Germany is the “Honored Country” at this year’s Thessaloniki International Fair, which opens this Saturday in Greece’s second city. Not so long ago, this would have been unimaginable.
At the height of Greece’s sovereign rule in 2014 and 2015, the eurozone teetered on the brink of leaving the currency union.
It was a time when “Grexit” — the term used to describe the hypothetical withdrawal of Greece — was widely discussed across the continent.
Banks were nationalized, companies folded and . Many Greeks blamed the move, which they felt was dictated by Berlin.
Economic relations will improve
A decade later and much has changed in economic relations between these two EU members.
In 2024, Greece has the strongest outlook in Europe. Once seen as the “problem child” of the Eurozone, real gross domestic product (GDP) is now expected to grow by 2% this year.
Thanks to that, Greece has also posted high primary budget surpluses in recent years. Simply put, this means that it earns more than it costs. What’s more, it has been able to refinance its debt at historically low interest rates.
However, this is no reason for complacency, as the debt-to-GDP ratio for the country is forecast to be just under 159% in 2024.
This is higher than before the sovereign debt crisis began, as economic activity fell by a quarter as a result of the crisis.
Maintaining a primary budget surplus is key
But nominal debt is not the main issue here, said Panagiotis Petrakis, professor of economics at the University of Athens. “It is more important that the Greeks continue to post primary budget surpluses and meet the EU’s requirements,” he told DW.
If that happens, Petrakis said, the country will also be in a position to reduce its debt ratio in the coming years.
According to a report on business website Capital.gr, Finance Minister Kostis Hatzidakis also wants to “positively surprise” the markets and has set a target of bringing the debt-to-GDP ratio below 120% by 2027.
German investments help drive renewal
At least in response to pressure from its creditors, Greece has implemented important reforms and privatized state-owned enterprises.
In February 2024, Deutsche Bank reported that Greece had made a “surprising economic comeback” and had an “intact macroeconomic environment”.
The modernization of 14 regional airports by Freport Greece, a subsidiary of German airport operator Freport AG, is seen as one of the country’s model investment projects.
In 2017, the government of Athens granted concessions for these airports, whose potential had been largely underestimated until then.
Fraport paid €1.24 billion in concessions and invested more than €400 million ($444 million) in modernizing run-down airports, including airports in Thessaloniki and the popular holiday islands of Mykonos and Rhodes.
Government accused of ‘selling public property’
Although the resulting economic success exceeded expectations, not everyone was happy.
The alleged “sale of public property” to foreign investors was met with opposition, criticism and accusations, particularly from left-wing circles.
Economist Petrakis does not understand this trend. “The accusation of selling out when it comes to investment in the EU is silly,” he said.
Petrakis pointed to the fact that the Freport investment was successful, especially because the Germans invested in smaller airports, which attracted more visitors to Greece.
He emphasized that the project has not only benefited German investors, but also local economies in all regions where Freport is active.
Despite all the tensions between the two countries during the Greek sovereign debt crisis, Germany is now Greece’s most important economic partner and a major market for Greek exports.
And it works both ways: “Made in Germany” products are in high demand in Greece. Indeed, when it comes to imports, Germany still tops Greece’s list.
Focus on sustainable growth
What Greece needs now to return to a path of sustainable growth and new prosperity, experts say, is more investment, including from Germany.
Such investments are becoming more urgent due to the need for cushioning and cuts.
According to Petrakis, Greece has already received about 40% of the money allocated to the country from the EU’s COVID-19 recovery fund. But, he said, that’s not enough.
“It is important that German investors and other foreign investors get more involved, for example in the energy or transport sector,” he said.
He gave the example of the little-known port of Alexandroupoli in northeastern Greece. Strategically located at the junction of several energy pipelines and set to become more important in terms of geopolitical tensions in Eastern Europe, Petrakis said it will be very attractive to foreign investors.
The article was originally written in German and adapted by Angel Flanagan.
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