have made progress in carrying out widespread economic reforms in exchange for the disbursement of financing assistance to enable meeting their obligations. Many of these reforms aim to simplify the investment framework and attract foreign investment to drive the country’s long-term economic recovery. A leftist government took office in January 2015 parliamentary elections and won a renewed mandate in September 2015 elections for a four-year term. The SYRIZA-ANEL government, although highly critical of the existing reform plans, signed a new memorandum in August 2015 and agreed on a new reform program, the third since the start of the crisis. In May and June 2017, the government agreed with its creditors to implement pending and additional reforms in exchange for an additional tranche of bailout funds that will help it meet its fiscal obligations through 2019.
After six years of recession, Greece returned to positive growth rates (+0.4%) in 2014. However, this trend was interrupted in 2015 and the economy ended the year with a recession of -0.2% following Greece’s near default in summer 2015. The protracted economic crisis led to a contraction in bank lending, project development, and investment. Business confidence dropped sharply during the crisis. In 2016 the economy contracted the first two quarters, but ended flat (0% growth). Although, the economic sentiment improved slightly in May 2017 as a result of the preliminary agreement between the government and its creditors, economic activity remains low, as well as the investor and consumer confidence. Capital controls – though eased since June 2015 (when originally imposed) - are still in place and remain one of the main barriers to investment. If the new program is implemented in full, growth is expected to return in 2017.
Greece scores poorly on a number of widely used business and investment climate scorecards, reflecting a commercial environment that is burdensome for business, creates barriers to entry for new firms, permits oligopolistic incumbents to earn high profits, and allows for arbitrary decisions and corruption on the part of some public servants. For 2017, Greece was listed at the 61th position (out of 190 countries surveyed) in the World Bank’s “Doing Business” report, from the 60st place in 2016 (the big jump was recorded in 2014, when the country was placed in the 65th position from the 100th position in 2014, as a result of the implementation of reforms between 2012 and 2014).
In May 2010, due to its exclusion from international capital markets and facing an enormous deficit and public debt load, Greece requested financial assistance from the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) - the so-called “Institutions” (formerly known as the “Troika”). An initial multi-annual financing package for Greece of €110 billion was announced, payable in installments through 2012. In exchange, Greece agreed to implement tough fiscal austerity measures and structural reforms. In October 2011, the EU agreed to a second multi-annual financing package for Greece that was approved on February 21, 2012. The second package included €130 billion in official loans, and incorporated a voluntary write-down of over 50% of the nominal value of privately-held Greek government debt (€103 billion in absolute terms), which occurred in March 2012. This debt restructuring was followed by a buyback program in December 2012 that erased a further €20 billion from Greece’s debt stock.
After it took office in July 2012, the country’s prior coalition government made rapid progress in reducing Greece’s enormous national fiscal imbalances. The fiscal deficit rapidly declined from 10.3% of GDP in 2011 to 3.7% of GDP in 2014. However, public debt as a percentage of GDP increased to 179.7 % in 2014, largely the result of the addition to the debt of Greece’s bailout loans and the country’s sharply contracted GDP. At the end of 2014, the general government deficit was 3.7 % of GDP. When the cost of debt servicing is excluded from this figure, Greece generated a primary budget surplus of 0.3 % of GDP. Consistent with the requirements of Greece’s EU/IMF bailout program, the government had sought to liberalize the labor market, open closed product markets, sell state-owned assets and enterprises to generate revenue and enhance competitiveness, cut public payrolls, reform the tax code, strengthen tax enforcement, and streamline investment procedures. The government restructured its one-stop-shop investment promotion agency, Enterprise Greece, to assist interested foreign investors. The then government agreed with the EU/IMF to adopt and implement the majority of 329 recommendations the OECD made in November 2013 on improving economic competitiveness.
