Greece is slowly recovering from the economic crisis – although even “crisis” hardly seems to capture the depths of the country’s economic plummet – that plunged the country into financial lockdown, with massive restructuring commitments to the Troika, record unemployment, and nose-diving foreign investment. With the darkest days of recession now past, and with a new government in power, the country finds itself peering forward, hoping that the light it sees coming towards it through the lingering fog is the sun of a new day … and not an oncoming train.
The Greek economy, which averaged about 4% growth between 2003 and 2007, fell into recession in 2009 as part of the global financial crisis. By 2013, the economy had contracted 26% from its pre-crisis level of 2007. The first signs of nascent recovery arrived in 2014, when the country balanced the budget (not including debt repayments), issued government debt in financial markets for the first time since 2010, and reported its first economic expansion (a modest 0.7% growth in GDP) since 2007.
Nonetheless, frustration with austerity measures helped propel the far-left Coalition of the Radical Left (SYRIZA) party into government in the legislative elections of January 2015. Despite its pre-electionpromises to end those austerity measures, however, the SYRIZA-led government imposed capital controls in June 2015 and subsequently agreed to a new USD 96 billion bailout in order to avert Greece’s exit from the monetary bloc. Popular discontent with the slowness of the recovery and SYRIZA’s broken promises eventually led to the party’s rejection and the success of the New Democracy party in the July 7, 2019 legislative elections.
Initial returns on New Democracy’s governance are positive. Indeed, if one didn’t know better, one might identify an actual sense of hope in the air. Virginia Murray of Watson Farley & Williams says she’s optimistic about the country’s recovery; at least, she says with a smile, there is “not much that is likely to get worse.” And she’s encouraged by the first few months of the New Democracy government. “It’s still early but their progress so far is remarkable, with a lot having already passed.” She explains that “a lot of the headline work is done,” and it just now needs to be implemented.
According to the International Monetary Fund, Greece’s 2018 GDP makes it the 50th largest economy in the world, just behind Iraq and Peru (Romania is ranked 46th), and just ahead of New Zealand and Qatar (and, Hungary and Ukraine, at 55th and 57th, respectively).
Still, Murray insists that those hoping for a return to the pre-crisis economy are misguided. “Getting back to the pre-crisis period is not really the goal one should look for,” she says, “as the market was living a fantasy off of unsustainable loans.” Instead, she says, “where you can talk about pre-crisis levels is employment – and that’s slowly picking up.” Ultimately, she says, “the important thing is that we are slowly walking away from the cliff.”
Potamitis Vekris Managing Partner Stathis Potamitis is also encouraged by early signs from the country’s new government, noting that it “started off enthusiastically and they seem to know what they are doing.” Still, he says, there’s no shortage of problems needing attention, pointing to areas such as labor, pensions, and bankruptcy. “Yes, there has already been quite a bit of work done,” he says, “but there is reform and there is reform.”
As in so much of South Eastern Europe, infrastructure remains a source of real potential for economic stimulation (and legal work) in Greece. Ilias Anagnostopoulos, the Managing Partner at the Anagnostopoulos Law Firm, points to the EUR 8 billion Hellinikon development project which will transform the former airport site south of the city into a multi-purpose complex that will include hotels, luxury apartments, amusement parks, restaurants, bars, and a casino. The project is expected to create 10,000 jobs during the construction period and 75,000 jobs once mature and to attract over one million new tourists a year – contributing over EUR 14 billion in taxes in taxes to the Greek State.
Of course, Greece’s reputation as a tourist magnet is long-established – the sector is responsible for an impressive 18% of the country’s GDP – and Anagnostopoulos reports a surge in tourism in recent years, leading to a corresponding increase in investments in the sector. According to Anagnostopoulos, “anything that relates to [tourism] is quite attractive these days.” Not coincidentally, he says, Hellinikon is hardly the only airport drawing the attention of potential investors, and he suggests that peripheral airports on some of Greek’s more popular islands also represent a promising investment opportunity.
Real estate benefits from the tourist boom as well. The large real estate bubble in Greece burst in 2009, Anagnostopoulos says, with “a 40-50% drop in the value of real estate assets,” but he describes “a slow climb back up.” Investors are primarily focused on holiday residential assets, he says, with several Israeli funds and Chinese investors also looking at general residential assets.
