10 Apr Interview with Georgios Papadimitriou, Country Managing Partner, EY in Greece
How would you assess Greece’s economic performance in the past few years, and the economic turnaround we see now?
What we see today, is not the view of Greece 15 years ago, when the country was under a total collapse. It took a lot of sacrifice and effort from the Greek people, in addition to a lot of monetary and technical support, to implement the Greek reform program, that lasted many years, with a great toll on society and on the financial and economic indicators. A few years ago, unemployment was at 28%; this meant that in almost every Greek household, there was a family member who did not have a job. This was a painful transition period with a lot of reforms, support, and financing. Hopefully, that period also hardened the economy. A lot of companies did not make it and could not be saved because they did not have the resilience nor the prospects to survive in this new environment. But the ones that did survive and came out of this crisis standing tall, showed greater resilience than their European or global peers.
The stress of the last 3-4 years due to the turbulence caused by geopolitical instability, the war in Ukraine, the pandemic, the mounting inflation, and other challenges, found Greece much better positioned to withstand the shocks to its economy. This also holds true for the energy crisis, with investors surveyed for our annual Attractiveness Survey Greece having a positive perception on how the country has handled the situation so far.
Today, we are in a totally different reality; unemployment has reset at nearly pre-crisis levels, scaling-down to 10.8% in Q3 2023, according to Hellenic Statistical Authority data. In 2021, the GDP grew by 8.4%, and in 2022 by 5.9% – these rates are much higher than the Eurozone’s 5.3% and 3.5% annual GDP growth, respectively.
Looking ahead, we have reasons to be cautiously optimistic in this environment. The country’s trajectory is better than what we see in other European peers or even Germany, for example. For 2023, the forecasted growth is 2.4% and 2.3% for 2024 and this is 2-3 times higher than what the European Commission forecasts for the totality of the EU or the Eurozone for 2023 or 2024, respectively. It is a much brighter outlook, with more optimism now, after emerging from a painful period.
Investments are coming back to the country. How has the perception of Greece as an investment destination evolved in the past 4-5 years? What additional reforms or efforts would you advocate to accelerate investment in the country?
We monitor the perception of investors each year, through an extensive survey at the European level: EY’s Attractiveness Survey Europe. In Greece, we have conducted this survey annually since 2019, through our EY Attractiveness Survey Greece series, but the country has been a part of Attractiveness Survey Europe for more than 20 years now. One of the key takeaways from our surveys over the last few years is that a growing majority of respondents say that the attractiveness of Greece as an investment destination is steadily improving. More specifically, in 2019, the percentage of people who said that the country’s attractiveness was improving was 47%. Today, this sits at 60%.
According to our data, foreign direct investment (FDI) projects announced in Greece in the past three years alone, make for 35% of the entire FDI total of the last 23 years. This is remarkable, exponential growth in investment activity. In addition, the 2023 survey showed that 67% of respondents expect the attractiveness of Greece to further improve in the next two years. This may not have been remarkable at the first years after the economic crisis, when it was natural for investors to expect an improvement, but, a few years down the road, to have almost seven out of 10 investors thinking that there is still potential for the next few years, is important.
When asked about their short-term plans for Greece, 40% of investors said that they plan to invest or expand operations in Greece in the next 12 months; this is not just a pulse we are picking up, but rather a more precise picture of investment decisions that have already been made, since we are talking about the year ahead. This percentage was just 28% just a few years back. All in all, we are getting positive feedback through our surveys. Greece started from a low base and over the last 3-4 years, has done very well. We hope to continue to attract even more investments at this accelerated pace.
Investors’ perception on what needs to improve mainly revolves around three priorities: 1) improve the education system and workforce skills, 2) reform taxation, and 3) further increase the support of high-tech sectors and innovation.
There have been a few important steps to accelerate investment, either through state policies or as private initiatives; I will mention a couple, since there were many important developments in the past 1-2 years alone. First, there is a formal framework for promoting so called ‘strategic’ or ‘emblematic’ investments, to accelerate FDI in Greece. This framework simplifies things, as there is a fast-track process that will enable projects to go through quicker, as there is now more focus and emphasis being put on those strategic investments. In addition, there is also a specialized process on land development and permitting for strategic investments.
