GREECE
Heading towards full integration
EU member country with lowest GDP per capita
2000:
15,572 EURO; 69% of EU
for comparison Portugal: 73%, Spain 83%
Greece is not catching up in the long run
falling back specifically during 1978 - 1994
1975 - 2000: 2.0%, EU 2.4%, Portugal 3.4%, Spain 2.6%
GDP per capita 1980 had been already 72% of EU
Productivity growth ½% lower than in EU
A country with traditionally unfavorable Philips curve
lowest employment rate in Europe: 55% 2000
high unemployment 11% 2000
highest European inflation rate: 9% 2000
high misery index ( = inflation + unemployment)
constant depreciation of the currency (Drachma)
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Regaining growth and stability in the
nineties
Despite of specific hard environment
New competition from the accession countries
Balkan wars increase “economic distance”
EU defines Maastricht criteria as condition for EURO
EU pressure facilitates economic discipline
Above EU growth 1995 – 2001
striving for economic stability
fulfilling Maastricht criteria and finally becoming
success and surprise:
member of the Monetary Union 2002
productivity growth slower than in EU
Economic level in accession countries quite near or higher
Slovenia lags only by about 10% in GDP per capita at PPP to EU
Larger difference but catching up: Hungary, Bulgaria, Romania
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Manufacturing
Low share, low growth in output, productivity catching up
2nd lowest share of GDP in EU (10% GR, EU 18% )
½% of EU output originates in Greece, 3% of population)
Growth 75-1990 less than in Europe , higher in nineties
Higher productivity growth due to competitive pressure
Instead of spreading employment across workers
Work force remains in agriculture
Or switch to tourism
Unfavorable structure, large discontinuous changes
High share of labor intensive industries (still increasing) and food
Highest structural change in manufacturing
But not active and voluntary
First enclave type capital intensive industries
came under pressure by increasing “economic” distance to Europe
then labor intensive textiles
came under pressure from eastern reform countries
Textiles one forth of production and exports
Capital intensive industries
in tobacco, boats, petroleum, cement and ferrous metals
Largest firms: Hellenic Telekom, National Bank of Greece
Coca Cola Hellenic, EFG Eurobank, Alpha Bank
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Costs and productivity
Productivity spread
Slow growth in domestic oriented sector
like food and apparel
fast growth in capital intensive sectors
Costs: Wages and productivity in manufacturing
Catching up, now 50% of EU average
Taxes to GDP rising from 35% to 48% 1990 – 2000
Government expenditures explodes from 1980 - 1990
30% of GDP to 50%
Fiscal deficit: from 10% of GDP to 0% in 2000
FDI position: 11% of GDP
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Growth drivers
Last position in R&D share
Lagging in innovation and ICT
Exemption:
Telecom expenditures
Liberalization and low telecom prices
Relative high share of tertiary education (universities)
But nor well connected to economy
Insufficient training
High unskilled school dropouts
Low innovation in small and medium firms
Investment ratio less than EU average
Relative high market capitalization
Open tendering
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Greece is EU member with important external
interests
Politically: Turkey, Cyprus
Economically 50% of exports are extra EU exports
Extra exports grow faster
Intra exports grow slower
High and growing shares with
Cyprus, Bulgaria, Macedonia and Turkey
But also Russia, Bulgaria, Romania
One of the most open economies (export + import)
High trade deficit
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Overall assessment
A laggard not catching up in a persistent process
Small industrial basis: from agriculture to services ?
Unsuccessful investment in capital intensive industries
Of a labor abundant country
Specialization in labor intensive industries are contested
from new low cost countries
Non strategic economic development policy over decades
Permissive macro policy: high inflation, unemployment, devaluations
Increasing “economic” and political distance from EU in the
nineties
Application of EU rules lead to for self discipline in the nineties
Successful years of consolidation plus growth in the nineties
Major success: entry into the Monetary Union in 2002
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