Greece completes its comeback, reclaiming its position among the developed markets

Greece was admitted to developed markets in 2001, then booted out in 2013. Its comeback will be complete when it is re-admitted effective Sept 1st 2026. Greece's upgrade back to developed-market status, by the global index provider FTSE Russell, represents an undeniable triumph for a country that barely a decade ago was in the midst of a sovereign default. While the change becomes effective in Sept. 2026 and technical factors may limit passive investment flows - U.S. brokerage house Cowen actually thinks index tracker funds will be net sellers of $112 million on the day of inclusion - it will undoubtedly boost active investment into Greek stocks GR:GD and bonds. The MSCI Greece index XX:930000 has vastly outperformed not just the U.S. but virtually every market this year, having already regained investment-grade status for its bonds from Moody's in March, and reclassified as a developed equity market by S&P in July. Already, the cost of capital for Greece is more favorable than it once, whose 10-year bonds BX:TMBMKGR-10Y now yield 3.35% compared to 3.49% for Italy BX:TMBMKIT-10Y and 3.53% for France BX:TMBMKFR-10Y. The FTSE Russell move will also reduce the equity risk premium that analysts apply to Greek shares. JPMorgan separately has overweights on all the Greek banks including Eurobank Ergasias Services & Holding (GR:EUROB) National Bank of Greece (GR:ETE) with the cost of equity reset from 12% to 11.5% in their models. Greece's checkered financial history has included as many as five defaults going back as early as the nineteenth century but the turbulence has been especially pronounced this millennium. Greece was actually promoted to developed market status once before, when in 2001 it joined the eurozone and replaced the drachma with the euro (EURUSD) as its currency. Government spending was unrealistic and irresponsible in the years that followed with the expenditure on the Athens Olympics of 2004 in particular exacerbating public finances. After the global financial crisis of 2008-2009, Greece found itself submerged in debt and unable to access capital markets. Public debt at 210% of GDP in 2010 necessitated repeated bailouts and provoked a crisis that threatened to blow up the whole European Union experiment in the years that followed. GDP fell by a fifth. Severe recessions were endured. Greece suffered the humiliation of being demoted back down into the emerging-markets bucket in 2013. The recategorization of Greece as a developed market reflects the stunning recovery of the Greek economy in the last decade. FTSE Russell acknowledged its structural reforms, its institutional framework, capital market depth and credit profile. Greece is growing faster than many of its eurozone rivals and its debt-to-GDP ratio has fallen to 145%. All IMF loans were repaid ahead of schedule, and it's one of only six European countries with a budget surplus. -Jules Rimmer This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

Greece completes its comeback, reclaiming its position among the developed markets

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