COMMISSION STAFF WORKING DOCUMENT Country Report Greece 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011
Date: 2020-02-26
Institutions: European Commission, Secretariat-General
Subjects: Greece, economic situation, green economy, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 26.2.2020  SWD(2020) 507 final  COMMISSION STAFF WORKING DOCUMENT Country Report Greece 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2020) 150 final}  
 
 
CONTENTS 

Executive summary 

1.  Economic situation and outlook 

2.  Progress with country specific recommendations 

3.  Summary of the main findings from the MIP in-depth review 

4.  Reform priorities 

4.1.  Public finances and taxation 

4.2.  Financial sector 

4.3.  Labour market, education and social policies 

4.4. Competitiveness, reforms and investment 

4.5.  Environmental sustainability 

Annex a: Overview table 

Annex B: Commission debt sustainability analysis and fiscal risks 

Annex C: Standard tables 

Annex D: Investment Guidance on Just Transition Fund 2021-2027 for Greece 

Annex E: Progress towards the Sustainable Development Goals (SDGs) 

References 

LIST OF TABLES 

Table 1.1: 

Key economic indicators- Greece 

Table 2.1:  Overall assessment of progress with 2019 CSRs 

Table 3.1:  MIP assessment matrix — Greece 2020 

Table 4.2.1:  Financial stability indicators /1 

Table 4.4.1:  Share of high growth enterprises (1) 

Table C.1: 

Financial market indicators 

Table C.2:  Headline Social Scoreboard indicators 

Table C.3: 

Labour market and education indicators 

Table C.4: 

Social inclusion and health indicators 

Table C.5: 

Product market performance and policy indicators 

1 

3 

8 

14 

19 

24 

24 

29 

33 

46 

67 

72 

79 

80 

86 

88 

93 

13 

17 

22 

30 

51 

80 

81 

82 

83 

84 

 
 
 
Table C.6:  Green growth 

Table E.1: 

Indicators measuring Greece’s progress towards the SDGs 

LIST OF GRAPHS 

Graph 1.1:  Real GDP growth and components 

Graph 1.2:  Current and Capital account balance and composition in % of GDP 

Graph 1.3:  Activity, employment and unemployment rates, 2000-2018 

Graph 4.1.1:  State investment budget execution 

Graph 4.1.2:  Debt Dynamic determinants (% GDP) 

Graph 4.3.1:  Unemployment by duration (thousands of persons), 2008-2019 

Graph 4.3.2:  Net migration by citizenship, 2013-2017 

Graph 4.3.3:  Proportion of population at risk of poverty or social exclusion per age 

groups, 2005-2018 

Graph 4.4.1:  Investment as a percentage of GDP 

Graph 4.4.2:   Trade openness and Greek goods and service exports by destination in % 

of GDP 

Graph 4.4.3:   Competitiveness and dynamics of Greek export markets and Greece’s 

export market shares of goods. 

Graph 4.4.4: Share of high growth enterprises 

Graph 4.4.5:   Economy-wide Product Market Regulation index (a lower value indicates 

lighter regulation) 

Graph 4.4.6:  Ease of doing business ranking (a higher ranking denotes worse 

performance) 

Graph 4.4.7:   Product Market Regulation index for retail and professional services (a 

lower value indicates lighter regulation) 

Graph 4.4.8:  Real gross value added per worker (thousands € per employed) 

Graph 4.4.9:  Distribution of public officials by age group 

85 

88 

8 

10 

11 

24 

25 

33 

34 

39 

46 

48 

49 

53 

53 

54 

59 

60 

Graph 4.4.10: 

Efficiency of the Greek justice system  63 

LIST OF BOXES 

Box 2.1: Commission Structural Reform Support Programme in Greece 

Box 4.3.1: Social Pillar 

Box 4.4.1: Export promotion and trade facilitation strategies 

Box 4.4.5: Investment challenges and reforms in Greece 

Box 4.4.6: EU funds and programmes to address structural challenges and to foster growth 

and competitiveness in Greece 

16 

35 

46 

50 

64 

2 

 
 
 
 
 
 
EXECUTIVE SUMMARY 

This is Greece’s second year of participating in 
the  European  Semester  after  successfully 
exiting  the  European  Stability  Mechanism 
in  August  2018.  By 
support  programme 
reforming its economy and administration, Greece 
has  ended  8  years  of  financial  assistance  and  has 
been  integrated  into  the  European  Semester  for 
economic and social policy coordination. Greece is 
also  subject  to  enhanced  surveillance,  which 
monitors,  among  other  things,  implementation  of 
the  post-programme  policy  commitments  given  at 
the Eurogroup of 22 June 2018 (1).  

The  recovery  of  the  Greek  economy  continues. 
After  returning  to  economic  growth  in  2017,  the 
growth  rate  has  stabilised  at  around  2%,  largely 
backed  by  consumer  spending  and  net  exports. 
Export  performance  has  been  positive  in  recent 
years  backed  by  cost  competitiveness  gains. 
Economic  growth  is  expected  to  remain  robust  in 
2020  with  the  support  of  a  growth-friendly  fiscal 
mix and other productivity-enhancing policies.  

the 

upturn, 

Despite 
large 
economic 
accumulated  imbalances  remain  as  a  legacy  of 
the  crisis  and  will  take  some  time  to  resolve. 
These imbalances concern the high public debt, the 
negative  net  international  investment  position,  the 
high  share  of  non-performing  loans  on  banks’ 
balance  sheets  and  the  still  high  unemployment 
rate.  While  significant  progress  has  been  made  in 
correcting flow imbalances (e.g. the government’s 
budget  balance)  amid  the  deep  institutional  and 
structural  reforms  of 
last  decade,  stock 
imbalances (e.g. government  debt)  will take some 
time  to  resolve  and  will  require  sustained  growth 
and  implementation of reforms. 

the 

Potential growth, which has suffered during the 
last  decade,  is  set  to  improve,  backed  by 
investment-supporting  policies.  Persistently  low 
investment and the continued emigration of skilled 
workers will continue to weigh on Greece's growth 
prospects  for  some  time.  Investment  growth  is 

(1)  This  report  assesses Greece’s  economy  in  light  of  the 
European  Commission’s  Annual  Sustainable  Growth 
Strategy,  published  on  17  December  2019.  In 
this 
document, Commission sets  out a new strategy  on how to 
address  not  only  the  short-term  economic  challenges  but 
also  the  economy's  longer-term  challenges.  This  new 
economic agenda of competitive sustainability rests on four 
dimensions:  environmental  sustainability,  productivity 
gains, fairness and macroeconomic stability. 

to  accelerate, 

expected 
to  structural 
reforms,  including  the  ongoing  shift  towards  a 
more investment-conducive tax framework.  