Lastly, there are several financial incentives for someone to invest in Greece, in the form of both tax grants and tax relief. In parallel, there have been several incentives to repatriate Greeks from abroad, to work in the country and help add more value to the economy. But there are also non-doms for whom there are tax incentives to transfer their tax residence to Greece. To further support this framework, we have seen a number of digital nomads flowing to the country the past few years, specifically to Athens. If you take some of the metrics associated with these digital nomad trends, Athens was tenth in the world when it comes to digital nomad arrivals in 2018-2023, when the flow increased by 163%.
In addition to the feedback we get from investors, people also recognize the need to improve the speed and delivery of justice, which has been a longstanding issue for the country. There is also still ample space for further digitalizing the public sector. We have done a lot, but there is still plenty of road ahead of us.
Digitalization has clearly accelerated after the pandemic. We now see an uptick in other types of technology like AI, blockchain, big data, and so on. How is Greece navigating this age of digital disruption and embracing these technologies?
There have been huge leaps in digitalization in the public sector, especially during the pandemic, when it was desperately needed. There is a need to adapt to and integrate new technologies like AI, machine learning, quantum computing and the like. At EY, we place a special focus on these new technologies. Specifically, we work along with other business partners on a big data project in the public sector, which aims to better utilize public data and embed new technologies, whether this is data analytics or AI, on the end-user data. There are concrete actions already being implemented and more things in the pipeline, heading in this direction, that have been announced regarding the integration of new technologies, such as AI within the public sector.
When it comes to the startup and innovation ecosystem, which also helps in integrating new technology and creating the right culture, there has been substantial progress being made in the last 2-3 years, especially with regards to funding. Several new funds were created to support newly-formed startups which mainly deal with new technologies. The Hellenic Development Bank of Investments and a couple of private venture capital funds behind it, along with funds from the EU Recovery and Resilience Facility, were earmarked to support and fund startups. One pillar of these initiatives is funding programs, and the second dimension focuses on initiatives to create and nurture a startup ecosystem; such is Elevate Greece, a government initiative to create a platform to identify promising startups and onboard them, allowing them to better connect to global innovation networks and measure their progress with specific KPIs.
Several public and private accelerators and incubators were also established, for example INNOVATHENS, which is a business accelerator formed by the Municipality of the City of Athens, with many others announced in the last few years. There was a lot of effort being put in boosting R&D, like tax incentives introduced by the government, with super-deduction in R&D tax rates. In addition, tax incentives were also introduced for angel investors, providing income tax exemptions of 50%. I would also mention the special framework, R&D focus, and several initiatives, to facilitate the establishment of spinoffs from research centers or universities.
Now, what more could be done? There is a long road ahead, beginning with important funding for university research, R&D budgets for private companies to bring in more innovative activities, with the goal of having foreign companies establish R&D hubs in Greece, and also, fully utilizing RRF opportunities for research and development. Secondly, the legal framework when it comes to intellectual property rights and patents is not yet perfect, so this is an area that we also need to focus on.
However, it is important to remember that transformation is not just about implementing new technologies; at EY, as trusted advisors, what we have seen from organizations that create exponential value is that they place humans at the center, leverage technology at speed and innovate at scale. It is a careful, yet important balance, that unlocks new opportunities if kept right.
What strategies does Greece deploy to contain the brain drain and repatriate some of these brains and develop local talent? What is EY’s approach to this issue?
According to OECD data, about 25% of Greek people hold a bachelor or equivalent degree, whereas the global average is 16%. When it comes to the education of the workforce, we score quite well globally. Now, an educated workforce is one thing, but the degree to which university education responds to the needs of the labor market, is a whole other challenge. EY in Greece conducted a survey back in 2017 that pointed out the disconnect between the academia, the business community, and the labor market in the country. There surely has been a marked improvement over these past few years, but still the situation is not where it could be.
