08 Apr Interview with Marios Psaltis, Country Managing Director, PwC, Greece
The Greek economy has bounced back significantly since its decade-long financial crisis, and we know it was about 2,5% growth for 2023, Greece is growing at 3 times the speed of the EU average. However, significant challenges remain such as monetary policy tightening, persistent inflation, and rising real estate prices. As a major firm with a grip on the economy, how would you assess Greece’s economic performance and its economic turnaround since the crisis years?
The Greek economy performed well in 2023, with a growth rate of 2.5%, which is one of the highest in the eurozone. This growth was driven by the rising disposable income from improved economic activity, overperformance of the tourist industry, tax reductions, increased foreign direct investments and the absorption of the Recovery and Resilience funds of the European Union.
During the difficult years of the economic crisis, through the implementation of a strict adjustment program, monitored by the IMF, ECB and EC, Greece managed to drastically reduce its public deficit, restructure its public debt, implement product and labor market reforms, recapitalise its banking sector and gradually restore the country’s credibility in the international markets.
On the back of these improvements the stable political environment experienced during the last few years acts as a positive multiplier in economic activity. Greece has a government that implements a combination of business friendly and socially responsible policies, improving the level of trust within Greek society. The remarkable turnaround of the image of the country as an investment destination has also been confirmed by the recent upgrade of the Greek economy to investment grade status by the credit rating agencies. All these developments allow us to be optimistic about the prospects of the Greek economy, having entered a cycle of GDP growth, reduction in debt to GDP ratio and unemployment, tax rate reduction and improvement in real wages.
What impact will the expected €55 billion in EU structural recovery funds by 2027 have on the country? What key areas is it mostly focused on in Greece?
During the period of the economic crisis, Greece lost almost 25% of its GDP because of the dramatic squeeze in public spending. The unavailability of equity and debt finance, together with the high country risk which discouraged foreign direct investments, hindered the ability of the economy to enter a trajectory of growth.
The EU structural recovery funds provide the finance required to support the transformation of the Greek economy. The bet now is to make the best use of the funds absorbed and shift the economic model to address future challenges and promote sustainable growth. This means directing the funds towards the programme’s two pillars of digital transformation and green transition, promoting investments that encourage innovative responses to the climate crisis, continued reforms in the public sector, and improvements in the education system.
Climate change means huge opportunities for energy transition in a country that stands to benefit substantially because of its geographic position and ample sun and wind. The impact of the recent weather-related disasters highlights the vulnerability of various sectors of our economy to the consequences of climate change. Addressing climate disruption demands transformative changes in forecasting, prevention, and planning. For example, the agricultural sector should transition to climate-resilient smart-farming practices, while the insurance sector should pioneer innovative coverage models for home, corporate, and livestock. In tourism, the vision should be to create a sustainable model that balances growth, driven by the capacity of the existing and future infrastructure, with environmental responsibility.
The lack of investments in technology during the crisis impacted the country negatively. Technology and AI can prove the spark for change and innovation in the private sector and the accelerator for the modernisation of the public sector. Technological advancements require continuous reskilling and upskilling of the existing workforce and the upgrade of the education system to be able to respond to future demands.
In the past, Greece has been known for its tax evasion, for its lack of efficiency regarding taxation, but upon his reelection, Mr. Mitsotákis outlined his administration plans for 2027, which included an additional number of tax-related reforms. How has the taxation system evolved in Greece? What have been some of the latest initiatives undertaken by the government to create a more sustainable and efficient taxation system?
The tax related policies of the Greek government are directed towards gradual reduction of the tax burden, simplification of the tax system, and strengthening the audit mechanisms to combat tax evasion.
During the last few years, despite the overall tax rates having gone down, the overall tax collections have gone up because of the higher economic activity and the improvement in tax collection policies.
There are continuous improvement efforts to strengthen tax collection mechanisms through the upskilling of tax officers and the introduction of data analysis and risk-based practices in tax audits. Also, the acceleration of electronic payments in daily consumer transactions, initially due to the introduction of capital controls and more recently to the restrictions imposed by the pandemic, has worked favorably towards improvement in tax collections.
Another important aspect of the tax related reforms is the provision of stability in the tax system. This is extremely important for investment decision making purposes. The foreign investors that examine doing business in Greece want to know that there is a commitment for the tax laws and regulations not to change. There is still work to be done, but the general direction now is minimum changes in tax rules. If there is a change, it would be for further reduction of the tax rates, and higher compliance.
In 2023, Greece improved its core on Transparency. International’s Corruption Perception Index ranking it 51st out of 180 countries. This is the highest ranking achieved by the country since 2012. How would you assess the progress made in terms of good governance and transparency in the country?
Despite the strict legal framework in place in Greece, there is a general perception that the enforcement of the law is not always at the level that it should be. The complexity that exists in the legal system, the delays experienced in the decisions of the courts, together with the bureaucratic government processes that relate to the issuance of various permits required, are considered as impediments in doing business in Greece. The non-transparent reporting of public finances prior to 2010 led to the restatement of the public deficits reported and created an image of low transparency for the country.
This image is continuously improving with the progress demonstrated in the reforms enacted, including the codification and simplification of laws and regulations, streamlining of legal processes, strengthening of the independence of various committees, improvement in the governance and reporting of the public sector companies, and the discipline implemented in fiscal policies and public finance reporting. The area where there is still work to be done is the judicial system, where we need to improve the speed that decisions are taken by the Greek courts.
Regarding the private sector, new laws were introduced to improve the governance of the publicly listed entities by strengthening the quality and diversity of the Board of Directors.
From a PwC perspective, how is Greece perceived as an investment destination?
