Stournaras: Challenges and Weaknesses in Investment Implementation in Greece

Greece faces challenges and weaknesses in implementing investments, according to the Governor of the Bank of Greece, Yannis Stournaras. A key prerequisite for increasing investment volume is the timely absorption of Recovery and Resilience Facility (RRF) funds, amounting to €36 billion. However, given the delayed disbursement profile into the real economy and the limited lifespan of the RRF, efforts must be intensified to fully realize its positive impacts on growth and productivity. Specifically, as highlighted by Stournaras, the complex regulatory framework often lacks transparency, increasing administrative burdens for businesses, while the legal system is not sufficiently effective or protective regarding property rights. Regulatory barriers, shadow economy issues, and limited access to financing—especially for small and medium-sized enterprises—continue to hinder competition, private investments, and overall productivity. The lack of a stable tax system also constrains business growth. Effective institutional functioning, combating bureaucracy and corruption alongside digital transformation of public administration can reduce uncertainty and administrative burdens. A more efficient regulatory framework ensuring contract enforcement and property rights protection will encourage investment projects. Tax stability and incentives like accelerated depreciation and larger tax breaks for research and development will enhance Greece’s attractiveness as an investment destination. Accelerating reforms in goods and services markets to lower entry barriers and limit oligopolistic structures, upgrading human capital through improved education and training in new technologies, and better functioning financial markets enabling Greek companies to access required capital are essential. Greece could benefit from institutional interventions such as completing the Banking Union and creating a European Savings and Investment Union ensuring economies of scale in available funds and steady investment flow across the EU. Establishing a common supervisory mechanism for EU capital markets, unifying fragmented European financial market infrastructures, and standardizing products for individual investors can mobilize both EU savings and foreign capital. Deepening the securitization market and simplifying related legislation can attract investors. Nationally, facilitating access to alternative funding forms via capital markets and utilizing the new Microloan Fund is crucial for SMEs. Continued attraction of Foreign Direct Investment (FDI), which increased by about 34% in 2024 compared to 2019, reaching €6 billion, highlights positive dynamics. Significant acceleration in FDI could result from faster implementation of privatization programs and utilization of public assets. Political stability remains a critical factor for investments amid heightened global uncertainty and trade disputes.