thanks 

is 

international  position 

Greece’s 
slightly 
deteriorating,  amid  a  widening  deficit  in  goods 
trade. Exports continue to grow, but more slowly 
than  in  previous  years  due  to  weakening  foreign 
demand. Following strong growth in 2018, exports 
are projected to increase more slowly in 2019 and 
to  slow  down 
in  2020  and  2021. 
Meanwhile, imports are set to pick up in response 
to  the  domestically-driven  recovery,  which  will 
worsen the trade balance. Against this background 
and  as  wages  and  inflation  start  picking  up,  it  is 
important  that  labour  cost  increases  are  matched 
with  productivity  gains  so  as  not  to  hurt  future 
competitiveness. 

further 

in  a  fairer 

Labour  market  improvements  are  reducing 
income 
poverty  and  resulting 
distribution,  but  substantial  social  challenges 
remain.  Unemployment  —  including  long-term 
and  youth  unemployment  —  has continued to  fall 
steadily, but at around 17%, it remains very  high. 
In response to labour market developments and the 
strengthening  of  the  social  welfare  system  in 
recent  years,  poverty  has  been  gradually 
decreasing.  However,  it  is  still  among  the  highest 
in  the  EU,  with  children  and  working-age  people 
particularly  affected.  Similarly,  income  inequality 
has  declined  although  it  remains  higher  than  the 
EU average. 

Greece  continues  to  consolidate 
its  public 
finances.  As  Greece  is  currently  subject  to  the 
preventive arm of the Stability and Growth Pact, it 
must comply with the agreed primary government 
balance target (i.e. excluding the interest payments 
on government balance) of 3.5% of GDP and with 
the  medium-term  budgetary  objective  from  2020 
onwards.  According  to  the  Commission’s  2019 
Autumn Forecast, the government’s overall budget 
balance  is  forecast  to  reach  a  surplus  of  1.0%  of 
GDP in both 2019 2020. Accordingly, its primary 
balance  monitored  under  enhanced  surveillance  is 
projected to comply with the fiscal target of 3.5% 
of  GDP  in  both  years.  Greece’s  public  debt-to-
GDP ratio is expected to decline significantly from 
181.2% in 2018 to 163.1% of GDP in 2021. 

The  2019  country  report  reviewed  investment 
performance  and  identified  priority  areas  for 

3 

 
                                                           
 
(ii) 

and 

logistics, 

public and private sector investment in order to 
promote long-term growth and reduce regional 
disparities.  These  areas  included:  (i)  sustainable 
environmental 
transport 
protection,  energy  efficiency,  renewable  energy 
interconnection  projects,  (iii)  digital  technologies, 
(iv)  research  and  development,  (v)  education,  (vi) 
skills, (vii) employability, (viii) health, and (ix) the 
renewal  of  urban  areas.  Greece’s  second  country-
specific  recommendation  therefore  called  on  the 
authorities  to  use  economic  policy  to  support 
investment  in  these  particular  areas,  while  taking 
into  account  regional  disparities  and  the  need  to 
ensure social inclusion. 

the 

the 

(2)  progress 

reiterated 

authorities’ 

Greece  has  made  some 
in 
country-specific 
2019 
addressing 
recommendations.  It  has  notably  made  some 
progress  in  addressing  the  first  recommendation 
that 
previous 
commitment to continue and complete the reforms 
adopted  under  the  European  Stability  Mechanism 
programme  and  to  ensure  that  the  objectives  of 
these  important  reforms  are  safeguarded.  Greece 
has  taken  the  necessary  action  to  meet  all  of  its 
specific  reform  commitments  for  mid-2019  and 
has  progressed  well  in  implementing  its  specific 
end-2019.  The 
reform 
being 
supplementary  measures 
implemented  or  announced  by  the  government 
should  allow  for  their  completion  in  time  for  the 
sixth  enhanced  surveillance  report  scheduled  for 
May  2020.  This  requires  continuous  engagement 
of  the  Greek  authorities  in  particular  in  the 
financial sector, where significant further action is 
needed.  Some  progress  has  also  been  made  in 
addressing the recommendation that the authorities 
use  economic  policy  to  support  investment  in  the 
above-mentioned priority areas.  

commitments 

that 

are 

for 

Greece  has improved on  most indicators of the 
Social  Scoreboard  supporting  the  European 
Pillar  of  Social  Rights,  but  on  several  fronts, 
challenges  remain  significant.  On  the  positive 
side,  the  effectiveness  of  social  benefits  has 
increased,  income  inequality  has  declined  and  the 
overall  social  situation  has  improved  in  the  wake 
of  social  welfare  system  reforms.  On  the  other 

(2)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
country-specific  recommendation 
the 
overview table in the Annex. 

is  presented 

in 

Executive summary 

hand,  despite  steadily  increasing  in  recent  years, 
the employment rate remains among the lowest in 
the EU, and the particularly high gender gap is not 
narrowing.  In  response  to  the  ongoing  economic 
recovery,  unemployment  —  including  long-term 
unemployment  — is also  going down, although it 
is  still  among  the  highest  in  the  EU.  The  high 
proportion  of  young  people  not  in  employment, 
education or training is a serious concern however. 

On  progress  in  reaching  the  national  Europe 
2020  strategy  targets,  Greece  is  performing  well 
on  reducing  the  rate  of  early  school  leavers, 
increasing 
tertiary  education  attainment  and 
reducing  greenhouse  emissions.  It  is  on  track  to 
reach its targets on research and development, the 
use  of  renewable  energy  resources  and  energy 
efficiency.  By  contrast,  the  employment  rate  and 
poverty reduction fall short of the target. 

Greece  has  made  substantial  progress  towards 
meeting  its  sustainable  development  goals  over 
the  past  years.  Significant  progress  has  been 
observed  as  regards  the  environmental  objectives 
(SDGs  7,  12,  13)  with  a  very  strong  achievement 
in  climate  action  goals.  Also,  Greece  managed  to 
bring  income  inequality  below  pre-crisis  levels 
(SDG  10),  thanks  to  deep  social  welfare  reforms 
over the past years. On the other hand, the country 
is 
sustainable 
employment  for  its  population,  notably  the  youth 
(SDG8) (3).  

to  generate 

struggling 

still 

The main challenges facing Greece’s economy and 
society are the following:  

Productivity growth remains low and is coupled 
with  high  investment  needs.  Despite  gradually 
recovering,  the  Greek  economy  still  faces  low 
investment,  in  particular  by  the  private  sector. 
Flagship  privatisation  projects  and  attracting 
foreign direct investment are crucial for increasing 
private  investment.  Other  factors  holding  back 
productivity  growth  include:  (i)  low  business 

(3)  Within the scope of its legal basis, the European Semester 
can help drive national economic and employment policies 
towards the achievement of the United Nations Sustainable 
Development  Goals  (SDGs)  by  monitoring  progress  and 
ensuring  closer  coordination  of  national  efforts.  The 
present report contains reinforced analysis and monitoring 
on  the  SDGs.  A  new  annex  (ANNEX  E)  presents  a 
statistical  assessment  of  trends  in  relation  to  SDGs  in 
Greece during the past five years, based on Eurostat’s EU 
SDG indicator set 

4 

 
 
                                                           
                                                           
Executive summary 

productivity, are crucial to set Greece on a path 
to strong and sustainable economic growth. 

