In just two months, Greece will exit from its bailout programme, marking the end to an eight-year-long memoranda era. The details of Greece’s exit are set to be decided when the Eurogroup, composed of eurozone finance ministers, meet on Thursday. This is a significant step forward for Greece as the country will have renewed freedom and responsibility to manage its own economy.
“Greece is about to exit a huge crisis,” said Greek Deputy Prime Minister Yannis Dragasakis. “This is a turning point for the country.”
Greece has made significant strides in overcoming years of economic decline. In 2017 the economy expanded by 1.4%. This was the first time in a decade that real GDP growth exceeded 1%. As well, for the third year in a row, the country is expected to register a budget surplus in 2018. This means that not only is the government balancing its books, it is also in a position to ease austerity measures. These positive developments made it possible for Greece to return to the bond market with the sale of approximately 3 billion euros of 7-year bonds in February.
In order to sustain this positive economic trend, the government has drawn up an official growth strategy. The plan consists of a roadmap that reverses deindustrialisation in Greece. It places greater emphasis on entrepreneurship, foreign investment, and increasing the productivity of all sectors, while simultaneously embracing the digital revolution.
“The Ministry of Economy & Development, which I have the honour to supervise, aspires to be a Ministry of Investment,” commented Dragasakis, who is overseeing the implementation of this new growth plan.
On this point, the government has introduced important reforms to attract foreign capital. It has fast tracked procedures for major investments and will continue improving this framework for investors, Dragasakis said. Its golden visa programme, which was originally established to grant residency without citizenship in return for an investment in real estate, is being expanded to include the purchase of shares and bonds – and general activity in the Greek economy – as eligible requirements for obtaining a golden visa.
Furthermore, Greece has created a favourable regime for major multinational corporations. As Dragasakis highlights, “This means that multinationals could establish call centres or accounting centres, or research centres in Greece.” Indeed, last year 22 parties expressed interest in exploring these sorts of opportunities in Greece.
A big part of the country’s draw is the high quality of its human capital, specifically in the fields of science and research.
“There is great new potential in many fields, particularly R&D and manufacturing,” said Dragasakis, noting that he has been in discussions with representatives from Nokia and Tesla who made clear they are becoming active in Greece due to its talented pool of scientists. Nokia already has a plant in Greece, and Tesla is about to open a research centre in the country.
However, Dragasakis hasn’t become complacent following the success of these reforms. As he explained, “We stand ready to make this regime even more favourable and in line with this we are currently in talks with investors regarding this prospect.”
Importantly, Greece’s growth strategy isn’t only about attracting foreign corporations. Dragasakis was keen to emphasise that “all the economic strategies we previously discussed are integrated in an overall plan for modernising the state, to ensure a friendly environment for investors, but primarily for its citizens.”
The government wants to empower ordinary Greeks who have previously had to jump through bureaucratic hoops to start their own businesses, with a particular focus on socially responsible entrepreneurship. In order to address this, the government has worked alongside the World Bank to reform its business licensing regime to make it easier to establish a company in Greece.
As Dragasakis described, “Previously, it required a lot of paperwork, too many certificates, etc in order to receive an established license. This is not the case now.”
Nevertheless, all these reforms will come to naught if Greek entrepreneurs can’t access funding to get their ideas off the ground. Consequently, the government wants to establish a national development bank that will help address the country’s financing gap. Greece is one of the few countries that doesn’t have a national promotional bank, and with its main commercial banks suffering from high levels of non-performing loans, Dragasakis believes there is a need for a parallel financial institution.
In order to bring this about, Greece is collaborating with outside partners. The government has reached an agreement with the European institutions over the establishment of a national development bank. The Development Bank of France is also providing the Greek government with technical assistance.
Dragasakis highlighted that this new financial institution will help improve the country’s international economic relations, stating “We will have an institution that will be assigned the task of maintaining a dialogue with public and private bodies from abroad. This dialogue will lead to the funding of both small and large-scale projects. This is why it has been prioritized both by our government, and the Ministry of Economy & Development.”
In addition to developing a new national development bank, Dragasakis’ Ministry of Economy & Development has launched other financing initiatives. For example, the government recently entered into a partnership with the European Investment Fund to create EquiFund. This fund provides financing to small and medium sized enterprises at different stages in their development in order to support social and economic wealth creation amongst Greece’s young workforce. With a budget of € 500 million, it is the largest such fund currently being implemented in Europe.
And there are discussions for other state and private funds, said Dragasakis. For example, Greece recently signed a Memorandum of Understanding with the United Arab Emirates to establish a joint fund with a € 400 million budget to be invested in Greek businesses and projects. This agreement will provide solid groundwork for Greece’s next steps after the memoranda era.
These initiatives are indicative of the Greek government’s desire to attract the right sort of investment to the country. The focus is on spurring investment that will make the most of Greece’s well-educated and industrious human capital. By creating a friendly investment environment, Greece’s next generation of entrepreneurs, scientists, and agriculturalists will be able to carry out their ventures in Greece rather than going abroad to seek out new opportunities.
All of these efforts at economic reform, which will become especially important after August 20 when Greece exits its final bailout programme, are being done within the context of the digital revolution in industry, the so-called Industry 4.0. Through these programmes, Greece is looking for ways to strengthen each sector individually, for example by introducing smart technologies to traditional fields, and enhance cross sectoral connectivity. To this end, a think tank has been established within the Ministry of Economy & Development in collaboration with the Ministry of Research and Technology.
“In the past, we have melancholically said that Greece was one of those countries that ‘saw trains passing by,’” said Dragasakis, “but this is no longer the case.”