Athens. Greece is entering the international competition for foreign investment capital with a new strategy. The government of conservative Prime Minister Kyriakos Mitsotakis wants to encourage foreign companies to set up new production facilities in the country with aid, tax breaks, loan guarantees and accelerated approval procedures.
The funding concept is aimed primarily at the manufacturing industry, research, applied innovation and artificial intelligence (AI), biotechnology as well as the defense and aviation industries. Other sectors eligible for funding include logistics, healthcare and social welfare, such as nursing homes.
In doing so, the government is setting a counterpoint to an investment boom that has been heavily influenced by real estate, tourism and other services in recent years. In the future, Greece would like to extract more value from capital inflows and increase the productivity of the country's economy.
The Ministry of Development has submitted a draft law, which is now going to parliament after the public consultation process has been completed. The core of the new approach is so-called greenfield investments, i.e. new investments in which a company builds a new plant, location or business unit from scratch - often on undeveloped land.
The construction of new facilities, but also the expansion of existing production capacities, the diversification of production and the modernization of production processes are supported. Investment projects outside metropolitan areas are given priority in order to help structurally weak regions.
Projects with an investment volume of at least ten and a maximum of 50 million euros are eligible for funding. State support can reach up to 20 million euros per project. The funding concept also includes tax exemptions, loans with guarantees from the state development bank HDB and the simplified issuing of residence permits for investors and employees from third countries.
Greece wants to speed up the previously lengthy approval process. Complete applications should generally be processed within two months. If this deadline is exceeded, responsibility passes from the approval authorities to the Minister of Development, who can decide within another month.
Expenses for buildings, new machines and systems as well as for intangible assets such as patents, licenses and software can be funded. The mere purchase of company shares, on the other hand, is not considered worthy of support.
Greece does not want to use taxpayers' money to pay investors to take over existing assets. The new capital is intended to create additional added value.
Foreign investments in the energy sector, tourism and real estate are also not eligible. In recent years, a significant portion of foreign capital has already flowed into these sectors.
Between 2015 and 2025, 73 percent of total foreign direct investment (FDI) was in the services sector and the real estate market. Now the structure is to change: The government would like to use the new funding instrument where Greece still has some catching up to do.
The change in strategy comes at a time when FDI in Greece is increasing significantly. According to calculations by the World Trade and Development Conference UNCTAD, in 2020 they amounted to 3.2 billion euros, in 2022 they were already 8.5 billion, and last year they reached 12.9 billion euros. With a cumulative investment portfolio of around eight billion euros, Germany is one of the largest foreign investors.
For the government, it is now less important to bring foreign capital into the country. Rather, the quality of investments should increase, i.e. their contribution to increasing the added value and productivity of the Greek economy.
Because low productivity is one of the most serious weaknesses of the Greek economy. It is due to the small structure of the companies and the high proportion of services in the gross domestic product, but also a result of the investment gap from the years of the national debt crisis.
According to figures from the EU statistics office Eurostat, this gap amounts to more than 100 billion euros. In 2007, a year before the global financial crisis and the subsequent sovereign debt crisis, the investment rate in Greece was 25.5 percent, still above the EU average of 22.6 percent.
At the height of the crisis in 2013 it was only 11.5 percent. Last year the rate rose to 16.9 percent, but was still more than five percentage points below the EU average.
The new legal framework serves to “reduce the overall economic investment gap and primarily promote value-added, technology-driven projects,” says the Development Ministry. The new funding concept could therefore be an important point of departure. Its success will determine whether the Greek economy can overcome its chronic structural weaknesses after the comeback from the debt crisis, which lasted until 2018.