  The  accumulated  imbalances  will  require 
further  reform  efforts  in  the  coming  years. 
Given  the  high  stock  imbalances,  positive 
developments in flow indicators in recent years 
have  had  only  a  limited  effect  in  helping 
Greece  reach 
the 
macroeconomic  imbalance  procedure.  Policies 
that  support  economic  growth  and  labour 
market  recovery  are  expected  to  create  an 
environment where imbalances can be reduced 
at  a  faster  rate,  also  with  the  help  of  further 
reforms  and  the  implementation  of  existing 
reforms.  

the  benchmarks  under 

to  continued  efforts 

  The  further  normalisation  of  the  financial 
sector  is  a  key  ingredient  for  sustained 
growth.  Thanks 
to 
strengthen  the  legal  framework,  the  Greek 
banking  sector  has  become  more  stable  and 
resilient  to  shocks.  Although  non-performing 
loans  have  been  decreasing  significantly  from 
their end-2016 peak, they remain very high and 
weigh  considerably  on  the  banking  system’s 
performance, while constraining its capacity to 
finance growth. The pace of implementation of 
ongoing initiatives to streamline the insolvency 
legislation and ensure appropriate enforcement 
of  all  collateral,  coupled  with  the  recently 
voted  ‘Hercules’  asset  protection  scheme,  will 
be  critical  for  banks  to  further  accelerate 
further  their  non-performing  loan  reduction 
strategies.  The  creation  of  a  fully-fledged 
central credit registry could also further reduce 
information  gaps  between 
and 
borrowers.  

lenders 

  Action 

improving 

is  being  taken  to 

improve  the 
functioning  of  the  labour  market.  Greece  is 
in  the  process  of  reforming  the  active  labour 
market  policy  system  and 
the 
capacity  of  the  public  employment  service  to 
assist  jobseekers.  The  fight  against  undeclared 
increased  focus  on 
work  continues,  with 
preventing  the  abusive  use  of  part-time  work. 
Wage  developments  need  to  be  monitored  to 
avoid  any  adverse  effects  on  competitiveness 
and  employment.  There  is  room  to  strengthen 
social  dialogue,  including  by  promoting  a 

a 

still  high 

investment,  notably  in  research  and  development, 
(ii) 
(iii) 
inefficiencies  in  public  administration  and  the 
justice  system,  iv)  access  to  finance  constraints, 
and (v) skills mismatches. 

regulatory  burden, 

the 

The  stock  of  non-performing  loans  is  declining 
gradually  but  remains  very  large,  requiring 
significant  further  action.  The  Greek  banking 
sector  has  become  more  stable  and  resilient  to 
shocks,  as  evidenced  by  the  improvement  in 
liquidity  and 
lifting  of  capital  controls. 
Nonetheless, it remains burdened by a  large stock 
of non-performing loans. The profitability outlook 
of  banks  is  fragile,  and  their  quality  of  capital  is 
low  and  reliant  on  the  state.  The  authorities  are 
working on a range of initiatives to strengthen the 
non-performing  loan  resolution  framework,  to 
reduce debt levels more rapidly and to improve the 
effectiveness of the justice system. However, there 
is  scope  to  accelerate  implementation  in  certain 
areas. 

Regional disparities remain, mostly between the 
capital  region  and  the  rest  of  the  country. 
Greece  is  a  country  with  significant  regional 
disparities,  with  half  of  the  population  and  two 
thirds  of  its  economy  concentrated  in  the  capital 
region.  Given  the  sparse  population  and  the 
morphology of the country, with its mountains and 
islands, 
and 
opportunities  for  the  peripheral  regions  requires 
substantial  strategic  planning.  High-quality  local 
planning  is  also  needed  to  ensure  an  efficient  and 
effective use of EU resources. 

connectivity  with 

ensuring 

findings  of 

The  main 
review 
contained  in  this  report  and  the  related  policy 
challenges are as follows: 

in-depth 

the 

  Macroeconomic  imbalances  are  prevalent 
across  sectors  in  Greece,  but  adjustment 
efforts  are  ongoing.  Under  the  adjustment 
programme,  the  authorities  adopted  a  wide 
range of measures to: (i) put public finances on 
a sound footing; (ii) restore the financial sector; 
(iii)  improve  the  functioning  of  product  and 
labour  markets;  and  (iv)  strengthen  the  social 
welfare  system.  Past  and  ongoing  institutional 
and  structural  reforms  require  many  years  of 
sustained  implementation  for  their  impact  to 
unfold  fully.  Further  measures  to  tackle  the 
root  causes  of  the  imbalances,  such  as  low 

5 

 
 
Executive summary 

meaningful  involvement  of  social  partners  in 
national policy-making. 

  Despite an overall improvement, the country 
still  faces  problems  with  social  exclusion. 
The  risk  of  poverty  or  social  exclusion  is  still 
one  of  the  highest  in  the  EU.  In-work  poverty 
is  still  above  the  EU  average.  Children  and 
working-age people continue to be more at risk 
of  poverty  or  social  exclusion  than  older 
people, and the partial roll-back of past pension 
reforms  risks  decreasing  again  the  relative 
share  of  social  benefits  spent  on  younger 
generations.  Access  to  affordable  housing  and 
energy  poverty  are  still  significant  concerns. 
The  integration  of  third-country  nationals  has 
become  more  challenging  with  the  increased 
inflow  of  asylum  seekers.  In  particular,  access 
to basic services, such as education, health and 
housing, for these groups remains an issue. 

reforms  are  needed  to  improve  the  business 
environment and enable the creation and expansion 
of competitive firms, while attracting domestic and 
investments.  The  most 
foreign  productive 
problematic  areas  include  registering  property, 
enforcing  contracts  and  accessing  credit.  Sector-
specific  product  market  reforms  have  progressed 
but  public  administration  inefficiencies,  including 
a  very  limited  provision  of  digital  public  services 
and  red  tape,  continue  to  be  obstacles  for  firms. 
The  successful  uptake  of  digital  public  services 
requires  high-speed  networks 
the 
country.  Efficiency  in  public  spending  would 
benefit  from  addressing  systemic  deficiencies, 
in  public 
such  as  excessively 
procurement  procedures.  Inefficiencies 
the 
in 
justice system also negatively affect the investment 
climate and limit the provision of credit to the real 
economy.  

