From the Recovery Fund to the Medium-Term nightmare

Everything indicates that 2026 will mark the end of a sluggish growth period that began in 2021 and continued for the last three years with an annual growth rate of 2.1%-2.2% in Gross National Product (GNP). Also for the year that has just begun, the European Commission is predicting an increase of 2.2%, while the Greek government in the recent budget approved by Parliament is more optimistic, raising the estimate to 2.4%.The growth performance of our economy is characterized as anemic for two main reasons:

First, because the country at this time had a wealth of European funds, 36.6 billion euros from the Recovery and Resilience Fund (RRF), 26.2 billion from the NSRF, significant resources from the structural Cohesion, Social and Agricultural Development Funds as well as great potential for banking credit expansion, leveraging the low-interest loan component of 17.7 billion of the RRF.

Secondly, because looking back at the Pissarides Report (Development Plan for the Greek Economy, November 2020), the preparation of which was commissioned and adopted by the government to a group of renowned economists, one finds a large discrepancy between the objectives of the report and the final results from the implementation of the program. Thus, the report refers to “a target of an annual increase in real GDP of around 3.5% for the next decade, on average. This goal can be achieved through an annual increase in labor productivity of 2.5%. If these are achieved, then in 2030 the GDP per capita is expected to reach 81% of the EU …”.

The Failure of the Recovery FundToday, just a few months before the expiration of the program, for which it should be noted that there is no provision for an N+3 extension, the performance of the Greek economy with an average growth rate of 2.1% in GDP and 1% in labor productivity, is far from the goals of the Pissarides Plan.

The negative, still temporary, footprint from the use-utilization of resources is also presented in relief in a report by the European Commission, which amounts to 29.6 billion euros over a decade, i.e. less than the initial amount allocated to the country. Thus, the multiplier related to the final footprint is limited to 0.81, which also explains the government’s negative predictions for the course of the economy in the years following 2027.

Specifically, the Multiannual Financial Framework 2026-2029 foresees a slowdown in growth after the end of the inflow of resources from the Recovery and Resilience Fund, which ends at 1.3% in 2029. This is due exclusively to the sharp decrease in investments from 5.7% in 2025 to 0.8% in 2029.

On the other hand, consumption is holding up well and is contributing, as in all previous years, to GDP with a percentage of 70%, which shows that our production model remained unchanged even after the successive crises, despite the large inflow of resources into the economy, which should have functioned as a mechanism for its transformation.

But unfortunately, the vast majority of the funds ended up in sectors such as construction, tourist accommodation and current needs, which should be covered by the state budget. There is a lack of productive investments and examples of new manufacturing units in the country. Therefore, the impact of the Recovery and Resilience Fund only has an impact on income and not on growth.

The focus on the absorption of funds and not on their productive utilization and on the financing of radical changes in the functioning of the state but also in the composition of the product, deprived the country of a unique opportunity to strengthen and participate in the international distribution on an equal basis.

The bleak predictions of the Medium TermEven more unfavourably, which would justify the expression tragic, the medium-long-term prospects are presented in the government’s program, also approved by the EU, entitled: “Medium-Term Fiscal-Structural Plan 2025-2028”. The estimates for the evolution of macroeconomic figures until 2038 are presented, with regard to the growth rate of real GDP (in percentages): 2029: 0.4, 2030: 0.3, 2031: 0.2, 2032: 0.2, 2033: 0.2, 2034: 0.3, 2035: 0.7, 2036: 0.7, 2037: 0.8, 2038: 0.9.

This predicted negative development that conceals lasting austerity, in the midst of increased obligations to service the public debt after 2032, distances us from the rate of convergence of our economy with the EU average of the Pissarides plan for 2030 at 81%, but even for 2040. According to studies, for the latter to happen, the Greek economy would have to grow by then at a rate higher than the European average by 1%, something that does not emerge from the Medium-Term Program.

On the contrary, during the 1930s, we would rather diverge towards a more unfavorable position than converge. The most likely scenario is therefore to regain the pre-financial crisis convergence rate in 2050. This means that two entire generations will live worse than their parents and grandparents, something that is unprecedented in the economic history of nations.

Change of course even at the last minuteThe highlighting of the negative government forecasts regarding the medium-long-term performance of the Greek economy, which we hope will not be confirmed, is to sound the alarm, albeit slowly, and do everything possible to avoid the implementation of this negative scenario. We urgently need an institutional upgrade, which will facilitate entrepreneurship and the choice of our country as an investment destination.

Specific reforms aimed at reducing bureaucracy, facilitating new business initiatives in penetrating sectors dominated by monopolistic and oligopolistic conditions, accelerating the resolution of legal disputes, reducing corruption, etc.

The investment gap that needs to be filled is enormous. We are at 56% of the eurozone average in terms of new investments. As a percentage of GDP in our country, investments participate with only 16%, compared to 21.5% of the eurozone average. Gross fixed capital amounted to 34 billion euros in 2024. Compared to the corresponding figure in 2007, when the Greek crisis began, which was 58 billion euros, there is a gap of 24 billion.

However, beyond the quantitative lag, a major problem, perhaps a bigger one, is their qualitative composition. Business and investment activity in our country is largely concentrated in sectors with low added value. Construction, real estate and tourism. Thus, it is necessary that the allocation of whatever resources we have at our disposal from now on be guided by their optimal use and their contribution to the formation of fixed capital that increases productivity and promotes the productive and technological upgrading of our economy. Only in this way will its competitiveness be strengthened and the also major problem of the current account deficit, which is linked to the level of innovation, research and development as well as the skills of the human resource, be addressed.

With the aim of always improving the well-being of society as a whole, without exclusions, commitment is required to the implementation of a long-term visionary strategy, which will incorporate the above challenges to ensure sustainable development that is necessary, not only for the lives of citizens but also for social cohesion.