If you take data from the IMD World Talent Ranking for 2023, Greece ranks 42 out of 64 countries, which implies that there is still a lot of room for improvement. We need a new strategy for aligning school and university education with the requirements of the labor market. We need to update the universities’ curricula with more IT and STEM courses. We also need to help students develop soft skills. For instance, when you talk to young people from startups, they say they would have liked to have been taught more soft skills in some areas, and less technical stuff. They say they would have liked to have learned how to manage failure, for instance. They say that knowing they would likely fail at their first or second effort at trying something and learning how to deal with that type of failure, would help them empathize more with other people, collaborate, and cooperate. The notion of soft skills, especially in this IT- and automation-driven environment, is a differentiator of paramount importance.
There is a discussion on what more could be done to introduce private universities and how this could improve education in Greece, with the government very recently introducing a draft law that we expect to be ratified by the Hellenic Parliament. More investment in IT, more education and training options for people, and a potential inflow of professors and students from abroad, are to be expected from such a monumental development. That would be good for everybody; but it is not just about offering educational, as well as reskilling and upskilling opportunities, but about the work environment, culture, and framework you have in place, if you want to repatriate people.
The younger generations are totally different than the older ones in what they want and what they need. They expect different things, pursuing their physical and mental well-being, apart from their financial well-being. Things like working from home and having free time are equally important to career progression and a good salary. These all play an important role in people’s mental health, especially post-COVID-19. Focusing on these elements of work culture that start with mental, financial, and physical well-being, diversity and inclusion – for people to feel “at home” while at work – is equally important. This is our emphasis at EY – to provide this type of work culture to our people, so they can thrive both as individuals and as professionals; the “EY experience” as we call it, is theirs to build.
As stated by a Transparency International report, Greece ranked 51st in the 2022 Corruption Perceptions Index. How would you assess Greece’s progress regarding compliance, good governance, transparency, and the rule of law?
If I may add, Greece has moved up Transparency International’s ranking by three places from 2021, so there has been some improvement in the right direction. Several things have happened in the last couple of years to steer the country toward the right path. There was the incorporation of a new law for corporate governance that transposes EU law to Greek legislation, introducing parameters that relate to the legal framework of corporate governance. These relate to suitability of board members, board of directors’ operations, non-executive directors, corporate governance codes, etc. That was a concrete, interesting step, from our perspective as a professional services firm.
There has also been a transposition of the EU Whistleblower Directive to Greek Law. This allows people to “blow the whistle” on illegal or fraudulent business practices, so this gives Greek businesses an extra layer of transparency and integrity. The information we get from our surveys informs us that there is still potential for improvement in this area. Just over half of the people in Greece who participated in our Global Integrity Survey back in 2022, feel that they could not reveal information on such activities without fear of negative consequences. It is not only about having a framework in place, but also about nurturing a culture that allows people to utilize this framework. Obviously, there are still opportunities to improve in that aspect. All in all, by introducing new legislation and processes, we see the situation improving and this is reflected in metrics like the Corruption Perception Index, and others.
How important are North American investors in Greece and what are the specific areas most attractive to US investors?
The United States of America have traditionally been a main investor in Greece and a major trade partner of our country. We have seen this situation improve over the past couple of years based on data from the Greek Embassy in the US. During 2022, bilateral trade improved, with Greek exports increasing by 19.5% versus 2021. Equally, US exports increased by 5.8%. Overall, the trade between both countries exceeded $5.6 billion, which is the highest we have observed in a while. Based on EY’s Attractiveness Survey Greece, the US, in terms of number of American FDI projects attracted, accounted for 40% of greenfield investment projects in Greece, improving from 23% in 2021. Half of these investments were related to the software and IT services sector, which from our perspective, is important for Greece because these are high value-added business areas. These are the main observations, which are very important, as the outlook has been improving and there are more prospects for economic growth on the horizon as a result of the solid Greek-US cooperation.
What is your final message to the readers of USA Today?
Greece is a beautiful country. If you have not visited yet, now is the ideal time. My second message is that the country has changed a lot over the last 15 years, by implementing a series of reforms. There are still a lot of things being planned, to further increase the attractiveness of the country; which is my third message. My fourth message is that the relationship between the US and Greece is at its best. We share common values and vision. We have always been on the same side of history. We see that our relationship is at the highest level ever, so we would be happy as EY to provide any type of support to either US citizens seeking to move to Greece for a job or US investors who would like to assess growth opportunities in our country. We are on standby to assist both types of groups: employees and companies.