throughout 

tenders 

low 

its 

international 

  Greece’s fiscal outlook has improved but its 
government  debt  remains  high.  Achieving  a 
more  balanced  current  account  can  help  it 
investment 
enhance 
position.  Although  Greece’s  government 
balance  has  improved  and  the  country  has 
exceeded  its  annual  fiscal  targets  since  2016, 
government  debt  —  at  over  180%  of  GDP  at 
the end of 2018 (one of the highest in the EU) 
—  needs  to  be  further  reduced.  In  order  to 
reduce  the  debt-to-GDP  ratio,  it  is  important 
the  enhanced 
that 
surveillance  framework,  in  particular  pension 
reforms 
and 
as 
improvements 
the  budgetary  process, 
continue  to  be  implemented.  Reducing  the 
debt-to-GDP  ratio  will  also  require  sustained 
economic  growth. 
the  deeply 
negative  net  international  investment  position 
will  require  further  adjustments  to  the  current 
account balance.  

reforms  agreed  under 

Improving 

healthcare 

as  well 

in 

business 

environment, 

Although 
public 
administration  and  justice  reforms  are  under 
way,  the  policy  agenda  needs  to  be  more 
ambitious.  Since 2010, Greece has undertaken an 
extensive  legislative  reform  to:  (i)  reduce  barriers 
to  competition; 
simplify  administrative 
procedures  for  starting  a  business;  and  (iii) 
streamline 
legal  framework  of  regulated 
professions.  Yet,  Greece  lags  considerably  behind 
its  EU  peers  in  ‘ease  of  doing  business’.  Further 

the 

(ii) 

The  Greek  health-care  system  has  persistent 
weaknesses leading to both inefficient spending 
and high-unmet medical needs. The increasingly 
ageing  population  will  be  an  additional  challenge 
to  the  medium  and  long-term  sustainability  of  the 
healthcare  system.  To  respond  to  this  upcoming 
demographic challenge, and to ensure the viability 
of Greece’s healthcare and long-term care systems, 
it  will  be  essential  to:  (i)  optimise  healthcare 
spending  by  discouraging  the  overuse  of  products 
—  especially  pharmaceuticals,  and  services;  (ii) 
public 
improve 
improve 
procurement  procedures; 
governance.  The 
initiated  primary 
recently 
healthcare  system  reform  should  be  completed  in 
order  to  improve  efficiency  and  ensure  equitable 
access to healthcare.  

hospital  management 

(iii) 

and 

and 

a 

framework 

Establishing 
in  which 
environmental sustainability goes hand in hand 
with economic growth and institutional reforms 
is key. Partly due to the economic crisis, progress 
in promoting environmental sustainability has been 
limited  and  Greece  now  faces  specific  challenges 
in  the  fields  of  energy,  transport  and  protection 
against natural disasters. Greece plans to introduce 
fundamental changes to improve sustainability, the 
social  impact  of  which  will  need  to  be  closely 
monitored.  

sustainable 

Supporting 
and 
modernising  the  Greek  economy  will  require 
skilled  workers.  Greece  needs  to  address  poor 

growth 

6 

 
 
Executive summary 

transition towards EU climate neutrality is  fair by 
helping Greece’s most affected regions address the 
social  and  economic  consequences.  It  includes  a 
Just  Transition  Fund,  a  dedicated  just  transition 
scheme  under  InvestEU,  and  a  new  public  sector 
loan  facility  with  the  European  Investment  Bank. 
Key  priorities  for  support  by  the  Just  Transition 
Fund,  set  up  as  part  of  the  Just  Transition 
Mechanism, are identified in Annex D, building on 
the analysis of the transition challenges outlined in 
this report 

to  upgrade 
educational  outcomes,  continue 
vocational  education  and 
lifelong 
in 
invest 
learning. For this, it will need to find ways to make 
the  education  system  more  relevant  to  the  labour 
market,  especially  at  post-secondary  level.  Skills 
—  including  digital  skills  —  and  competences 
need  to  be  improved.  Overall,  the  low  and 
inefficient funding of education and a general lack 
of  accountability  in  the  system  remain  major 
challenges. 

for 

Identifying 
green 
investment  needs 
technologies  and  sustainable  solutions,  and 
securing  adequate  funding,  will  be  key  to 
deliver on the climate and energy objectives and 
shape a new growth model. Investment is needed 
for  sustainable  growth,  particularly  in  the  energy 
sector.  Greece  is  highly  dependent  on  imports  of 
key  primary  energy  sources,  such  as  oil  and  gas, 
with  the  former  having  relatively  high  use  in 
electricity generation compared to the EU average. 
The sector also faces  market  distortions, a  lack of 
competition,  and  slow  development  of  renewable 
energy  sources  in  recent  years.  Thanks  to  its 
geographical  location,  Greece  has  the  potential  to 
become  an  energy  hub  —  both  for  gas  and 
electricity  —  for  Southeast  Europe,  but  for  this  it 
would  need 
infrastructure 
to  develop  major 
projects with neighbouring countries.  

The  transport  sector  is  responsible  for  the 
largest  share  of  total  final  energy  consumption 
in  Greece.  Its  external  costs  to  society  (i.e.  costs 
related 
to  accidents,  air  pollution,  etc.)  are 
estimated at around 6% of the country’s GDP.  

Greece  faces  multiple  and  severe  natural  and 
environmental  risks,  in  particular  floods  and 
wildfires. An adequate response is often hampered 
by a lack of structures, coordination, planning and 
prioritization,  as  well  as  the  absence  of  early 
warning systems.  

significant 

socio-economic 

The transition to a greener economy will entail 
impacts  and  will 
severe 
environmental 
necessitate 
rehabilitation efforts in Greece’s lignite  mining 
regions.  The  government  recently  announced  an 
accelerated plan to decommission Greece’s lignite-
2028.  The 
plants 
based 
Commission’s  proposal  for  a  Just  Transition 
Mechanism  under  the  next  multiannual  financial 
framework for 2021-2027 will help ensure that the 

generation 

by 

7 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

GDP growth  

The  recovery  of  the  Greek  economy  continues. 
The  Commission’s  2020  winter  forecast  projected 
real  GDP  growth  in  2019  to  reach  2.2%,  mainly 
driven  by  exports,  while  consumption  growth 
remained  weak in the first three quarters of 2019. 
In 2020, growth is forecast to rise to 2.4%, but this 
is  still  well  above  potential  growth  and  will 
therefore help to close the output gap. 

Graph 1.1: 

Real GDP growth and components 

savings  ratio  points  to  a  continued  low  debt 
servicing capacity of households in the future.  

low 

Investment  is  expected  to  accelerate,  though 
level.  Supported  by  positive 
from  a 
expectations  and 
towards  a  more 
the  shift 
investment-conducive  tax  framework  with  the 
2020 tax package, investment is expected to grow 
by  more  than  10%  in  2020,  making  it  the  second 
main  driver  for  growth.  This  will  help  to  reduce, 
albeit  very  gradually,  Greece’s  large  investment 
gap  compared  with  its  EU  peers,  which  reflects 
persistently low levels of investment as a legacy of 
the  crisis  years.  In  2018,  investment  stood  at 
11.1%  of  GDP,  which  is  less  than  half  of  its  pre-
crisis average level and the lowest in the EU. The 
decline during the crisis was due to the decrease in 
private  investment,  although  public  investment 
also decreased substantially.  

