Greece's Recovery Is Real - but So Are Its Structural Problems

The Greek government has mounted a vigorous defense of its economic record, rejecting what it describes as the opposition's "20 myths" about the economy and presenting Greece as a country that has moved beyond its debt-crisis era, buoyed by solid growth, fiscal discipline and a gradual narrowing of the gap with the rest of Europe.

But three recent reports—from the Foundation for Economic and Industrial Research (IOBE), the Labour Institute of the General Confederation of Greek Workers (INE-GSEE) and the European Commission—suggest a more nuanced picture, one in which impressive headline figures continue to mask deep structural weaknesses.

The first challenge to the government's narrative concerns growth itself. The European Commission expects Greece's economic expansion to slow from 2.1% in 2025 to 1.8% in 2026 and 1.6% in 2027, warning that higher energy costs are eroding household purchasing power and weighing on consumption. IOBE has also cautioned that geopolitical tensions are likely to weaken real income growth while keeping inflation elevated.

The findings raise questions about one of Prime Minister Kyriakos Mitsotakis's central economic arguments: that Greece has entered a period of sustainable, self-reinforcing growth after more than a decade of crisis and austerity.

The country's economic model also remains vulnerable. According to IOBE, Greece continues to rely heavily on imports, suffers from chronically low domestic savings and faces a significant investment gap. Its productive base, the think tank argues, still fails to generate enough high-value-added output. The European Commission reaches a similar conclusion, noting that import demand is likely to remain strong because investment activity itself depends heavily on imported goods.

That assessment challenges the government's assertion that Greece's widening trade deficit is simply a byproduct of rapid economic expansion.

The government's claim that living standards are steadily converging with those of the eurozone is also only partly supported by independent analysis. While IOBE acknowledges progress, it says the gap with the rest of Europe is closing slowly and that real incomes remain well below European levels.

The labor market offers another example of the disconnect between headline indicators and underlying conditions. The European Commission expects unemployment to continue declining, but at a slower pace, and notes that long-term unemployment remains the highest in the European Union, reflecting persistent skills shortages and structural deficiencies.

The issue of household incomes is even more contentious. The government points to increases in the minimum and average wage as evidence that living standards are improving. Yet the European Commission warns that higher energy prices will reduce real disposable income, while INE-GSEE argues that inflation and the rising cost of living continue to place severe pressure on households and erode workers' purchasing power.

The same divergence appears in assessments of poverty and social vulnerability. While the government says absolute poverty has fallen substantially, INE-GSEE highlights continuing risks of poverty, income inequality and financial stress across large segments of the population, arguing that social sustainability remains an unresolved challenge.

Inflation, meanwhile, remains a persistent problem. Both IOBE and the European Commission note that Greece continues to experience price increases above the eurozone average and warn that inflationary pressures are likely to remain elevated.

Perhaps the most telling example concerns public debt. Athens has celebrated the sharp decline in the debt-to-GDP ratio, which has fallen by more than 60 percentage points from its crisis-era peak, as evidence of fiscal rehabilitation. But the European Commission notes that much of the improvement reflects strong nominal GDP growth and continued budget surpluses rather than a fundamental reduction in the debt burden itself. Public debt is still projected to stand at 140.7% of GDP in 2026 and 134.4% in 2027, among the highest levels in the European Union.

INE-GSEE argues that improved solvency indicators do little to alter the economy's structural vulnerabilities or its dependence on external conditions and European funding.

None of the three reports disputes that Greece has made considerable progress since the sovereign debt crisis. They acknowledge declining unemployment, strong investment supported by European funds and a significantly improved fiscal position.

Their common conclusion, however, is that behind the encouraging headline numbers lie familiar weaknesses: sluggish convergence with Europe's richer economies, an excessive dependence on imports, persistent inflation and deep social inequalities.