Let’s Tune In To The EU’s Periphery: Greece’s Second Economic Miracle

Nicholas Zalewski

Two people pose in Santa outfits in front of the Hellenic Parliament. Source: REUTERS/Alkis Konstantinidis

Apart from Celebrating Christmas this past Monday, Greece has further reason to celebrate. While it was considered to be the sick man of Europe for the longest time, things are changing for the nation. For the second year in a row, Greece tops the ranking by the Economist which ranks 35 OECD members on economic performance. While unemployment remains higher than all other EU member states besides Spain, unemployment continues to fall. The European Commission expects that Greece’s unemployment rate will finally fall below 10 percent in 2025. In October of this year, Greece finally regained an investment grade ranking from Stand and Poor’s. This is a very important development. Having an investment grade credit ranking makes it cheaper and easier for national governments to borrow money and continue to help the national economy develop. This makes it difficult for nations with weaker economies that typically have a stronger need to borrow money in order to help their economies to develop, yet have less access to funds. This however is no longer the case for Greece. 

Similar to other European nations, Greece had a period of economic growth after World War II referred to as its economic miracle. For Greece however, this economic miracle ended with a sharp increase in oil prices. The newly elected democratic government after the Greek dictatorship ended in 1974 caused the national debt to rapidly increase, setting it up for disaster when the value of the economy fell significantly below the value of its debt. The Greek government also lied in order to join the Eurozone before it was economically ready which hurt the economy even further. Despite its troubled economic history, Greece’s economy is clearly entering a second period of strong economic growth which can rightly so be referred to as its second economic miracle. Gone are the days were Greek citizens could only take out 600 euros in cash from ATMs.

Political cartoon criticizing how loans added to the Greek. debt crisis
Source: Chappatte

Greece’s National Debt

Fortunately for Greece, things should get easier due to its new credit rating and as it tackles its national debt. Between 203 and 2020, Greece’s national debt stagnated around 180 percent of its GDP per capita and shot up to 203 percent during the Covid-19 pandemic. This debt to GDP ratio however has come down to 160.9 percent in 2023 and is expected by the European Commission to further decline to 147.9 percent in 2025. Part of its debt that it has had to focus on repaying is loans which helped the nation to function at the height of the economic crisis. 

Greece has been tackling its debt very well and has even paid back loans quicker than expected. Last year, Greece paid back the IMF in full two years before expected. Greece has also sent a 5.3 billion euro payment to Eurozone nations which lent Greece 260 billion euros. This payment is for bonds maturing in 2024 and 2025. Greece is optimistic that in 2024 it will be able to send another payment ahead of schedule. This is important for Greece as it helps the nation save interest on these loans. By paying the IMF back two years early, Greece saved 50 million years in interest. This will help Greece be able to focus more on reinvesting in its economy and citizens quicker than expected and help the economy continue to outperform what people thought was possible. 

Strong Economic Growth

While Greece’s GDP per capita is still significantly lower than other EU member states, strong economic growth is helping close the gap. Currently Greece’s GDP is growing twice as fast as the EU average. The Greek economy is still smaller than it was in 2008, yet it is still attractive to investment as the nation has proved that it is committed to smart policy decisions that are helping Greece reach its full potential in the long run. While foreign investors were previously scared off from Greece, Greece accomplishing the near impossible is attracting them back. This is important not only for Greece’s international reputation, but its citizens. 

Spread between Italian and Greek 10-year bonds. Source: Bloomberg

Strong economic growth is important in order for Greeks to continue to find jobs and help lower the unemployment Greece. While Greece’s unemployment rate of 9.6 percent in October 2023 is the second highest still in the European Union, it is important to look at how far Greece has come. In 2012, Greece had an unemployment rate of 27.5 percent. A 65 percent decrease in unemployment is a significant achievement that should be celebrated. It is also important to acknowledge that the unemployment in the Eurozone is currently 6.5 percent, showing Greece is not far off from the typical EU member state that has adopted the euro currency. Sweden which is considered to have a highly developed economy had an unemployment rate of 8 percent in October of this year.

Conclusion

While Greece has had a very difficult economic period since 2008, the nation has proven itself up for the challenges it has had to overcome. While it is easy to glance at economic indicators and see Greece is still performing worse than other EU member states, it is important to remember that Greece’s economy is indeed improving. Despite having an unemployment rate still higher than most EU member states, one in four Greeks were unemployed just eleven years ago. It is important to analyze a member state’s economy based on historical data besides simply comparing them to other EU member states. 

Please Read The Following For More Information: 

Papadimas, Lefteris. “Greek economy seen growing by 2.9% next year on strong investment”. Reuters. 2023.

Which economy did best in 2023?”. The Economist. 17 December 2023.

Hirst, Thomas. All of Greece’s problems can be traced back to … oil. Business Insider. 9 March 2015. 

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Let’s Tune In To The EU…

by Nicholas Zalewski time to read: 4 min
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