Household  debt  remains  well  above  prudential 
thresholds  despite  active  deleveraging  in  2018. 
At 56.8% of GDP the debt of private households is 
well above the prudential- and fundamentals-based 
benchmarks for household debts in Greece (36.1% 
and  21.6%  respectively  in  2018) (4).  Households 
have  been  actively  deleveraging  but  the  debt 
absorption  capacity  of  Greek  households  remains 
too low to bring household debt down to prudential 
levels 
to  high 
unemployment  and  reduced  income  levels.  This 
goes  hand  in  hand  with  the  high  non-performing 
loan  ratio  of  private  households  in  Greece  (see 
Section 4.2 for further details).  

future,  due 

the  near 

in 

are 

Non-financial 
actively 
corporations 
deleveraging  but  the  stock  of  private  debt  and 
particularly non-performing debt remains high. 
At 59% of GDP in 2018, the debt stock of the non-
financial  corporate  sector  remains  above 
the 
fundamentals-based benchmark of 40%, but below 
the prudential threshold of 67%, due  to the recent 
deleveraging  efforts.  Credit  growth 
the 
corporate  sector  has  turned  positive  in  2019  but 

in 

(4)  Fundamentals-based  benchmarks 

are  derived 

from 
regressions  capturing  the  main  determinants  of  credit 
growth and taking into account a given initial stock of debt. 
Prudential  thresholds  represent  the  debt  threshold  beyond 
which the probability of a banking crisis is relatively high, 
minimising the probability of missed crisis and that of false 
alerts.  Methodologies 
in  European 
Commission (2018c). ‘. 

are  described 

Source: European Commission  

Private  consumption  is  expected  to  accelerate. 
In 2020 and 2021, private consumption is expected 
to be one of the main drivers of economic growth. 
The  tax  measures  adopted  in  2019  should  have  a 
positive effect on private consumption in 2020 and 
2021, as they aim to lower the taxation of earnings 
from  labour  (the  ‘tax  wedge’)  at  lower  incomes 
and decrease the tax burden  on labour and capital 
in general.  

The  saving  rate  remains  negative.  Since  2012, 
the  gross  saving  rate  of  households  has  been 
negative,  implying  that  households  run  down 
savings  to  finance  consumption.  Despite  recent 
improvements,  it  is  not  expected  to  become 
positive  within  the  next  years.  Coupled  with  still 
high unemployment, moderate income growth and 
high  public  debt,  and  given  the  projection  that 
fewer  people  of  working  age  will  need  to  support 
more  people  of  retirement  age,  the  negative 

8 

 
  
                                                           
remains  concentrated  towards  large  corporations 
(see Chapter 4.2).  

Exports continue to grow, but more slowly than 
in  previous  years  amid  weakening  foreign 
demand.  Following  strong  growth  in  2018  and 
2019,  exports  are  projected  to  increase  more 
slowly  in  2020  and  2021.  Despite  export  market 
gains during the last couple of years, the economy 
remains relatively closed. At some 36% of GDP in 
2018,  exports  of  goods  and 
services  are 
substantially  lower  than  the  euro  area  average  of 
48%. As economic growth slows down in the main 
export  markets,  Greek  exports  are  expected  to  be 
affected  as  well,  though  due  to  their  structure, 
Greek  exports  are  somewhat  cushioned  from  a 
slowdown  in  destination  markets.  Facilitating  a 
shift  in  the  economic  structure  towards  tradable 
goods  and  services  could  open  up  further  growth 
potential for the Greek economy (see Box 4.4.1. on 
export promotion strategies for further details).  

investment, 

Imports  are  set  to  increase  due  to  increased 
consumption  and 
leading  to  a 
deterioration  in  the  trade  balance.  During  the 
crisis,  the  trade  balance  improved  significantly, 
from -12.6% of GDP in 2008 to -0.2% of GDP in 
lower 
2018,  on 
the  back  of  substantially 
in  a 
investment  and  consumption  activity 
recessionary  environment,  which  in  turn  led  to  a 
reduction  in  imports.  In  the  years  ahead,  with  the 
domestically driven recovery expected to drive up 
imports,  and  lower  growth  of  exports  due  to  the 
external environment, the trade balance of goods is 
expected to deteriorate again. 

Potential growth  

Total  factor  productivity (5)  increased  in  2018 
but  remains  substantially  below  pre-crisis 
levels.  Total  factor  productivity  growth  in  Greece 
reached  around  1.5%  in  2018,  almost  three  times 
higher  than  the  euro  area  average,  but  is  still  far 
below  pre-crisis 
total  factor 
productivity was still 14.4% below the 2008 level). 
In the lead up to the crisis (2000-2008) annual total 
productivity growth was on average 1.6%, whereas 
during  the  crisis  years  (2008-2016)  the  average 
dropped  into  negative  territory  at  -2.2%.  This 

levels  (in  2018 

(5)  Total  factor  productivity  is  a  measure  of  productivity 
accounting  for  effects  in  total  output  not  caused  by 
traditionally measured inputs of labour and capital 

1. Economic situation and outlook 

in 

increase 

indicates  that  current  growth  rates  are  not  enough 
to foster substantial real convergence with the EU 
total  factor 
average.  The  recent 
the 
in 
productivity  was  driven  by 
productivity of the capital share. This indicates that 
while 
capital 
is 
accumulation  has  been  negative  in  the  last  few 
years.  Increasing  investment  and  replacing  the 
diminished  capital  stock  could  therefore  unlock 
further growth potential.  

employment 

recovering, 

increases 

The  decline  in  labour  productivity  (output  per 
person  employed)  since  the  start  of  the  crisis 
ended  in  2017.  In  2018,  increasing  employment 
drove  the  growth  in  value  added  and  although 
labour  productivity  increased  only  marginally 
(0.2%  growth  in  2018)  the  prolonged  period  of 
decline since the start of the crisis in Greece came 
to  an  end.  This  was  in  line  with  developments  in 
the euro area, where the labour share in total factor 
productivity  also  stagnated  in  2018.  However, 
certain sectors such as manufacturing and services 
had higher labour productivity growth rates (3.4% 
and 0.6% in 2018).  

