Wolfango Piccoli, Director of Research at Teneo's Geopolitical Advisory, in an interview with Business Daily, emphasizes the need for the government to "break the curse of the second term" and emerge from the reform inertia it has entered following the weak electoral outcome of the European elections.
Commenting on the government's measures regarding banks, Mr. Piccoli notes that these could create a constructive shock while highlighting the progress made by domestic banks.
He points out that the economy's growth rate is not particularly impressive, given the low starting point of the Greek economy and the boost from the Recovery Fund. He underscores challenges in attracting investments, the failure to evolve the country's productive model, and the difficulty of upgrading the Athens Stock Exchange to a mature market.
The Teneo Directors expresses pessimism about resolving Greek-Turkish disputes and is equally pessimistic about Europe's trajectory, highlighting the lack of leadership and vision.
Regarding risks for 2025, he singles out the uncertainties posed by a second Trump term.
- The Prime Minister announced measures targeting the banking sector, including the elimination of fees for various banking transactions. How do you view these actions?
The decision to cut the bank fees is undoubtedly good news for bank clients, especially given that fees charged by Greek banks have been among the highest in Europe—a long-standing issue. This move addresses a significant concern.
However, banks may feel the financial impact in the short term due to reduced revenues. That said, this could actually work in their favor in the long run. By adjusting their fees now, they can better compete with digital disruptors like Revolut, which are steadily gaining market share. It's a case of taking the short-term pain to secure long-term survival and innovation. Failure to adapt could mean losing out entirely to these digital-only competitors.
As for the government, while this decision is a positive step for the public, its impact on popularity remains uncertain. The government initially claimed it had limited ability to address this issue, and the timing of the action—amid declining popularity and pressure from PASOK on the extra profits tax—might appear reactive rather than proactive.
Nonetheless, the decision to cut bank fees instead of imposing an extra profits tax is politically and practically sound. It’s a more effective approach and ultimately benefits both consumers and the economy.
- Τhe Greek banking system has stabilized, is well capitalized and has reduced NPEs close to the eurozone average. What risks do you see going forward? Is the profitability of Greek banks sustainable in the long term?
It's challenging for me to comment in detail on the profitability of Greek banks, as I’m not a banking expert. However, I don’t see any major risks for them at this point. As you mentioned, they are well-capitalized, and we’ve observed interest in the Greek market from prominent European banks like UniCredit. The NPL ratio stands at 6.9%, slightly above the EU average, but it reflects significant improvement over recent years.
One challenge for banks may lie in managing the residential real estate on their balance sheets. With the government recently increasing taxes on these properties and housing becoming a politically sensitive issue, there may be growing pressure to offload some of these assets.
That said, the overall outlook for Greek banks remains positive. They are even ahead of schedule in addressing the DTC, which is another encouraging sign. All in all, the Greek banking story is one of resilience and progress, and I don't foresee any significant risks on the horizon.
- The government has set a goal for the Athens Stock Exchange to be upgraded to the developed markets. Do you believe that such an upgrade would benefit the Greek market? Can a small regional market hold its ground in today's globalized investment landscape?
That’s a tough question, as achieving this goal requires significant effort. The current capitalization of the Athens market remains quite low, and there’s still substantial work needed in areas like transparency, corporate governance, and attracting foreign firms. While it’s a worthwhile target, I see it more as a long-term objective rather than something achievable in the medium term.
Will it be beneficial? Absolutely. It’s a positive and ambitious goal to aim for. However, the challenges shouldn’t be underestimated. Take London, for instance—despite its size and historical importance, the London Stock Exchange has faced significant struggles over the past 10–15 years, and not solely because of Brexit. For a smaller, regional market like Athens, the path will undoubtedly be tough.
That said, the pursuit of this goal could drive necessary reforms in transparency, governance, and accountability, which are valuable outcomes in their own right. The ambition is commendable, but whether it can be achieved—and within what timeframe—remains uncertain. It’s certainly worth pursuing, as long as it drives meaningful progress.
- Greece has exited a painful, ten-year economic crisis and is currently growing faster than the eurozone average. Do you see any political or economic risks for Greece in the medium term? Is reforms fatigue or political instability among the risks for the economic outlook? Do you think public debt is sustainable?
