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Greece Economic Outlook

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  • Greece Economic Outlook

    Now that Greece’s bailout program has ended, what are the prospects for economic growth and development in Greece?
    Over the last two years, the [Foreign Direct Investment has] not exceed 2% of GDP.
    There may be three reasons for the low foreign investment:

    Greece has the fifth-highest corporate tax rate in Europe (29%). This reduces the profit margin of a potential investor.
    Another drawback is the public bureaucracy. It is a problem that governments have tried to solve in recent decades, but little has been done.
    And a lack of political stability (the author pointed to a graph using data based on criteria set by The World Bank).

    In addition to a lack of foreign investment, Greeks are saving less than they did before. Theoretically, increased savings would encourage banks to offer more money and better terms for loans and thus in turn help people develop more wealth. According to the author, consumption needs have strained the savings of the average Greek now living with a decreased income.

    Beyond capital constraints, the other problem is a lack of labor participation in the market. Fewer Greeks are seeking work. The unemployment rate hovers at about 20% (since the crisis began in 2008, there was a 12% increase). To make matters worse, a brain drain has seen nearly half a million Greeks (1/20th of the population) leave for better economic opportunities abroad. The majority of these people are university graduates. So the quantity and quality of labor is depressed.

    It seems the future course for Greece would be to set a more competitive tax rate, encourage further foreign investment in business development (something that may encourage Greeks to learn better practices from abroad and then adopt into their own ventures), establish better law and order, and continue the slow process of reducing bureaucracy (mainly as more and more retire with fewer replacements) while simultaneously reestablish confidence in the Greek labor market. Obviously there are further problems as they relate to funding social safety nets and not to mention security issues relating to illegal immigration and Turkey's emboldened foreign policy, but finding the right balance to address those issues will see steady improvements in Greek living standards and quality of life.

    Most of these measures need time to bear fruit, but at least we are now able to act with better independence than we could under the bailout program.

  • #2

    Foreign investors have shown a very keen interest in receiving their five-year residence rights with the purchase of property in Greece through the golden visa program, with the Chinese and Turks leading the way.

    Mostly benefiting from the golden visa scheme, which grants five-year residence rights renewable for third country nationals who purchase – individually or through a legal entity – property in Greece valued at a minimum of 250,000 euros, or who have taken out a minimum 10-year lease in hotel accommodation or tourism facilities, are the Chinese and the Turks.

    Indicatively, 3,464 investor visas out of the total 5,302 have been granted to Chinese buyers.

    According to Bank of Greece data, the golden visa program appears to be stimulating Greece’s previously slow housing market attracting foreign capital to the tune of 736 million euros in the first half of 2019, up by 94 percent compared to the corresponding period in 2018.

    Not what I was hoping to read.


    • #3
      yep - Im curious if we apply the same restrictions to Turks as they do us - Greeks are not allowed to purchase coastal or border properties in Turkey . Do these foreign investors pay a higher price for these properties or are locals competing with cashed up foreigners . here in Australia its a pretty big problem especially for locals who try to buy a house at Auction - but cashed up Chinese will happily pay 30 , 40 or 50 % more than what the property is worth to secure it , other people in the street see how much it sold for and put their house up for sale - s over 4 or 5 years the same investor will purchase a whole bunch of houses in a street then try develop them - it artificially inflates house prices and rents - its becoming a massive problem here. The govt allows it though because they pay massive tax as well on top - however the Chinese have started to circumvent that by financing citizens to purchase the houses for them , they are also purchasing a lot of agricultural land . Its a dangerous game opening up your real estate to foreigners like this - because in 20 years time youll find that they own far more than you bargained for .


      • #4
        I'm not sure if they enter the market offering higher prices, but I imagine they are outbidding other would-be investors. Their ownership of property is contingent on renewable residence rights and/or leases, which seems to offer some protection against the threat of foreign influence.

        Here's a good read from eKatherimini about the new pro-business agenda:

        The feeling among foreign and Greek businesspeople can be summed up as follows: You are on the right path; you need to take specific steps so that key investments move forward (such as the Elliniko project); we are already looking out for opportunity. After emerging from the crisis, Greece stands at a turning point. During his visit to New York, Prime Minister Kyriakos Mitsotakis sent out the right message. Its appeal will depend on the degree to which his words translate into actions. In the coming months, Greece will appear on the radars of many large and medium-sized investors at home and abroad. The follow-up will be the next key challenge. Greece has always had a problem here, even when the ruling officials had the best of intentions.
        The article goes on to mention that Greece can be Turkey's most important partner vis-a-vis the EU if the Turks quit their tough guy antics on migrations, the Aegean, and Cyprus. I think it's all a big show, it's very clear the Turks are committed to the path they are on and see themselves a world power, like Iran does.