Assessing Greece's Fiscal Recovery: Insights from the 2025 Jan-Oct Central Government Primary Budget

Greece's fiscal trajectory has long been a focal point for investors and policymakers navigating the Eurozone's periphery. The 2025 Jan-Oct central government primary budget data, however, signals a marked shift in the country's economic narrative. With a primary surplus of €9.45 billion-surpassing its target by nearly 80%-Athens has demonstrated a blend of disciplined expenditure and robust revenue collection that challenges historical perceptions of fiscal instability in the region according to data. This performance, coupled with a credit rating upgrade to BBB from Fitch and a projected debt-to-GDP decline, raises critical questions about Greece's role in the evolving investment landscape of the Eurozone.

A Surplus Built on Revenue and Restraint

The Greek government's ability to generate a primary surplus of €9.45 billion in the first nine months of 2025 underscores a transformation in fiscal management. Tax revenues, particularly from income tax and value-added tax (VAT), outperformed expectations by 4.1%, reaching €52.7 billion. Meanwhile, expenditures of €52.26 billion fell €3.4 billion short of targets, driven by delays in social security and defense payments. This combination of strong revenue and controlled spending has positioned Greece to meet its annual budget goals, reflecting a departure from the austerity-driven strategies of the past.

The surplus is not merely a short-term anomaly. It aligns with broader structural reforms, including digitalization of tax collection and streamlined public procurement processes. These measures have enhanced transparency and reduced leakage, a critical factor for a country that once faced skepticism about its ability to manage public finances according to analysis.

Credit Rating Upgrades and Debt Sustainability

Fitch's upgrade of Greece's long-term credit rating to BBB in Q1 2025-from BBB--cements this progress. The agency cited a nearly 20 percentage point reduction in the public debt-to-GDP ratio between 2024 and 2025, with projections of further declines to 120% by 2030. This trajectory is bolstered by Greece's 4% annual GDP growth, which outpaces the Eurozone average, and consistent primary surpluses that have become a hallmark of its fiscal policy.

The debt reduction is particularly significant given Greece's history of crisis. In 2010, its debt-to-GDP ratio exceeded 160%, necessitating three international bailouts. Today, the country's fiscal credibility is being rewarded: Fitch notes that Greece's macroeconomic fundamentals have shown durable strengthening. This shift has not gone unnoticed by investors. Fund managers have taken overweight positions in Greek government bonds, attracted by what they perceive as improved risk-adjusted returns compared to Nordic peers according to Morningstar analysis.

A Periphery Rebalanced: Greece vs. Its Neighbors

While Greece's recovery is notable, it is part of a broader but uneven trend across the Eurozone periphery. Spain and Portugal have also made strides, with Spain's GDP growth projected at 2.5% in 2025 and Portugal nearing an A credit rating. Italy, however, remains a wildcard. Despite attracting 50% exposure in some bond portfolios, its debt-to-GDP ratio is expected to hover near 140% through 2025, compounded by political instability and weak growth.

This divergence has reshaped investment dynamics. The European Central Bank's (ECB) sovereign-bond-buying programs have narrowed spreads for Greece and Spain, but Italy's yields remain volatile. For Greece, the 3.2% projected 10-year bond yield for Q3 2025-down from peaks above 7% in 2020-reflects renewed market confidence. Yet, as Morningstar notes, investors must still weigh the risks of a current account deficit (6% of GDP) and reliance on domestic demand-driven growth.

Investment Implications: Caution and Opportunity

The Greek case offers a template for how fiscal discipline can unlock credit access and investment. Its BBB rating has already reduced borrowing costs, enabling infrastructure projects and green energy initiatives that could further diversify the economy. For institutional investors, Greek bonds now represent a "high-conviction" trade, particularly in portfolios seeking yield in a low-interest-rate environment according to Morningstar analysis.

However, the Eurozone periphery is no longer a monolith. While Greece and Spain have emerged as relative leaders, Italy's challenges highlight the fragility of the region's recovery. Investors must assess each country on its merits, balancing fiscal metrics with structural vulnerabilities. For Greece, the key risks include inflationary pressures from high living costs and the sustainability of its current account deficit.

Conclusion

Greece's 2025 fiscal performance is a testament to the power of policy consistency and institutional credibility. The primary surplus, credit upgrades, and debt reduction have repositioned Athens as a more attractive player in the Eurozone's sovereign debt market. Yet, as with any emerging narrative, investors must remain vigilant. The periphery's rebalancing is ongoing, and while Greece has earned its place in the spotlight, the broader Eurozone's stability will depend on whether other nations can replicate its success.