Greek Miracle: How Athens recovered from the crisis and brought investors a return of 70%

10 years ago, Greece's economic problems were the trigger for the European debt crisis. Yields on 10-year government bonds exceeded 36%. Today, the country borrows at rates 0.50% lower than the US and even cheaper than the EU's second economy, France. How Greece has returned to global markets and which sectors are worth watching - Oninvest spoke to Yorgos Karageorgos, head of Freedom24's Greece office.

How would you describe the state of the Greek economy today and what is the outlook? What are the key indicators now - inflation, labor market and public debt?

- From a macroeconomic point of view, the Greek economy has gained impressive resilience. The government is building a surplus budget, GDP growth is above the EU average for the last 5 years. The outlook remains positive, this is evident from the latest reports of the leading rating agencies, GDP growth for 2025 is expected to be 2.2%. The key indicators to watch are the labor market and unemployment, which has been steadily declining for the last 6 years, the debt to GDP ratio, which is also rapidly declining mainly due to early debt repayments by the government. On the other hand, inflation is still high: it is expected to reach 3.1% compared to the EU average of 2.1%. This is primarily due to high energy and food prices. An obvious indicator of changes in the Greek economy is the cost of borrowing, which has approached pre-crisis levels and is comparable to bond yields in Italy and France.

- How did Greece manage to rein in public spending without causing the kind of political chaos we are now seeing in France?

- In 2015, Greece reached a point of no return. The country technically defaulted on its debt, and banks imposed a limit on cash withdrawals - no more than 60 euros a day. Those were days of immense stress and social unrest. The country was on the verge of leaving the eurozone. Greek society experienced firsthand what conflict with the EU and other institutions leads to and realized that reforms and sacrifices were necessary to rebuild the economy.

- Can we say that Greece has finally overcome the debt crisis?

- Yes. Debt is no longer a threat to Greece. The debt-to-GDP ratio has fallen from 209.4% in 2020 to 154% in 2024. Forecasts are also very optimistic. The terms of existing debt service are favorable, with annual payments of only 1.73% and a weighted average debt maturity of 18.8 years. The Greek government has committed to early repayment of €31.6 billion of debt by 2031, further reducing the burden on the economy.

- China participated in the privatization of Greece's largest ports. Who are the significant foreign investors today?

- Indeed, China has been actively investing in Greece: COSCO's acquisition of the port of Piraeus was a landmark project. Among recent investments, we can mention the investment made by State Grid, the largest energy company in the world, in the Independent Power Grid Operator (IPTO). At the moment we see an influx of foreign direct investment mainly from European countries such as Cyprus, Luxembourg and the Netherlands, followed by China and the USA. The lion's share of investments is concentrated in the services sector, especially in real estate management, financial and insurance activities, as well as in warehousing and transportation services. In the manufacturing sectors, food, beverages, tobacco, petroleum and petroleum products, and pharmaceuticals have shown the greatest interest in recent years.

- Which is the driver of the impressive rise in Greek equities - MSCI Greece has about 70% YTD, STOXX Europe 600 about 11%.

- As I mentioned earlier, the rise in Greek equities is fueled by strong macroeconomic fundamentals, attractive valuations, and add to that a high dividend yield. GDP growth is consistently ahead of the EU average, the government's budget is in surplus, debt to GDP is declining, all of which bolsters investor confidence. At the same time, the market is trading at a discount on both P/E multiples and market capitalization-to-GDP ratios compared to other European markets, suggesting further upside potential. Combined with sustained momentum and increased interest from foreign and domestic investors, these factors have led to MSCI Greece up 67% YTD and the Athens Stock Exchange up 44%.

- What should investors know about the peculiarities of the Greek market?

- The Greek stock market is relatively concentrated, with a small number of companies accounting for the bulk of transactions and liquidity. The market is bank-centric, with 4 bank stocks responsible for more than 50% of the average daily trading volume. Greek equities provide generous dividends to their shareholders, with dividend yields reaching an impressive 4.5% in 2024. The Athens General Composite has been a strong performer and is among the world's best performing indices. Over the past three years, its return has been approximately 118.3%, and over a five-year horizon, its cumulative gain is 172%.

- Which sectors of the Greek economy look the most attractive from an investor's point of view?

