Greece's economic recovery faces banking and living standards challenges
The European Central Bank's blog post assesses Greece's impressive economic recovery from crisis, highlighting achievements in the banking sector and ongoing challenges in living standards and debt resolution.
Banking sector's remarkable turnaround
Greece's banks have achieved a remarkable recovery since the early 2010s crisis, driven by increased capital, balance sheet clean-up, and strengthened supervision.
The Hellenic Asset Protection Scheme (HAPS) was instrumental, facilitating the securitisation and sale of approximately €57 billion in non-performing loans (NPLs) by 2025.
This enabled banks to restore their capacity to finance households and businesses, with loans to non-financial corporations increasing markedly.
Empirical evidence from AnaCredit data shows that by 2024, credit access for micro firms had improved significantly compared to 2019, narrowing the previous disparity with larger firms.
This progress signals a more inclusive recovery, supported by broader economic improvements and the Recovery and Resilience Fund.
Unresolved debt and institutional hurdles
While Greek banks have strengthened, a significant private debt problem, equivalent to about a third of Greece's GDP, now sits outside the banking system, managed by foreign funds.
Resolution efforts are slow due to structural and institutional hurdles, including court backlogs and gaps in the electronic auction system.
This impedes debt enforcement and restructuring, effectively shutting out affected households and firms from new bank lending and limiting growth.
Furthermore, the report emphasizes that institutional quality, from government effectiveness to the rule of law, remains a challenge, crucial for fostering a dynamic business environment and attracting high-tech investment.
Recovery solid, but work remains
Greece's economic rebound is undeniably impressive, showcasing a significant turnaround from its crisis years.
However, the slow resolution of non-performing loans outside the banking system and persistent institutional quality weaknesses pose tangible risks to future growth.
Fully closing the living standards gap and ensuring sustainable convergence will require continued, targeted reforms.