The international credit rating agency Fitch attributes Greece’s three-notch sovereign rating upgrade since 2022 primarily to the rapid and substantial reduction of its public debt. In a recent report on Greece’s public finances, Fitch highlights that the debt-to-GDP ratio plummeted from a post-pandemic peak of approximately 209% in 2020 to 146% in 2025 — the largest absolute decline among Greece, Cyprus, and Portugal, the three eurozone countries that saw the most significant debt improvements over the same period.
A Historic Decline — and Continued Momentum
Fitch projects Greece’s debt-to-GDP ratio will fall further, reaching 125% by 2029. That would place Greece roughly 37 percentage points below its pre-pandemic level — a stark contrast to the broader eurozone, where the average debt-to-GDP ratio remains about four percentage points higher than before the pandemic.
Strong economic growth played a central role: Greece’s GDP expanded by around 22% between 2021 and 2025, outpacing the EU average of approximately 13.5%. According to Fitch’s calculations, this robust expansion alone contributed to a 36-percentage-point reduction in the country’s debt burden.
What Set Greece Apart?
While tourism recovery, EU Recovery and Resilience Facility (RRF) funding, and negative real financing costs all supported Greece’s fiscal turnaround, Fitch notes these tailwinds are now fading. Tourism has fully rebounded, RRF disbursements peak in 2026, and negative real interest rates are disappearing.
What truly distinguished Greece — alongside Cyprus and Portugal — was its disciplined fiscal policy, which generated sustainable primary budget surpluses. This contrasts sharply with Italy and Spain, both of which enjoyed favorable growth conditions but were upgraded only once. Italy recorded modest primary surpluses starting in 2024, while Spain has yet to achieve one.
Looking Ahead: Surpluses Under Pressure
As external supports wane, Fitch warns that primary surpluses will shoulder more of the burden in driving future debt reduction. Yet maintaining them is becoming increasingly challenging amid population aging and rising defense spending commitments.
The agency also notes that improvements in banking sector health — particularly in Greece and Cyprus — and stronger external positions — notably in Portugal — reinforced the positive outlook, enabling the multi-notch upgrades across all three nations.