I don’t see debt as a major issue for Greece. Whether debt is deemed sustainable depends heavily on the assumptions used in a DSA—'garbage in, garbage out,' as they say. However, Greece’s debt stands on good ground, with long maturities, low interest rates, and the majority held by the public sector. Additionally, the debt level has declined significantly in recent years, which is a credit to the authorities for their effective management.
Greece’s growth rate, while above the eurozone average, isn’t particularly remarkable. Growing at 2.2% or 2.3%—after the severe contraction caused by the eurozone crisis and with the benefit of RRF funds—is decent but not extraordinary. Furthermore, this growth hasn’t been widely felt by the public due to the cost-of-living crisis, despite improvements in unemployment and income levels.
The main challenge domestically lies with political inertia. Since the European elections, where results fell short of expectations, the government has been relatively passive and seem to have lost ambition. With a long road ahead to the 2027 elections and ND underperforming in opinion polls, the question is whether the government can regain momentum and revive reforms. In Greece, there’s talk of a 'second-term curse,' and it could manifest if ND continues with its current inaction. However, a renewed focus on reform could still secure their position.
Externally, the main risks come from the broader European and global economic environment. The eurozone is expected to grow at just 0.9% to 1% next year, reflecting a sluggish economy with weak leadership across the continent. Germany lacks a government until at least the end of March, Macron is politically weakened, and Spain is governed by a minority coalition. Compounding these challenges are global factors: Trump’s return to office could bring new tariffs on Europe, and the war in Ukraine continues after nearly three years.
For Greece, the external risks outweigh domestic ones. However, domestically, the key question remains: will New Democracy use this time to reignite reforms, or will they coast on inertia until 2027? The answer will determine their fate.
- Criticism has been voiced that investments are not progressing at the desired pace. What is your opinion? Is there a risk that the lag in investments could undermine the economy's growth moment?
Credit where it’s due—the government has been implementing reforms, which deserves recognition. However, the challenge with investment in Greece is broader. For instance, while FDI last year was just under €5 billion, nearly 50% of it went into real estate. This is not particularly productive for the economy and raises concerns about social cohesion.
Looking at investment growth, the government’s budget forecasted a 15% increase last year, but the actual growth fell well short of that, highlighting the persistent challenges. Fundamentally, Greece’s economic model hasn’t changed significantly. It remains heavily reliant on services, particularly tourism, with construction playing a supporting role.
Another key issue is the return of the current account deficit, which reached 6.2% of GDP last year. This occurred despite significant fiscal adjustments and notable competitiveness gains from reduced labor costs compared to other countries. The persistence of the deficit underscores the lack of substantial transformation in the economic model.
Without addressing these structural issues and shifting towards a more diversified and productive economy, attracting sustainable investment will remain difficult.
- Greece has regained investment grade status but remains in distance from the “A” grade it had reached before the financial crisis. Is it possible, in your view, for Greece to be upgraded to “A” in the medium term?
As they say, predicting the behavior of rating agencies is a fool’s game. Achieving further upgrades is a tough target, primarily due to the large debt burden. While Greece’s debt-to-GDP ratio has decreased significantly, it still stands at around 160–162%, which remains a considerable challenge.
Progress on debt reduction will be a key factor, but upgrades will also depend on continued reforms and addressing structural issues, such as the current account deficit. Without meaningful progress in these areas, further upgrades will remain elusive.
At best, reaching higher ratings might be a medium-term goal, but at this stage, it feels quite far-fetched.
- Within an unstable geopolitical context, Greece and Turkey are taking steps towards normalizing their relations and perhaps solving their disputes over Exclusive Economic Zones and mineral rights in the Aegean. Are you optimistic that these diplomatic initiatives can bear fruits in the foreseeable future?
No, I am not optimistic but it’s important to emphasize the value of continued dialogue between the two countries. Talking and negotiating are positive steps, and this process helps reduce risks.
That said, the two sides remain far apart on the key issues you mentioned, and I believe significant progress on resolving these disputes will be challenging. However, the commitment to maintaining open lines of communication is a positive development for both sides—not just for Greece, but for Turkey as well.
