The fiscal position remained solid despite some expansionary measures. Cuts in social-security contributions, higher public-sector wages, a means-tested rent refund and a permanent EUR250 annual benefit for vulnerable individuals led to a decline in the primary surplus from 4.7% to 4.3%. Additional pressures, including higher healthcare and defense spending, also put pressure on public finances, but these were partly offset by increased revenue, supported by ongoing tax-compliance measures, the extension of the digital-labor card to new sectors to reduce undeclared work and higher local-government fees. A further reduction in the primary surplus is expected in 2026-2027 as a result of the announced expansionary fiscal package, expected to cost 0.6% of GDP and 0.8% of GDP in 2026 and 2027, respectively.

Sustained fiscal discipline helped to bring public debt down from 209.4% in 2020 to 151.2% in Q2 2025. As a consequence, Greece is now considered investment-grade by all major agencies, a major milestone after 13 years of junk-level ratings. Moreover, most of the public debt remains in official hands and has secured long maturity, so rollover risks should be cushioned.

In Greece, business insolvencies soon returned to pre-pandemic levels. We expect the number of bankruptcies to have reached an 11-year peak in 2025, with roughly 280 cases, and to remain around 300 cases per year in 2026 and 2027.

The Greek banking sector has strongly reduced its burden of non-performing loans, enhancing its capacity to provide credit to the real economy, especially businesses, over the last decade. Greece’s NPL ratio decreased from 47.6% in 2017 to 3.6% in Q2 2025, but most of the impaired assets remain in the economy as they have moved from the banking sector to servicers. Encouragingly, Stage 2 loans have been on a downward trajectory since Q1 2021, alleviating some concerns about credit risk. Finally, private sector debt decreased markedly to 95% of GDP in 2024 (from 125% in 2020).

Greece’s business environment has improved in recent years but remains regulated and complex. It is characterized by a recovering, service-based economy (tourism, shipping) with significant EU investment in digital and green transitions, but still faces challenges from bureaucracy and judicial slowness, though recent labor reforms enhance flexibility. Key opportunities lie in tech, renewable energy, tourism and logistics.

While the ruling party, New Democracy, retains a lead in polls, its support has declined, and internal party tensions are rising. The government remains committed to a European stance and reforms agenda, but faces mounting challenges. However, the opposition remains fragmented; the main opposition force, the centre-left PASOK, failed during the year to narrow the double-digit lead of New Democracy, while the decline continued for the once-governing left-wing party SYRIZA, which can now rely on the support of only about 6% of voters.increase revenues.