As a leading international professional service firm with a strong presence in the Greek market, PwC has a critical role to play in supporting our international clients that want to make an investment in the Greek market. In fact, our teams were involved in most of the major M&A transactions and investments that were made into Greece. This places us in a unique position to be able to assess the level of investment interest and how Greece is perceived as an investment destination.
Through our communication and interaction with our international clients, we have experienced first-hand the turnaround in the image of the country; how foreign investors turned from doubters to believers of the prospects of the Greek economy. The country risk, from the very highs of the crisis, has now returned to normal levels, even lower than other developed European countries. The improvement in the macroeconomic environment, the continued reforms, the government stability, and the sensible policy making have all contributed to making Greece an attractive investment destination. We now see a lot of interest for foreign direct investments into Greece.
We have also experienced the evolution of the funds that are looking to make investments in Greece. In the beginning, it was mostly speculative funds looking to buy out distressed debt and non-performing loans. As the economy gradually improved, we saw other types of funds arriving with appetite for short to medium term investments, and now we see more private equity funds and investors that have a long-term investment horizon. The areas of interest are mainly the hospitality sector, food industry, healthcare sector, renewable energy, real estate and logistics.
With the rise of the investment grade, we would expect there will be more investors coming into Greece. How is PwC preparing to welcome more of these funds and investors?
We are witnessing a rising interest for long-term investments in Greece, creating a positive environment for business activity and healthy competition, which is a prerequisite for achieving sustainable growth. We at PwC aspire to be part of this growth and transformation of the Greek economy, leading to job creation and prosperity for the people. Through the relations we have with international players and the combination of international and local expertise, we can provide high quality services that add value to our clients.
Zooming into PwC, what sort of historical presence, role, and contribution do you have in Greece? What are some of the key areas where you have made a footprint on the country?
PwC has always been a market leader in the Greek market. During the crisis and in the recovery phase thereafter, we played a significant role in the economic activity and through our high-quality services we always aim to serve our purpose “to build trust in the society and solve important problems”.
In line with that purpose, we strove to build trust and solve important problems both in the public and private sector. Just to name a few examples where PwC helped during the crisis, our strong technical expertise contributed significantly to the restructuring of the banking sector, the reduction of non-performing loans and the strengthening of tax audits. More recently, PwC had a leading role in the vaccination programme which proved extremely successful for the country. We also assisted in the drafting of the national plan for the absorption of the RRF, and for expediting the processing of the backlog of long overdue pension payments.
We have always been at the forefront of investing in our people and in technology. Responding to the opportunities and challenges that lie ahead, we build new capabilities in the areas of AI, cloud, cyber-security, sustainability, energy transition, ESG, supply chain operations, people organization and change. By transforming our own business around the pillars of Trust and Sustained Outcomes, we aim to create an environment that promotes innovative solutions for our clients and shapes the workplace of the future, improving the experience of our people.
The example of Greece, managing to restore confidence within Greek society and the international markets is a great turnaround story of building trust and achieving sustained outcomes for a country and its people. At PwC, being in the trust and sustained outcomes business, we aspire to be part of this success story and have a leading role in creating sustainable growth in the Greek economy, thriving together with our country going forward.
The government is currently working under its Digital Transformation Strategy 2020 to 2025. However, Greece continues to lag in the EU, sitting at the 25th out of 27 nations in the EU Digital Economy and Society Index 2022. How would you assess the level of digitalization in Greece’s public and private sectors? What are some of the latest progress and key issues that need to be addressed for Greece to reach this goal in that sector?
Recent under-investment in technology, both in the public and private sectors, impacted the ability of the country to innovate and compete effectively internationally. Consequently, Greece is currently behind the rest of Europe and the Western world.
The availability of funds through the RRF, and the focus on technology and digital transformation, can be the accelerator of transformation and growth, both for the public and the private sector. Technology and AI can play a significant role in the fight against the inherent systemic weaknesses of the Greek economy and be the accelerator of change and innovation, creating a breakthrough into the future.
The US is also one of the big investors in Greece, with big players like Google, Meta, Microsoft and Pfizer, all participating in the market. What further potential or synergies could be created from further participation from US firms in the Greek market? What possible partnership opportunities exist, and which sectors could be of most interest to US investors?
In terms of tourism, we see an impressive increase in the number of visits from US citizens coming to Greece for holidays and an associated increase in the number of direct flights from the USA to Greece. In terms of investments, the speculative US funds were the first to tap into the Greek market, exploring opportunities for distressed debt buyouts and NPLs. Gradually we have seen interest from the more long-term investment funds coming into the Greek market. The areas where there is a lot of potential are hospitality, linked to the interest of US people coming to Greece for holidays, the healthcare sector, real estate and logistics.
The Big Tech companies have already established a presence in Greece and have initiated plans for more investments going forward. For the economy, it is important to create an ecosystem of technological presence in Greece from companies like Microsoft, Amazon, Google. Their presence is also critical for the start-up community, which creates an ecosystem of innovation and technological solutions that can provide the competitive edge required by the more traditional industrial companies.
Would you like to share with us about your Sustainability Innovation Center in Rhodes?
As part of our strategy, we have initiated the setup of satellite offices in regions where we can come closer to the universities, and the local community. Each new office location has a theme. In Rhodes we decided to set up our Sustainability Innovation Center, where we want to build people with expertise around sustainability. Without having to relocate to Athens we want to be able to work on projects that we have not only in Greece, but also in cooperation with our Network of PwC Firms in Europe.
What is your final message to the readers of the USA Today?
Greece is a country that suffered during the economic crisis but managed to restore its confidence and trust and, through effective strategy, achieved a remarkable turnaround, generating business, new jobs, economic growth and prosperity for its people. PwC aspires to be part of this success story and, through continuous investment, build the capabilities and skills required to support the country to thrive into the future.