Low  investment  in  research  and  development, 
high  regulatory  burden  and  skills  mismatches 
weigh  on  productivity  growth.  By  a  variety  of 
metrics,  Greece  is  one  of  the  countries  with  the 
lowest  business  dynamism  in  the  EU.  High 
regulatory burden, and inefficiencies  in the  public 
administration  and 
justice  system  hinder 
productivity  growth.  Low  business  investment  in 
the 
research  development 
relatively 
relevance  of 
labour  market 
education,  and  increasing  skills  mismatches  also 
point  to  weak  growth  prospects  in  the  future. 
Reform efforts in the last years are slowly bearing 
fruit,  as  visible  in  the  mildly  positive  total 
productivity developments in the past year. 

innovation, 

low 

and 

the 

Competitiveness 

Cost  competitiveness 
improved  during  the 
crisis, which will be key for wage increases to be 
matched  by  productivity  gains  in  the  future. 
During  the  crisis,  nominal  and  real  unit  labour 
costs  decreased  —  mainly  due  to  wage  decreases 
and subdued inflation — and cost competitiveness 
recovered.  As  wages  and  inflation  started  picking 
up  during  the  economic  recovery  in  2018  and 
2019, unit labour costs started to increase, but less 
than  those  of  the  country’s  main  trading  partners. 

9 

                                                           
1. Economic situation and outlook 

0.7%  during  2020  and  to  increase  slightly  to  just 
below 1% in 2021 as the output gap closes. 

Graph 1.2:  Current and Capital account balance and 

composition in % of GDP 

Note: *19 is subject to forecast 
Source: European Commission 

Labour market  

The  labour  market  continues  to  improve,  but 
major  challenges  remain.  Responding  to  the 
ongoing  economic  recovery  and  labour  market 
reforms, the employment rate grew from 59.7% in 
the  third  quarter  of  2018  to  61.2%  in  the  third 
quarter  of  2019.  Nevertheless,  it  remains  the 
lowest in the EU, and far below the EU average of 
73.8%  in  the  third  quarter  of  2019.  Furthermore, 
while the employment rate of men stood at 71.3% 
it  was  only  51.3%  for  women,  one  of  the  lowest 
among EU Member States and significantly below 
the EU average of 68.2%. Employment is forecast 
to grow by 2.2% in 2019 and 2020.  

to  decrease 
Unemployment  has  continued 
steadily,  but  is  still  the  highest  in  the  EU.  The 
unemployment rate decreased to 16.6% in October 
2019,  down  from  18.5%  in  October  2018,  and  is 
forecast to reach 15.4% in 2020.. Despite steadily 
decreasing  since  October  2013,  unemployment  in 
Greece remains among the highest in the EU, both 
in  aggregate 
the  various 
terms  and  among 
population  groups.  Youth  unemployment  declined 
from 37.8% in the third quarter of 2018 to 34.2% 
in 
third  quarter  of  2019,  but  remained 
significantly above the EU average of 14.4%. The 

the 

As a result, Greece’s competitiveness was resilient 
and  export  market  shares  recorded  sizeable  gains. 
However,  in  the  coming  years,  low  productivity 
growth  will  be  a  risk  for  competitiveness.  With 
growing  wages and domestically driven economic 
growth,  Greece  cannot  rely  on  subdued  wage 
growth  to  maintain  competitiveness.  Supporting 
productivity  growth  will  therefore  be  of  key 
importance. 

External position  

The  external  position  is  slightly  deteriorating, 
amid  a  widening  deficit  in  goods  trade.  The 
current  account  balance  has  adjusted  substantially 
from  its  unsustainable  pre-crisis  levels,  but  it  is 
expected  to  remain  negative  at  -2.5%  of  GDP  in 
2019 and -2.9 in 2020. A positive trade balance of 
services  and  a  smaller  negative  balance  of  goods 
have  helped  the  large  current  account  balance  to 
improve to levels above -2% in 2017. However, as 
investment  and  consumption  pick  up  in  2020  and 
2021,  the  contribution  of  trade  in  goods  to  the 
current account is expected to decrease again, due 
to  the  high  import  content  of  domestic  demand 
(see Box 4.4.1). 

international 

The  net 
investment  position 
remains strongly negative, mostly due to public 
debt.  At  -143.3%  of  GDP  in  2018,  net  external 
liabilities remain large. The composition of mostly 
public debt to official creditors mitigates the direct 
risk, but the country remains vulnerable to external 
shocks nevertheless. The current account needed to 
stabilise  the  net  international  investment  position 
above  -35%  of  GDP  within  the  next  20  years  is 
calculated  to  be  1%,  which  can  only  be  reached 
with further reform efforts, substantial productivity 
growth and investment over the medium term (see 
Chapter 4.4 on investment and productivity). 

Inflation 

Inflation is expected to remain low in the short 
term  but  to  increase  in  the  medium  term.  The 
growth  rate  of  the  harmonised  index  of  consumer 
prices, which is used to measure headline inflation, 
declined to 0.5% in 2019 partly due to a  decrease 
in  energy  prices.  In  addition  to  lower  energy 
prices, a reduction of value added tax in the second 
quarter  of  2019  contained  inflation  for  that  year. 
Inflation  is  expected  to  remain  broadly  stable  at 

10 

-25-20-15-10-5051015020304050607080910111213141516171819*Income balanceCapital account  Trade balance - services  Trade balance - goodsTrade balanceCurrent account balance   
1. Economic situation and outlook 

long-term  unemployment  rate  decreased  from 
15.6% in 2017 to 13.6% in 2018, but was still far 
above the EU average (2.9%). 

Graph 1.3:  Activity, employment and unemployment 

rates, 2000-2018 

This  reduction  was  also  evidenced  by  an  increase 
in  the  income  share  of  the  poorest  households,  a 
decrease in the income share of the top 20%, and a 
relatively stable middle-income share. This income 
redistribution has also been partly due to the social 
benefits  system,  whose  corrective  power  has 
increased  following  recent  reforms,  although  it 
remains well below the EU average. 

Public finances 

surplus 

Greece 
is  expected  to  achieve  a  general 
in  2019  and  2020. 
government 
According  to  the  Commission’s  2019  autumn 
forecast,  which  incorporates  both  the  measures 
adopted  in  May  worth  0.7%  of  GDP  and  the 
balance-neutral  package  of  measures  worth  0.6% 
of  GDP  for  2020,  the  headline  fiscal  balance  is 
forecast to reach a surplus of 1.3% of GDP in 2019 
and  1.0%  of  GDP  in  2020.  Accordingly,  the 
primary  government  balance  monitored  under 
enhanced  surveillance  is  projected  to  reach  3.8% 
of  GDP  in  2019  and  3.5%  of  GDP  in  2020,  i.e. 
meeting the target of 3.5% in both years. Greece’s 
public  debt  to  GDP  ratio  is  expected  to  fall 
significantly  from  181.2%  in  2018  to  163.1%  of 
GDP 
inequality  of 
opportunities  for  children  remains  high  (see 
section 4.3.2) 

in  2021.  Meanwhile, 

Financial sector  

Non-performing  loans,  as  a  ratio  of  total  loan 
exposures, remain the highest in the EU, despite 
a  marked  acceleration  in  their  reduction.  The 
stock of non-performing loans of Greek banks has 
declined  more  rapidly  since  the  end  of  2017, 
boosted by accelerating non-performing loan sales. 
By the end of June 2019, the stock of these  loans 
had  gone  down  by  almost  30%  from  its  peak  in 
March  2016.  However,  as  a  share  of  total  loan 
exposures,  the  reduction  in  non-performing  loans 
has  been  less  pronounced  given  the  resulting 
deleveraging  effect.  Multiple  systems  for  dealing 
with  bankruptcy  and  insolvency  as  well  as  a 
backlog  of  household  insolvencies  is  hindering  a 
more  efficient  reduction  of  non-performing  loans 
(for  further  analysis  see  Chapter  4.2).  Systemic 
initiatives,  like  the  recently  adopted  ‘Hercules’ 
asset  protection  scheme  (see  Section  4.2),  are 
expected to accelerate the pace of non-performing 
loans  reduction  in  the  future.  The  still  high  non-
performing  loan  ratio  leaves  little  room  for  a 

