Greece’s Economy Is Improving, but Global Risks Remain
Greece’s economy is continuing to improve after many difficult years, but it still faces risks from the global economy. Borrowing costs are falling, investor confidence is rising, and international institutions recognise the progress. At the same time, experts warn that a more uncertain global environment could create new challenges for the country.
After the long economic crisis, Greece has made clear progress. The government can now borrow money at much lower costs, and access to financial markets has become much easier. International investors are showing renewed interest, and confidence in the country is much stronger than it was in the past.
Because of this recovery, Greece may soon reach an important milestone: a possible return to “developed market” status. This would mark a major step away from its crisis-era image. However, analysts point out that returning to normal conditions also brings new risks, especially as Greece becomes more connected to global markets.
Better conditions in bond markets
According to a report by analyst Mathias Gnevoch from the European Stability Mechanism (ESM), European government bond markets have become more stable since 2019. This followed years of disruption after the eurozone debt crisis. For Greece, this change has brought much better borrowing conditions.
In May 2025, the interest rate difference between Greece’s 10-year government bond and Germany’s benchmark bond fell below 80 basis points for the first time since 2007. This means that investors now see Greek bonds as much safer than before. These levels are similar to the period before the financial crisis, when eurozone government bonds were viewed as nearly equal in risk.
This improvement reflects the strong recovery of the Greek economy in recent years. Greece has recorded steady economic growth, managed to achieve budget surpluses, and has reduced its debt compared to the size of the economy since 2021. These developments have helped rebuild trust among investors.
Investors are returning
Lower borrowing costs are not the only positive sign. Greece is also seeing renewed interest in its stock market. MSCI Inc., a major global index provider, has started a public consultation on whether Greece should be upgraded from an Emerging Market to a Developed Market.
MSCI is highly influential in global finance. Its stock market indices are widely used by investors, banks, and fund managers to guide investment decisions. Many large funds follow MSCI classifications closely. As a result, any change in a country’s status can strongly affect how much investment it receives.
If Greece is upgraded to Developed Market status, it would mean that international investors see its stock market as more stable, mature, and reliable. This could attract long-term investors such as pension funds and large institutions that currently do not invest in emerging markets.
Such an upgrade could bring more money into the Greek stock market, increase trading activity, and reduce financing costs for Greek companies. It would also send a strong positive message about the country’s economic image and long-term prospects.
MSCI has already stated that Greece meets the main economic growth criteria. It has also recognised improvements in how the market operates and how easy it is for foreign investors to access it. In the past, Greece’s small market size and limited liquidity were major concerns. These issues are now being reviewed again, especially as European markets become more closely connected.
The final decision is expected by the end of March 2026. If approved, the change would likely take effect in the August 2026 index review.
New risks from greater integration
Despite these positive developments, experts warn that greater integration with European markets also brings new risks. When markets are more closely connected, economic shocks in one country can spread more easily to others.
In practical terms, Greek bond yields are now more influenced by what happens in larger eurozone economies. For example, when Germany announced a large increase in government spending in March 2025, German bond yields rose by about 35 basis points. Greek bond yields moved in almost the same direction, even though Greece’s domestic economic situation had not changed.
This strong link is a sign that Greece has returned to normal European market conditions. However, it also means that Greece is now more exposed to external events that it cannot control.
The need for balance and caution
The ESM analyst warns that although borrowing costs have fallen sharply, they could rise again. This could happen if economic conditions in the eurozone worsen or if unexpected global events occur. Trade conflicts, geopolitical tensions, or sudden policy changes in major economies could all increase Greece’s borrowing costs.
In this environment, Greece’s progress is real, but it is not guaranteed to last. The country must continue to manage its finances carefully. Keeping public debt under control, maintaining responsible budget policies, and strengthening the economy’s ability to handle shocks are all essential.
Overall, Greece’s return to stability and international trust is a major achievement. But as the country re-enters Europe’s economic mainstream, it must balance optimism with caution to ensure that the gains made so far are lasting and sustainable.
Also Read:
UK Finance News: How Brexit Shapes Investment Strategies
Europe’s priciest and cheapest countries for hotels & food
Spain’s Manufacturing Sector Shows Signs of Recovery