**Credit Expansion Underpins Bullish Outlook for Greek Banks**
The resilience of the Greek economy is emerging as a significant factor in the positive investment outlook for Greek banks, according to a recent report by Jefferies. The investment bank has maintained a "buy" recommendation for four major financial institutions: Alpha Bank, Eurobank, National Bank of Greece, and Piraeus Bank. Jefferies asserts that Greek banks are operating within one of the most attractive macroeconomic environments in Europe, despite currently trading at a discount of approximately 15% compared to the broader European banking sector.
The report, which was highlighted by the Greek business outlet Newmoney, draws attention to recent economic data following Greece's first quarter GDP figures for 2026. It notes that Greece continues to outperform the European Union in terms of economic growth. In 2025, Greece recorded a real GDP growth of 2.1%, significantly higher than the EU's 1.4%. This trend of outperformance has persisted for five consecutive years. The positive momentum continued into 2026, with Greece achieving a year-on-year growth rate of 2.0% in the first quarter, compared to just 0.7% across the EU.
Investment and private consumption are identified as the primary drivers of this economic expansion. The Bank of Greece has forecasted a GDP growth of around 2% for the years 2027 to 2028, even after the conclusion of the NextGenerationEU funding in 2026. The report also cites comments from the governor of the Bank of Greece, who indicated that the country has transitioned from a focus on recovery to what he termed "strategic acceleration." This shift aims to achieve long-term convergence with the EU by addressing the investment gap and steering clear of previous macroeconomic imbalances.
On the fiscal front, Jefferies underscores Greece's improved financial position, noting that it was one of only five European nations to report a budget surplus in 2025. This surplus reached 1.7% of GDP, contrasting sharply with the EU average deficit of 3.1%. Additionally, the primary surplus stood at an impressive 4.9% of GDP. For 2026, Jefferies anticipates that Greece will maintain a robust fiscal stance, projecting a primary surplus of 3.2% of GDP. The government has also demonstrated its capacity to introduce €0.8 billion in support measures following a strong fiscal outcome in 2025, aimed at alleviating the impact of rising energy prices.
The report highlights debt reduction as another critical theme. Although Greece's public debt remains high at 146% of GDP—substantially above the EU average of 89%—Jefferies points out that this ratio has significantly decreased over time. Since 2016, Greek debt has fallen by 40%, and by around 60% since 2020, thanks to sustained economic growth and fiscal discipline. Projections from the International Monetary Fund suggest that Greece could fall below Italy in debt levels this year and below France by 2029, with expectations that the debt-to-GDP ratio will dip below 100% by 2035.
For the banking sector, Jefferies notes that the most immediate benefit of the favorable macroeconomic environment is evident in credit expansion. In April, total lending in Greece surged by 8%, with business loans increasing by 11%. These growth rates are notably higher than the EU average, indicating a robust lending environment in Greece. Investment activity remains crucial to the economic outlook, with an 8.9% increase in investment recorded in 2025, and a further rise of 8.8% anticipated for 2026. However, investment still represents only 17% of GDP, compared to 21% in the EU, suggesting there is potential for further convergence.
Additional support for the economic landscape is expected from the Recovery Fund lending program, which allocates €18 billion to Greece, of which €5.8 billion has already been disbursed to final beneficiaries, along with €3.9 billion in bank co-financing.
In conclusion, Jefferies posits that the combination of stronger economic growth, fiscal discipline, declining debt levels, and robust credit demand continues to position Greek banks favorably compared to their European counterparts. As the country navigates its economic landscape, the outlook for Greek banks remains bullish, bolstered by a resilient economy and supportive macroeconomic factors.