Source: Eurostat 

Social developments  

Poverty  has  been  gradually  decreasing,  but 
remains  among  the  highest  in  the  EU,  with 
children  and  working-age  people  being 
particularly  affected.  Between  2017  and  2018, 
the  share  of  people  at  risk  of  poverty  or  social 
exclusion  dropped  from  34.8%  to  31.8%  (against 
an  EU  average  of  21.9%  in  2018).  Similarly, 
severe  material  deprivation  affected  16.7%  of  the 
population in 2018 down from 21.1% in 2017 (EU 
average is 5.9%). These positive trends reflect the 
ongoing  labour  market  recovery,  as  well  as  the 
strengthening  of  the  social  welfare  system  that 
took place in recent  years. Children and  working-
age people continue to be more affected by poverty 
(with  the  share  of  people  at  risk  of  poverty  or 
social  exclusion 
reaching  33.3%  and  35% 
respectively)  than  the  elderly  (21.3%),  despite 
having  a  greater  improvement  than  the  latter 
group.  

Income  inequality  has  declined  but  remains 
higher than in the EU as a whole. While in 2017 
the  disposable  income  of  the  richest  20%  of  the 
population  was  6.1  times  that  of  the  poorest  20% 
(vs  5.2%  in  the  EU),  this  ratio  dropped  to  5.5  in 
2018,  implying  a  reduction  in  income  inequality. 

11 

051015202530455055606570758000010203040506070809101112131415161718Unemployment rate 15-74, % of labour force (rhs)Activity rate 20-64, % of population (lhs) Employment rate 20-64, % of  population (lhs)  
1. Economic situation and outlook 

rebound  of  credit 
sizeable  and  sustainable 
provision 
including 
to 
households and non-financial corporations, thereby 
hindering domestic investment. 

real  economy, 

the 

Regional disparities 

the 
Regional  disparities,  notably  between 
capital  region  and  the  rest  of  the  country, 
increased  during  the  crisis  years  and  remain 
large.  In  2017,  only  the  capital  region  of  Attica 
had a GDP per capita of more than 75% of the EU 
average.  Most  other  regions  were  well  below  that 
threshold.  The  region  of  Eastern  Macedonia  and 
Trace  had  the  lowest  GDP  per  capita  among  all 
Greek  regions,  corresponding  to  46%  of  the  EU 
average,  while  in  three  other  regions,  GDP  per 
capita was also lower than 50% of the EU average. 
Disparities with the capital region increased during 
the  crisis  years,  notably  in  the  case  of  the  three 
Macedonia  regions  and  the  three  Aegean  island 
regions. The large disparities in GDP per capita are 
due  to  a  number  of  regional  disparities  in  areas 
such  as 
labour  market 
conditions,  investment,  research  and  development 
activity, 
innovation  and  competitiveness  (see 
section 4.4.4). 

labour  productivity, 

Greece  has  made  substantial  progress  towards 
meeting  its  Sustainable  Development  Goals 
(SDGs) over the past years. All of the calculated 
headline  indicators  have  achieved  at  least  a 
moderate  progress,  with  a  very  strong  mass  of 
indicators  having  highly  positive  figures.  More 
precisely,  significant  progress  has  been  achieved 
as  regards  the  environmental  objectives  (SDGs  7, 
12, 13) with a  very strong achievement in climate 
action  goals,  while  the  economic  recovery  is  also 
depicted  on  the  majority  of  the  related  goals 
(SDGs  1,  2,  8,  9),  due  to  the  significant  progress 
towards  poverty  reduction.  On  the  other  hand  but 
still  under  a  positive  sign,  the  country  seems  to 
progress  towards  improving  other  social  aspects 
such as the reduction of inequalities (SDGs 5, 10). 

12 

 
 
1. Economic situation and outlook 

Table 1.1: 

Key economic indicators- Greece 

(1) NIIP excluding direct investment and portfolio equity shares     
(2) domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-controlled branches     
(3) The tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the section on taxation     
Source: Eurostat and ECB as of 4-2-2020, where available; European Commission for forecast figures (Winter forecast 2020 for real GDP and HICP, 
Autumn forecast 2019 otherwise) 