And of course Greece’s shipping industry, which is valued at about USD 9 billion a year – USD 17 billion when related business is included – remains a critical element of the nation’s economy, responsible for about seven percent of the country’s GDP (second only to tourism) and directly employing over 190,000 people. As Anagnostopoulos says, the shipping sector “always has been and will likely continue to be the blue chip of the country,” and he says he “doubt[s] the country will ever lose the competitive edge it has in this area anytime soon.”
Virginia Murray notes that energy remains a particularly active area in Greece as well, and she reports that the country remains one of the few in the region with a firm support for renewables – a support that, she says, can only increase as the risk profile of the country decreases.
In short, according to Stathis Potamitis, “Greece is cheap at the moment,” and he says there is considerable interest from foreign investors – particularly distressed assets funds from the UK, France, Germany, or even the US – looking at infrastructure and NPL deals.
The Legal Market
Of course, Greece’s slow-but-steady recovery has benefited commercial lawyers as well, allowing them to breathe easier than they have for many years. Still, Anagnostopoulos says, while the legal market “has pretty much recovered, it is still sluggish,” especially for full-service corporate/commercial firms like his, as the specialized boutiques “took less of a hit.” Unsurprisingly, Anagnostopoulos says, the market is “kind of hoping the economy will continue to pick up.”
Few international firms have seen cause to extend their footprints to Greece – and, with the exception of Norton Rose Fulbright, none of the firms which pride themselves on their global footprints (such as Baker McKenzie, Dentons, DLA Piper, or CMS) – and those that do have offices in the country tend to focus primarily on the country’s shipping industry. In addition, none of CEE’s regional firms is in Greece – even those that have opened in Turkey (like Kinstellar and Schoenherr) and Belarus (like CHSH and Peterka & Partners).
Virginia Murray suggests that, at the end of the day, there is little need for more international firms on the ground in Greece, as she believes the leading Greek law firms are fully able to provide service at a high level and work in partnership with the internationals. In any event, she points out that many international firms have solid Greek desks in London that act as a liaison.
Indeed, Potamitis says that most of the offices of international firms that are in Greece represent little more than “listening posts” to provide direct contact on the ground where necessary, with the real work carried out in London.
While few internationals and no regional firms have expanded to Greece, several Greek firms – such as Drakopoulos (with offices in Albania, Romania, and Cyprus) and Rokas (with offices throughout South East Europe, reaching as high as Prague and Kyiv) – have attempted to extend their footprints northward. That phenomenon may have reached its end, however. Ilias Anagnostopoulos explains that “several Greek firms followed some of the Greek banks that were increasingly active in the region,” but “as those clients’ businesses slowed down, so did the momentum of domestic firms pushing outwards.”
Of course, the Big 4 are in Greece, as they are everywhere else – indeed, Potamitis Vekris began in 1997 as the legal arm of EY in Greece, eventually following outward investment by Greek banks and companies like Hellenic Petroleum to expand its coverage to Romania, Turkey, Bulgaria, Macedonia, and Serbia as well, before splitting off and going independent in 2009. The Big 4 famously retracted their formal provision of legal services around the world following the Arthur Anderson/Enron debacle, and although the consulting giants are starting to regenerate those amputated limbs, that expansion hasn’t really reached Greece’s legal market in any significant way
That wave of outward investment from Greece has dissolved and disappeared, and Potamitis doesn’t expect it to return in the near future. “The years following the crisis saw a lot of retrenchment,” he says, “and I don’t expect a new outward wave anytime soon.” As a result, he says, there is very little outbound work of any kind, he says, and even those Greek entities that have been selling assets abroad – most notably the National Bank of Greece (see Box) – have by and large used foreign counsel to do so.
Greece is, unmistakably, improving. As Ilias Anagnostopoulos says, the economy is “much better – far more so than in 2011 or 2015 when no one knew what tomorrow would bring.” Still, few experts are willing to tempt fate by claiming the bad times are gone for good. Nonetheless, Virginia Murray describes a sense of “quiet optimism” in the market. According to her, Greece has “seen defeat plucked from the jaws of victory too many times in the past, but there is a sense that things are calming down.”
This Article was originally published in Issue 6.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.