Country report Greece

Economic overview

Athens paid the last € 1.9 billion tranche of a total loan amounting to € 32 billion to the IMF in April, which was expected to be paid off in early 2024. Thanks to this early repayment, Greece will save € 230 million. euro in interest, according to what was communicated by the minister of the economy Christos Staikouras. The country’s public accounts, however, remain under constant observation. As the Greek daily Kathimerini recalls, loans granted by the EU remain to be repaid for a total of € 52.9 billion with annual installments of € 2.6 billion which will cease only in 2041. Following the Covid emergency, Greece’s debt / GDP ratio is re-precipitated to 189% (the worst in all of Europe). On the other hand, interest rates on government bonds are now 2.5% against 35% in the most acute period of the crisis.

The Eurogroup held in Luxembourg officially recognized the return to normalcy for the Greek economy, after its very long financial crisis which began at the end of 2009.

The Commission considers that Greece has successfully implemented most of the commitments that were agreed in 2018, with the latest assistance program, and will complete the remaining ones by the end of this year. The effective implementation of the reforms, according to the EU executive, has improved the resilience of the country’s economy and strengthened its financial stability, significantly reducing the risks of crisis and “spillover” to the rest of the Eurozone.

Klaus Regling, executive director of the Mes (the “bailout” Fund, which together with the instrument that preceded it, the Efsf device, financed the “rescue” of Greece “) recalled that thanks to the interventions of the institutions that now they hold 60%, the Greek debt, despite being the highest in the EU, has very low interest costs, and is not even subject to risk with the expected next monetary policy tightening. The rating agencies, on the other hand, he recalled, have decided on 12 successive upgrades in recent years for Greece.

In Greece, inflation is at its highest since 1995. Prices continue to rise, as is concern among retirees and workers. Natural gas prices have increased 122.6% since April 2021, with an 88.8% increase in the cost of electricity, 35.2% in housing overheads and 10.9% in food and drinks.

Crisis that manifested in all its dimensions in 2010 when the then head of government George Papandreu had to admit that the state accounts had been falsified to guarantee entry into the euro. For Athens the ghost of insolvency materializes. Huge international loans are granted but the government has to launch a frightening austerity plan that includes privatizations, cuts or freezes of salaries and pensions, reforms of the welfare state. Unemployment jumps to 16% but the effects of horse care are not being seen. Christine Lagarde herself, then head of the IMF admitted years later that an excessively punitive attitude had been adopted towards Greece.

Main sectors of industry

Greece is a traditionally agricultural country, which has made a notable industrialization effort since the 1960s, which has allowed it to be admitted to the European Economic Community. Despite the agricultural tradition, Greece is not particularly favored by the mainly mountainous territory and the often dry climate. The main product is wheat, mainly grown in the plains of Macedonia and Thrace, followed by barley, maize, rice and oats.

More relevant for commercial purposes are some tree-like crops such as the olive tree (Greece is the third largest producer of olive oil in the world), vines and citrus fruits, mostly destined for export. Considerable quantities of wine are obtained from the grapes, also renowned abroad, but the production of raisins is also very important. Growth is the production of cotton and tobacco. Other agricultural products are oil seeds, sugar beets and fruit and vegetables.

The forest mantle is very poor, therefore the production of wood is modest, zootechnical activity is also contained, mainly limited by the scarcity of pastures. Fishing is also relatively lacking.

The subsoil has a certain variety of minerals, but often in small quantities. The main mining productions are of nickel, bauxite and magnesite. Lignite, iron ores, manganese and silver are also mined. Famous are the marbles and emery (on the island of Naxos), in addition to building materials in general. 70% of electricity generation is based on imported oil.

The industry has undergone a strong development in particular in the textile sector (especially cotton, but also synthetic fibers) in the food sector (wine industries, sugar refineries, oil mills, breweries) and in the manufacture of tobacco. The chemical and petrochemical industries, the steel industry (rolled iron products) and metallurgy (lead, aluminum) also underwent a certain boost.

Taxation for businesses in Greece

Taxation on business activities: rate of 26% on retained profits up to € 50,000, 32% on undistributed profits over 50,000 and 35% on distributed profits.

The value added tax

The ordinary rate is 24% while the reduced rates are 6% and 13% depending on whether they are, respectively, goods or services in any case strictly listed. These percentages have been increased compared to previous years following the debt containment measures. The reduced rate applies to the sale of agricultural products, medicines, natural gas, electricity, foodstuffs, water supplies. It also applies to the provision of the following services: agricultural services, tickets for cinema shows, sporting events, concerts, passenger transport, restaurants, social services, funeral services.

The rate is also about 30% less on goods and services provided by VAT subjects residing in some of the Aegean islands (4% on newspapers, periodicals, books, editorial products, drugs, 9% on goods and products considered. basic necessities and tourist services); for the remaining products it amounts to 17% (but the Government, on the recommendation of the Troika, is proceeding with a gradual elimination of the preferential rates also in the islands). On a limited number of products (some agricultural products, tobacco, petroleum products, vehicles, alcohol, etc.) are applied taxes on consumption varying from a minimum of 10% to a maximum of 150% on the value of the asset (these taxes may exceed even 200% for high-powered cars).

Investing in Greece

The economic crisis has caused many difficulties in the peninsula, with a decline in revenues and the general collapse of the economy.                                                           

We must not forget the problem of closure and the strong control of capital, in order to avoid its foreign flight. All of this has led to a collapse in the cost of ownership and, consequently, to an increase in the number of individuals who are considering going to Greece for their investments. There are currently 245,000 homes available on the market and, according to 2019 forecasts, the number will increase considerably, given the previous and long economic paralysis of recent years. Grexit also played a decisive role in all this, considering that there is a risk that, after leaving Europe, Greece decides to return to the Drachma.

One wonders how safe it is to buy property in Greece. The Greek situation is still not resolved, the country is growing but at a very slow pace, the economy is not as open as before and due to the recent fire, many people have had to leave their homes.                                              

Tourism is the only point in favor of the country, with a double peak of guests (2016 and 2017). This is mainly due to the fact that the country has “attracted” visitors from neighboring Turkey and Egypt, where there are internal political problems which, of course, terrify tourism by pushing it to other destinations. In conclusion, after analyzing the situation, it is possible to say that investing in Greece today is not easy but the situation is improving.

Apparently it was the economic crisis that bewitched many investors in Greece, allowing them to purchase both luxury homes and rural homes. It goes without saying that investments in the Greek real estate market are not affordable for everyone. Prices and risks need to be balanced.

While the demand for stays in Greece remains very high, it does not allow prices to drop. Among the most accessible and economical locations in Greece we find both the smaller cities and the capital, Athens, where it is possible to buy properties of 100 square meters even for 40,000 euros.

What about taxation? In evaluating the investment, it is also necessary to take into account the taxes to be paid on the property: here for houses worth between 200 thousand and 5 million euros, the progressive rate is between 0.2% and 1%. To this we must add local taxes ranging from 0.025 to 0.035%, calculated on the value of the house.