Five years after the end of the adventure of the memorandums and one year after the withdrawal from the special regime of enhanced supervision, the government that will withdraw from elections designed to respond to new challenges: eliminate the last signs of the financial crisis, restore the investment level for Greek bondsand to promote in the country a new production model that is more competitive and extroverted.

The agenda of the next government will be heavy. The pandemic and energy crisis that aggravated the previous 4 years did not help heal chronic wounds economy.On the contrary, they returned – albeit temporarily – the budget and balance of payments deficits. A culture of benefits was also cultivated, and a number of reforms, for example in the area of ​​justice, were not successful. On the other hand, the country has recovered satisfactorily after its “submergence”. GDP in the first year of the pandemic and achieved strong investment performance, with the help of Recovery Fundbut also foreign direct investment, although the high growth rate is largely due to non-productive investment such as construction. Exports have increased significantly, and tourism has exceeded pre-pandemic levels.

Reducing the current account deficit is also a key priority.

Taxes were reduced under the program of the ruling party, but inflation disposable income decreased. OUR tax avoidance seems to be limited by the VAT gap measurement, but in practice it is still very common. Public debt after the first pandemic jump “crashed”, but in absolute terms increased and in any case is the highest in the Eurozone. Financial analysts note a number of priorities for the next day in the financial sector:

1. Recovery of investment grade. This is a condition for attracting investments and reducing the cost of borrowing by the Greek state.

2. Return to primary surpluses of 2%-2.5% of GDP. Greece achieved zero primary deficit in 2022 but now needs to make another adjustment based on new Stability Pactwhich are expected to be agreed this year. 2-2.5% of GDP means a savings of 4-5 billion euros, and this in turn means the end of support measures as we knew them during the energy crisis, and economic benefits from now on. It also means a reduction in tax evasion, which, despite the limitation shown by the VAT loophole, is still widespread.

If it fails to sustainably return to primary surpluses of this amount, the country will pay dearly with even higher borrowing costs, as this will jeopardize the sustainability of its debt.

3. Reducing the external deficit, the current account balance, through the transition to an outward-oriented production model. Analysts note that the share of consumption in GDP should be reduced, while the share of investment, on the contrary, should be increased, which now stands at 14%, while in the EU it averages 22%. National saving should turn positive again. Greece cannot continue to grow with consumption and tourism as drivers that have proven vulnerable during the pandemic.

Tourism is, of course, valuable, but analysts emphasize that it is necessary to strengthen the industrial base, especially in external sectors. On the contrary, today, as the experience of previous years has shown, growth depends on consumption, which, in turn, depends on imports. This is an unsustainable long-term model.

4. Promotion of reforms. There have been delays in areas such as justice, land cadastre, education and modernization of public administration, which also affect economic life, mainly by preventing investment decisions.

5. Full disbursement of the funds of the Recovery Fund using them for production purposes. The deadline expires in August 2026, by which time the country is required to invest an additional approximately 20 billion euros (out of its corresponding 31 billion euros).

Target

The ultimate goal of any economic policy is, of course, to improve the well-being of citizens. Greece is still far from the average GDP per capita in the EU. and rapprochement will come no sooner than in 7-10 years, economists say. During them, it will have to have a growth rate of at least 3%.