While we shouldn’t expect substantial breakthroughs in resolving existing disputes, the ongoing dialogue is a step in the right direction.
- At a time when there is intense debate about Europe's competitiveness and the widening gap with the U.S. and China, the EU's strongest economies, Germany and France, are facing serious political and economic challenges. How do you view Europe's trajectory in this context?
It’s a difficult situation. Europe is clearly on the back foot, with two major economies like Germany and France facing trouble. More critically, as I mentioned earlier, there’s a lack of leadership and political will to drive significant progress, whether through deeper integration or even implementing key recommendations from Mario Draghi’s report.
The political majorities needed to push forward in Berlin, Paris, and other capitals are no longer there. This makes progress on long-standing goals like the Capital Markets Union and Banking Union seem unlikely. On the brighter side, we might see some positive movement in the defense industry, where a joint European effort appears more feasible.
Europe is undoubtedly in a tight spot. Compounding this is the risk of external pressure, particularly from a potential Trump administration, to adopt a more confrontational stance toward China. Reaching a unified European position on China will be challenging, given the differing, and sometimes divergent, perspectives of Berlin and Paris.
The outlook for Europe is tough, and I have little doubt about the scale of the challenges ahead.
- Is it feasible for a union of states like the EU to compete with countries that have a centralized state structure, such as the U.S.? What are the prerequisites for the EU to enhance its position, both economically and politically, on the global stage?
I think it’s perfectly feasible. The EU remains the world’s largest trading bloc, and its future depends on whether decision-makers have the vision and courage to drive further integration at the European level while modernizing Europe’s economic model. The issue isn’t the structure of Europe itself, but rather the political will—both domestically and at the EU level.
That said, Europe faces a tougher global environment. The risk lies in being squeezed between the U.S. and China, unable to chart its own course due to political shortcomings. Take the car industry, for example, which is currently under intense pressure from Chinese competition. While the European Commission has initiated tariffs, the sharp divisions among EU member speaks loudly on this issue, including Greece abstaining from the vote, highlight the political fragmentation that weakens Europe’s position.
The outlook is challenging, but I don’t believe the structure of the EU is to blame. Instead, the focus should be on Europe’s politics—regaining competitiveness and making the hard, necessary decisions to secure its future.
- If you had to highlight some of the challenges or risks facing the global economy in 2025, which ones would you emphasize?
I think there's going to be a huge amount of uncertainty from the 20th of January onwards. I think the Trump administration has learned the lesson from the first term in office. They're going to arrive on the 20th of January with a plan and with a team, and they're going to launch many new policies and initiatives very quickly and some will be relevant to the global economy. Trump will be able to launch new tariffs using executive orders, without the need to go through Congress.
In his first 100 days in office during his first presidency, Trump signed 29 executive orders. This time we may see more executive orders signed during his first week in office.
Inevitably, this is will create a huge amount of uncertainty. Think about trade tariffs, for example. Think about the fate of Ukraine and what it means not just for Kyiv but wider European security. The conflict in the Middle East can escalate at any time. Counting on Trump’s support, Israel could decide to address the threat posed by Iran in a much more aggressive way.
In short, uncertainty is a key issue for 2025, in an environment where economic growth is still okay, but not particularly strong specifically in developed economies.
As for the US, the story to follow, in my view, will be the fiscal one. Trump may have big plans for the US economy, but he also has a big debt problem that could make it impossible to delivering on those plans.
And if you consider that Trump’s plan to cut taxes may add another USD 4 trillion to US debt over the next four years, the fiscal challenge is substantial. This is not a story for 2025, but it's something to keep an eye on, especially when you consider that the ten-year US Treasury yield is already at 4,3%. A very different story from 2017, when Trump got into office the first time, when the yield was around 1,7% - 1,8%. So the bond market here has sent a signal to the administration that on the fiscal side they need to be somewhat responsible. And that is something that is very difficult to do in the US, given the way in which the US Congress works and how polarized politics is. So that is another issue to keep an eye on, because if we end up in a situation where we have a fiscal crisis in the US, everybody is going to have to pay the price for that, not just the Americans
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