- Financial services, durable goods and industrials are among the hottest sectors at the moment. All of them are supported by limited competition and favorable economic conditions in Greece - they are now the main beneficiaries of the country's production model.

- Is Greece participating in the global AI race?

- Artificial intelligence is a priority for the Prime Minister, although progress has been somewhat slow, mainly due to bureaucratic obstacles. One of the main achievements of the current government has been the digitalization of the public sector and the shift to a supportive technology course. Major tech companies including Microsoft, Google and Digital Realty are choosing Greece to host their data centers - they are directly linked to AI projects. Recently, the Greek Prime Minister announced plans to create a Ministry of Research and Innovation, which will focus on advanced technologies such as AI and biotechnology, with the aim of strengthening the country's position in the global AI race by attracting talent and investment.

- Which Greek stocks would you highlight right now?

- Bank of Cyprus (BOCH.GR) recently completed the transfer of its listing from the London Stock Exchange to the Athens Stock Exchange. Now its shares are still trading at a reasonable price and at some discount to Greek peers. The banking index in Greece is up 71.3% YTD, mainly driven by the four systemic Greek banks. At this level, we could see a rotation towards Bank of Cyprus due to its solid fundamentals and reasonable price.

Greek Organization of Football Prognostics(OPAP.GR) is a public company that owns the national lottery, bookmakers and online gaming (Note: Oninvest) The largest gaming company in Greece with steady growth in recent years and generous dividend payments to its shareholders. OPAP has increased its market share and has successfully entered the online gaming industry through strategic acquisitions.

Metlen (MTLN.GR). METLEN is a global industrial and energy company with leading positions in the metals and energy sectors, focused on sustainable development and cyclical economy. Stable dynamics with a diversified portfolio and presence in the most strategic energy and industrial projects of the Greek and global economy. Recently completed a dual listing on the London Stock Exchange and entered the FTSE 100 index. International exposure is expected to attract more investors, leading to above average returns for the stock.

- Are there any Greece-focused ETFs that investors should look at?

- ALPHA ETF FTSE Athex Large Cap EQUITY UCITS (AETF.GR) is the most reliable and diversified instrument for investing in the Athens Stock Exchange and covers the vast majority of the Greek investment universe. The fund is listed on the ATHEX and fully follows the structure of the index. It includes the top 25 stocks of large-capitalization companies listed on the Athens Stock Exchange. The ETF is traded in euros and has ample liquidity with a Total Expense Ratio of 0.375% per annum.

An alternative instrument traded in U.S. dollars and listed on NYSE ARCA is the MSCI Greece ETF (GREK.US). The Global X MSCI Greece ETF seeks to provide investment results that broadly correspond to the price and yield (before fees and expenses) of the MSCI All Greece Select 25/50 Index. With a total expense ratio of 0.57%, it is a slightly more expensive solution.

- Does the Greek stock rally still have potential, or has the bulk of the upside already been realized?

- As mentioned, Greek equities have outperformed their peers over the past five years. Over the past three years, returns have reached approximately 118.31%, with a five-year cumulative gain of 172%. However, it is safe to say that this rally is far from over. Strong factors related to the Greek economy, as well as the entire eurozone, suggest even higher yields for the foreseeable future. And another argument in favor of a continued rally is that Greek stock market valuations are still lower than their European counterparts.

Warren Buffett's favorite indicator, the market capitalization-to-GDP ratio, remains about half the level of other European exchanges. At the same time, new listings, foreign inflows and growing domestic interest could help close the gap.

It is also one of the most widely used valuation metrics in the world, as it measures the value of a company or the broader market based on actual earnings. There is no single "correct" value, as the ratio varies depending on investor expectations and current economic conditions. The Greek market is trading at a discount to this indicator - both compared to global markets and emerging markets.

Based on the above data and expected favorable factors, we assume that the Greek stock market rally will continue with strong momentum.

- In March 2025, Moody's upgraded Greece's rating to investment grade (Baa3) and in April FTSE Russell put the country under consideration for a return to developed market status. From your perspective, when could this reclassification realistically happen?

- It would not come as a surprise if the reclassification is completed in the second half of 2026. It is worth mentioning here that Euronext is currently acquiring the Athens Stock Exchange (ATHEX), with the deal expected to be finalized in the fourth quarter of 2025. All these catalysts contribute to raising the status of the Greek market to where it should be.

This article was AI-translated and verified by a human editor