A research note titled "Fiscal Space and Sovereign Bond Market Developments in Selected European Economies," published by the Parliament's State Budget Office, underscores the necessity for Greece to maintain its commitment to fiscal stability while further reducing its debt levels. The report also calls for fair treatment in discussions concerning the enhancement of defense spending within the European Union.

"The fiscal performance of Greece is commendable; however, recent developments in Europe necessitate ongoing vigilance," the report observes. It highlights that Greece has successfully achieved primary surpluses and significantly reduced its debt-to-GDP ratio by 54.8 percentage points since 2021.

Examining the period from 2016 to 2024, the report states, "Greece has made noteworthy strides in fiscal consolidation. From Q4 2016 to Q1 2020, Greece consistently recorded the highest primary surpluses as a percentage of GDP among the countries analyzed." Nevertheless, it points out that "during this timeframe, these fiscal efforts did not substantially translate into a decrease in the debt-to-GDP ratio due to a constraining low economic growth environment."

The report further emphasizes the importance of noting that by the end of 2024, approximately 70% of Greek public debt will be held by the foreign official sector, a result of restructuring agreements made during the crisis. This segment of debt is structured at historically low interest rates—well below current market rates—resulting in a manageable effective interest rate for debt servicing. Additionally, the average maturity of Greek debt is notably long, estimated at 18.8 years by the end of 2024.

The report highlights that "the favorable composition of Greece's investor base, coupled with supportive policies from the European Central Bank, helps shield the Greek bond market from short-term volatility."

However, the report cautions that "prudence and vigilance are imperative, given the potential risks on the horizon." Despite the advantages presented by a favorable investor composition, "current favorable conditions may not persist indefinitely."

It further notes that "the heavy dependence on foreign capital poses a risk, especially as foreign investors may shift towards greater caution during times of crisis." Nevertheless, the report indicates that “such challenges, while important to monitor, remain a distant concern for now”.

The report underscores that "commitment to fiscal stability and prudent management, bolstered by structural reforms aimed at enhancing growth, will be essential for future upgrades."

 It highlights Greece's "historically high debt-to-GDP ratio as a significant risk factor, pointing out that Greece faces a longer path to meet the EU’s debt limit of 60% compared to other nations. While the country has made commendable progress in debt reduction, achieving the largest drop in the Eurozone since the pandemic, ongoing efforts are crucial. This necessity is amplified in the face of a rapidly evolving global landscape characterized by notable economic, geopolitical, security, and climate challenges in Europe”.

Moreover, the report asserts that "the ReArm Europe plan should not be viewed as a departure from fiscal prudence, but rather as an opportunity to replace national public resources with shared European funding for planned defense expenditures and the advancement of both the EU and Greece's defense industry."