How the EU Recovery Fund Is Changing the Investment Geography of Greece — and Which Regions Are Being Left Behind

There’s something subtly amazing about strolling through a Thessaloniki neighborhood on a winter’s afternoon and seeing the scaffolding encircling structures that appeared to have been abandoned to time just two years ago.

Thicker windows are being installed by workers wearing orange vests. With the patient suspicion of someone who has witnessed numerous programs come and go, a retired schoolteacher leans out from her balcony and observes the men below. She claims that this time is different because the program was delivered.

This small, almost domestic feeling is a part of a larger change taking place throughout Europe. The EU Recovery Fund, a post-pandemic tool that few outside of Brussels took seriously when it was first announced, has gradually and clearly altered the flow of capital across the continent. Some of the bloc’s most ambitious investment plans are currently being hosted by Southern European nations that were previously viewed as peripheral, sometimes condescendingly so. Specifically, Greece has emerged as a case study. With a total mobilization target of €60 billion, the nation’s Greece 2.0 plan unlocked about €30.5 billion in EU funds. Such figures do more than just finance initiatives. They divert investors’ attention.

Perhaps there was always going to be a shift in the geography of European money. Despite making up a sizable portion of the bloc’s population, Italy, Spain, Portugal, and Greece were long viewed as risk markets, where capital moved cautiously, if at all. That reasoning was, at least momentarily, reversed by the Recovery Fund. Project pipelines appeared out of nowhere. Ministries had money to spend all of a sudden. Abruptly, foreign banks that had discreetly closed advisory desks in Athens ten years prior began reopening them.

The change is evident in less glamorous settings. For example, more than 100,000 homes will be retrofitted as part of Greece’s residential energy renovation program, with an average primary energy savings of about 30%. That’s the kind of policy that subtly changes household balance sheets and, eventually, the construction industry, but doesn’t make magazine covers. These slow-burning initiatives appear to be more important to investors than the ones that make headlines. They may be correct. It seems that the fund is generating a new type of demand that European industry hasn’t experienced in a while: predictable, multi-year, government-anchored.

Another piece of the puzzle is the push for digital transformation. Approximately 100,000 SMEs are anticipated to benefit from a voucher program targeted at small and medium-sized businesses, and over 500,000 students from low-income families received devices as part of another program during the pandemic. These interventions are not futuristic or exotic. To be honest, what makes them intriguing is that they are the unglamorous plumbing of a digital economy. Investors in technology used to take flights to Stockholm or Berlin. Due to the recent overnight growth in the customer base of half a million, some of them are now taking flights to Athens.

However, it remains uncertain if this momentum will continue after the disbursement window. There are many critics who point out that Greece’s vulnerability has always been its ability to absorb EU funds. The pace of bureaucracies is slow. Public procurement is still complicated. There will unavoidably be audits, delays, and covert downsizing of some projects. As this develops, it’s difficult to avoid wondering if the Recovery Fund will be viewed as another cycle of hope or as a structural turning point. Perhaps both. Right now, it’s difficult to dispute that the cement is being poured in either direction.