Shortly after its January 2015 election, the newly elected Greek government agreed in February 2015 to a four-month extension of the second bailout program, through June 2015, as it sought to negotiate new, more favorable terms with the country’s EU and IMF lenders. However, the SYRIZA-ANEL government’s stated positions on labor market liberalization, pension reform, enhancing competition, and privatization differed from the measures traditionally considered by these institutions as best practices. The negotiations collapsed in summer 2015 and Greece appeared likely to default on its sovereign obligations. On June 29, 2015, the government and Bank of Greece instituted a two-week bank holiday, shuttering local financial institutions temporarily, and imposed capital controls to restrict capital flight. The economic uncertainty of the summer 2015 negotiations and the imposition of capital controls to prevent economic collapse drove the economy back into a recession. In August 2015, the government and its Eurozone lenders – acting through the European Stability Mechanism (ESM) – reached agreement on a third €86 billion bailout program set to run through 2018. The IMF chose not to participate in the initial August 2015 ESM agreement, as its own program remained in force through March 2016.
In the fall of 2015, following new elections, the Tsipras government returned to office with a mandate to implement the August agreement. In November, under the European Central Bank’s supervision, Greece’s major banks were successfully recapitalized, largely by foreign investors. The government passed several legislative packages to raise taxes and implement some of the August 2015 bailout agreement. In January 2016, the creditors, acting through the European Commission, European Central Bank, and the IMF, collectively known as the “Institutions,” launched the first of several periodic reviews of Greece’s compliance with the terms of the program in order to justify further disbursement of program funds to Athens. The talks proved difficult, but on May 2 Greece reached a preliminary deal with its creditors to conclude the second review of the current bailout program. The agreement includes pension cuts, a reduction in the tax-free threshold, and the elimination of myriad tax breaks. The government has subsequently engaged in the second review of the obligations under its current bailout agreement, which concluded in June 2017. Greece is expected to receive new funds from its European creditors prior to debt obligations in July 2017, which could remove some market instability through the remainder of 2017. However, Greece’s creditors remain at loggerheads over the question of whether and how much debt relief is needed to ensure that Greece’s debt obligations are sustainable over the long term.
In spite of the serious challenges in the Greek market, areas of opportunity remain for U.S. companies. The keys to doing business successfully in Greece include finding an effective local partner and sourcing financing for either commercial transactions or project implementation. As indicated above, the contraction in bank lending has drained capital from the domestic market. Otherwise, U.S. products are viewed favorably in Greece for their innovation and quality and are popular in this market despite stiff competition from EU and Asian suppliers.
• Population: 10,761,523 (July 2018 est.)
0-14 years – 13.72%
15-64 years – 65.14%
65 and over – 21.14%
• GDP: €219.8 (2017) €175.9 (2016), €175.7 billion (2015), €177.9 billion (2014)
Real Growth Rate: 1.4% (2017 est.)
Per Capita: $18,880 (2016)
• Unemployment Rate: 21.5% (2017 est.)
• Greece is an import-dependent economy
• No significant non-tariff barriers to U.S. exports
• Exports to the U.S.: $1,200 (2016)
• Exports from the U.S.: $636,0 (2016)
The United States and the European Union (EU) enjoy a mature economic relationship that is characterized by nearly $4 trillion in two-way investment as well as a massive merchandise trade of approximately $700 billion in 2014 – almost double the level from 2000. U.S. exports of goods and services to the EU-28 in 2015 reached approximately $272 billion and imports from the EU, $426 billion. It is estimated that transatlantic commerce generates more than 15 million jobs.
Recognizing that the U.S.-EU economic relationship is already the world’s largest, accounting for one-third of total trade in goods and services and nearly half of global economic output, President Obama, in his State of the Union address on February 12, 2013, announced the Administration’s plans to begin negotiations on a Transatlantic Trade and Investment Partnership (T-TIP) with the EU. The negotiations were officially launched at the G8 Summit on June 17, 2013. Since that time, fifteen negotiating rounds have taken place on both sides of the Atlantic.
T-TIP is an ambitious and comprehensive trade and investment agreement that will promote transatlantic international competitiveness, jobs and growth. T-TIP aims to address non-tariff barriers that impede trade in goods and services and seeks to promote greater compatibility, transparency and cooperation in the regulatory and standards arenas. According to non-U.S. government estimates, transatlantic zero-tariffs could boost U.S. and EU exports each by 17%. A 25% reduction in non-tariff barriers could increase the combined EU and U.S. GDP by $106 billion.  For up-to-date information on T-TIP, please visit the website of the USTR.