Executive Summary 

Greece has undergone an economic transformation, emerging from its sovereign debt crisis to become one of Europe’s strongest performing economies.  GDP growth has outpaced the Eurozone average as the country has demonstrated fiscal strength and discipline in the decade-and-a-half following the Eurozone Crisis.  Greece currently is on track to maintain a consistent primary surplus, particularly notable in a world where governments are expected to “Run it Hot” in an attempt to grow out of budget deficits.  

 As a result, Greek equities have meaningfully outperformed European and global indices over the last three years. Despite these positive developments and strong market performance, equity valuations remain attractive relative to peers as sentiment, market size and liquidity likely limit investor allocations.  

 We recommend a tactical allocation to Greece. Over the near term, equities may experience selling pressure due to index reclassification. However, given the fundamental story, near-term weakness may provide a more attractive entry point. 

Economic & Political Story 

Greece’s economic turnaround has been supported by recovering private consumption, growing foreign direct investments, political stability and fiscal discipline, providing capacity to further stimulate growth. 

GDP Growth. Real GDP grew 2.3% in 2024, more than double the Eurozone average of 0.9% and forecast to grow 2.1% in 2025 and 2.2% in 2026, continuing to outpace ECB-projected Eurozone averages of 1.4% and 1.2%, respectively.  Private consumption has recovered alongside an increase in real wages, supported by a tightening labor market as unemployment has fallen from nearly 30.0% in 2013 to 7.5%. Foreign direct investment has risen nearly 3.5x over the past decade with increased capital flows from Asia and the Middle East. 

Fiscal Turnaround. Greece maintained a primary fiscal surplus of €8.0 B for the full-year 2025, handily outperforming its target of €5.3 B, as most Eurozone peers continue to run deficits. Going forward, the country is targeting a primary surplus of 2.5% over the medium-term. Public debt remains elevated at 140% of GDP, but down from 210% in 2010 and trending lower as Greece has made early debt repayments. 

The fiscal consolidation has not relied on austerity but lower “growth-friendly” individual and corporate tax rates, public sector wage increases and social support measures. Prime Minister Kyriakos Mitsotakis recently announced tax cuts targeting the middle class and individuals under 30. As Mitsotakis noted during the announcement, “most European countries are being forced to impose austerity measures. We are in the opposite position.” 

Political stability. Mitsotakis has served as Prime Minister since his election victory in 2019, securing an outright parliamentary majority in the June 2023 elections, winning 40% of the vote and, providing a clear mandate to advance tax, pension reform, and labor market liberalization legislation. Consistent leadership is in stark contrast to earlier political volatility.  

Market Story 

On a USD basis, the ATHEX Composite Index returned +50.4% in 2025 and +177.4% (+40.5% annualized) over the last three years, meaningfully outperforming European and global indices. 

 Valuations. Despite this strong performance, equity valuations remain relatively attractive. 

• On a trailing and forward basis, the Athens Stock Exchange (ASE) is priced at a lower multiple relative to other major EM countries, trading at a P/E of 11x to trailing 12-month (TTM) earnings and 10x to forward earnings. 
•  Banks, which dominate the index (50% weighting to the 4 largest banks), trade at 11.6x TTM P/E, roughly in line with European banks. Looking ahead, UBS forecasts indicate a 10%+ discount on forward earnings (8.4x forward P/E compared to 9.5x for European banks). 
• The cost of capital for Greece compares favorably, Greek 10-year bonds now yield 3.35% compared to 3.34% for France and 3.39% for Italy. 

Capital Constraints. Lower valuation multiples may reflect heightened perception of Greek market risk as well as structural limits on institutional allocations.  

• The MSCI Greece Index dropped nearly 80% from 2014 to 2016 and has yet to fully recover the drawdown. The experience may weigh on investor sentiment, with investors unwilling or only reluctantly allocating capital. 
• As noted, banks represent a large percentage of the market, making the index sensitive to the banking cycle and raising portfolio diversification challenges.
• Greece’s primary stock exchange commands a humble market capitalization of $124 B (44% of projected 2025 GDP) compared to European markets, including the UK ($3.9 T market capitalization, 98% of GDP), France ($3.8 T, 113%), Italy ($1.1 T, 43%), and the US ($61.9 T, 202%). 
• The smaller market capitalization is evident in liquidity, with average daily trading volume of €215 MM ($255 MM) which is 1/64 and 1/315 of the Euronext (€13.8 B) and NYSE ($80.6 B), respectively.  

Technical Weakness. Greece is currently under review by FTSE Russell and MSCI for reclassification from an emerging to a developed market. History suggests the reclassification may create net near-term selling pressure. 

• If reclassified, Greece’s expected weight in global indices would drop by a factor of 10x: 0.37% in the MSCI Europe Index and 0.06% in the MSCI ACWI, compared to 4.4% in the MSCI EMEA and 0.6% in MSCI EM. FTSE projects 0.07% and 0.078% allocations in Global All Cap and Developed All Cap indices, respectively, from 0.84% in the FTSE Emerging Markets Index.
• JPM believes the lower representation is likely to result in less attention, less research and ultimately less money invested, estimating the reclassification could drive net outflows of $500M, or 0.6%-0.7% of the ASE’s $79-90 B free-float. 

Though anecdotal, a net outflow is consistent with the 2000 reclassification. Monthly ASE returns from 5 years before and after the reclassification announcements show: 

• Positive stock market performance prior to the announcement (Pre-Announced). 
• Negative returns between the announcement and effective date (Announced – Effective). 
• Continued negative returns after the effective date (Post-Effective). 
• This pattern was reversed during the 2013 downgrade. 

Conclusion 

We recommend a tactical satellite allocation to Greece. The country has undergone an economic transformation, emerging from its sovereign debt crisis to become one of Europe’s strongest performing economies and markets. GDP growth has outpaced the eurozone average as the country has demonstrated fiscal strength and discipline. This progress has been recognized by the major ratings agencies and index providers. After losing investment grade status in 2010 and being reclassified as an emerging market, Greece is again rated investment grade and in the process of being reclassified as a  developed market. 

 Despite these positive developments and strong market performance, equity valuations remain attractive relative to peers as sentiment, market size and liquidity remain constraints.  

 There are passive and active strategies with differing liquidity and costs available to gain exposure to Greek equities, including: 

• A passive ETF providing liquid, lower cost exposure to the MSCI Greece Index. 
• A privatepartnership providing active exposure to a concentrated portfolio equities and non-performing loans with monthly redemptions on 45-day notice, a 1-year 5% early redemption fee and no gate.

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