Investors are growing infatuated with Greece, as Europe’s debt crisis has receded to the shadows and the appetite for risk rages.

Greece even has a little good news to report on the fiscal side. Its general budget deficit shrank to its target of 12.9 billion euros last year from 19.7 billion euros in 2011.

Investors now believe “in a way they haven’t before” in the ability of Greece to implement the reforms required by its international creditors to keep the money flowing, Richard Deitz, president of distressed-asset hedge fund VR Capital Group, tells The Wall Street Journal.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

Investors feel good about the coalition government, he says. “We have been investors in Greece, and we continue to look at Greece as a source of investment opportunities.”

The Athens Stock Exchange General Index soared 33.4 percent last year, making it the top stock market in the European Union. And the index has gained another 9.6 percent so far this year.

Meanwhile, Greek bond yields are falling. Few government bonds are privately held after last year’s debt restructuring. But those that still are saw their yields drop to two-year lows in recent weeks.

In addition, Greek companies are selling bonds again for the first time in three years, and the 17-month ban on short selling in stocks has been largely lifted, according to The Journal.

Foreign multinationals, including Philip Morris and Unilever, have started to invest in the region, as labor costs have fallen by approximately one-third since the start of the crisis.

All this comes just six months after Greece was viewed as a dead man barely walking.

To be sure, Greece and the rest of Europe aren’t on easy street.

Pimco predicts that the eurozone economy will shrink 1 to 1.5 percent this year. And Pimco’s CEO Mohamed El-Erian is worried about the social and political implications in the region.

Forecasts of economic contraction “point to greater socio-political fragility in 2013,” he writes in Fortune magazine. “Specifically, the wave of popular dissatisfaction sweeping across Europe would persist.”

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown