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 peak of Greece’s sovereign rule in 2014/15, 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
Fast-forward a decade 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 is earning more than it is spending. What’s more, it has been able to refinance its debt at historically low interest rates.
Still, there is no cause for complacency, especially as the debt-to-GDP ratio for the country is forecast to be just below 159% in 2024.
This is higher than before the onset of the sovereign debt crisis 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, says 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 says, the country will be in a position to reduce its debt ratio in the coming years as well.
According to a report on business website Capital.gr, Finance Minister Kostis Hatzidakis also wants to “positively surprise” markets and has set a target of bringing the debt-to-GDP ratio below 120% by 2027. To see if this target can be achieved.
German model investment projects
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 a model investment project in the country.
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 in modernizing run-down airports, including airports in Thessaloniki and the popular holiday islands of Mykonos and Rhodes.
Allegations of ‘selling out’
Although the resulting economic success exceeded expectations, not everyone was happy.
There was opposition, criticism and accusations of alleged “selling of public assets” to foreign investors, particularly from left-wing circles.
Economic expert Panagiotis Petrakis does not understand this trend. “The charge of selling out when it comes to investment in the EU is silly,” he says.
Petrakis points to the fact that the Freport investment was successful, especially because the Germans invested in smaller airports, which attracted more visitors to Greece.
Petrakis emphasizes that the project not only benefited German investors, but also local economies in all regions where Fraport is active.
important economic partners
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 tops Greece’s list.
Focus on sustainable growth
What Greece needs now to return to a path of sustainable growth and new prosperity 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 earmarked for the country from the EU’s COVID-19 recovery fund. But, he says, that’s not enough.
“It is important that German investors and other foreign investors become even more involved, for example in the energy or transport sector,” he told DW.
He also gave the example of the little-known port of Alexandropolis in northeastern Greece. Strategically located at the junction of several energy pipelines, Petrakis says it will be very attractive to foreign investors and is set to become even more important in the context of geopolitical tensions in Eastern Europe.
Adapted from the German by Aingeal Flanagan
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