13 

2004-072008-122013-1620172018201920202021Real GDP (y-o-y)3.6-5.4-0.81.51.92.22.42.0Potential growth (y-o-y)2.9-1.0-2.1-1.0-0.7-0.5-0.20.1Private consumption (y-o-y)3.4-4.6-0.50.91.1...Public consumption (y-o-y)5.1-3.6-1.8-0.4-2.5...Gross fixed capital formation (y-o-y)5.8-17.1-2.09.1-12.2...Exports of goods and services (y-o-y)9.3-2.22.66.88.7...Imports of goods and services (y-o-y) 8.3-8.51.47.14.2...Contribution to GDP growth:Domestic demand (y-o-y)4.6-7.3-1.01.6-1.3...Inventories (y-o-y)-0.3-0.4-0.10.01.8...Net exports (y-o-y)-0.82.30.3-0.11.5...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.60.0-0.4-0.2-0.2-0.2-0.2-0.1Capital accumulation (y-o-y)1.00.1-0.5-0.3-0.4-0.3-0.20.0Total factor productivity (y-o-y)1.4-1.1-1.2-0.5-0.20.00.20.3Output gap3.4-5.9-13.5-9.1-6.7-4.6-2.2-0.4Unemployment rate9.514.525.621.519.317.315.414.0GDP deflator (y-o-y)3.11.6-1.20.60.50.80.91.6Harmonised index of consumer prices (HICP, y-o-y)3.22.9-0.81.10.80.50.70.9Nominal compensation per employee (y-o-y)5.1-0.5-3.20.51.30.41.12.0Labour productivity (real, person employed, y-o-y)2.0-2.4-0.70.00.2...Unit labour costs (ULC, whole economy, y-o-y)3.12.0-2.60.61.10.71.01.4Real unit labour costs (y-o-y)0.00.4-1.40.00.50.00.1-0.2Real effective exchange rate (ULC, y-o-y)1.6-0.5-3.31.11.1-2.6-1.7-0.8Real effective exchange rate (HICP, y-o-y)0.2-0.2-1.10.61.8-1.9-1.8-1.4Net savings rate of households (net saving as percentage of net -0.7-6.3-15.6-16.9-15.1...Private credit flow, consolidated (% of GDP)14.41.8-3.0-1.0-1.1...Private sector debt, consolidated (% of GDP)88.3124.1129.0118.1115.3...of which household debt, consolidated (% of GDP)37.858.362.756.856.5...of which non-financial corporate debt, consolidated (% of GDP)50.565.766.461.358.8...Gross non-performing debt (% of total debt instruments and total loans and advances) (2)........Corporations, net lending (+) or net borrowing (-) (% of GDP)5.17.411.36.14.85.14.74.0Corporations, gross operating surplus (% of GDP)19.018.519.018.418.018.118.018.1Households, net lending (+) or net borrowing (-) (% of GDP)-7.9-5.5-5.2-6.7-6.0-5.8-5.3-4.4Deflated house price index (y-o-y)4.6-7.0-5.7-1.51.4...Residential investment (% of GDP)9.95.51.10.60.7...Current account balance (% of GDP), balance of payments-10.8-9.9-1.2-1.9-2.8-2.6-2.9-2.8Trade balance (% of GDP), balance of payments-9.1-7.2-1.3-1.0-1.7...Terms of trade of goods and services (y-o-y)-0.1-0.71.9-0.4-1.90.20.20.6Capital account balance (% of GDP)1.41.21.20.50.2...Net international investment position (% of GDP)-79.7-93.4-133.8-140.7-143.3...NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1).-95.3-128.3-126.6-130.6...IIP liabilities excluding non-defaultable instruments (% of GDP) (1).188.2242.9223.6222.9...Export performance vs. advanced countries (% change over 5 years)13.6-4.9-15.0-3.14.7...Export market share, goods and services (y-o-y)0.9-5.9-1.35.18.03.00.2-0.6Net FDI flows (% of GDP)0.1-0.1-0.9-1.6-1.6...General government balance (% of GDP)-6.9-11.1-5.50.71.01.31.01.1Structural budget balance (% of GDP)..4.25.25.13.01.81.1General government gross debt (% of GDP)104.2142.8177.7176.2181.2175.2169.3163.1Tax-to-GDP ratio (%) (3)32.935.139.641.641.140.039.238.8Tax rate for a single person earning the average wage (%) (4)25.425.325.026.026.2...Tax rate for a single person earning 50% of the average wage (%) (4)16.017.816.016.316.6...forecast 
  
 
 
2. Progress with country specific recommendations 

2.  PROGRESS WITH COUNTRY SPECIFIC 

RECOMMENDATIONS 

successfully  exited 

Greece 
the  European 
Stability  Mechanism  support  programme  on 
21 August  2018,  marking  the  beginning  of  a 
new  era  for  the  country.  Since  then,  Greece  has 
been subject to enhanced surveillance, in line with 
the  post-programme  policy  commitments  given  at 
the Eurogroup of 22 June 2018 (6), and participates 
in  the  European  Semester  in  line  with  Regulation 
(EU) No 472/2013.  

the 

first  country-specific 
its 
Greece  received 
recommendations 
European 
under 
Semester  in  July  2019.  The  Council  issued  no 
such  country-specific  recommendation  (CSR)  to 
Greece  before  2019  because  —  pursuant  to 
Article 12  of  Regulation  (EU)  No 472/2013 (7)  — 
Greece  was  exempt  from  this  type  of  EU-wide 
monitoring and assessment since it was under EU-
supported economic adjustment programmes.  

To  ensure  full  consistency  between  Greece’s 
post-programme  policy  commitments  and  the 
European  Semester,  Greece  received  a  CSR  to 
continue and complete the  reforms  in line with 
its  post-programme  commitments  to  European 
partners.  Greece  committed  to  the  Eurogroup  of 
22 June  2018  to  continue  and  complete  reforms 
adopted  under  the  European  Stability  Mechanism 
programme  and  to  safeguard  the  objectives  of  the 
important  reforms  adopted  under  the  financial 
assistance  programmes.  These  commitments  are 
monitored as part of the post-programme enhanced 
surveillance  framework.  Specifically,  progress 
with  key  structural  reforms  that  started  under  the 
programme is measured in six key areas by agreed 
deadlines  up  to  mid-2022,  namely:  (i)  fiscal  and 
fiscal-structural  policies;  (ii)  social  welfare,  (iii) 
financial stability; (iv) labour and product markets; 
(v)  privatisation;  and  (vi)  the  modernisation  of 
public  administration.  The  first  CSR  to  Greece 
under  the  European  Semester  in  July  2019  called 

(6)  https://www.consilium.europa.eu/media/35749/z-councils-
council-configurations-ecofin-eurogroup-2018-180621-
specific-commitments-to-ensure-the-continuity-and-
completion-of-reforms-adopted-under-the-esm-
programme_2.pdf. 

(7)  Regulation (EU) No 472/2013 of the European Parliament 
and of the Council of 21 May 2013 on the strengthening of 
economic and budgetary surveillance of Member States in 
the  euro  area  experiencing  or  threatened  with  serious 
difficulties  with  respect  to  their  financial  stability,  OJ  L 
140, 27.5.2013, p. 1. 

in 

line  with 

on  the  authorities  to  continue  and  complete 
these  post-programme 
reforms 
commitments that are key to achieve a sustainable 
economic  recovery  and  to  tackle  the  underlying 
macroeconomic imbalances. 

are 

enhanced 

report (8) 

surveillance 

ongoing.  Progress 

Greece  has  taken  the  necessary  action  to 
implement policy elements of the first CSR due 
for  mid-2019,  while  efforts  to  meet  end-2019 
commitments 
on 
implementing this recommendation was monitored 
under  the  enhanced  surveillance  framework.  The 
fourth 
of 
November  2019  monitored  the  implementation  of 
the  specific  mid-2019  commitments,  while  taking 
into  account  the  efforts  of  the  new  administration 
in  the  months  following  the  July  2019  general 
election.  The  Eurogroup  of  4 December  2019 
welcomed the conclusion of the report and agreed 
to disburse the second tranche of policy-contingent 
debt measures (9). The  fifth enhanced surveillance 
report (10)  is  issued  together  with  this  country 
report  and  monitors  the  progress  of  the  specific 
end-2019 commitments. Overall, Greece has made 
some  progress  with  meeting  its  first  country-
specific recommendation.  

the 

Overall,  Greece  has  made  some  progress  with 
addressing 
country-specific 
second 
recommendation.  The  assessment  of  this  CSR  is 
made  both  quantitatively,  based  on  a  comparative 
analysis  of  recent  developments  in  private  and 
public  investment  spending,  and  qualitatively, 
notably  by  reviewing  sectoral  and  cross-cutting 
policies  with  a  potential  positive 
impact  on 
investment.  

In  terms  of  broader 
investment-conducive 
economic  policies,  Greece  has  taken  important 
steps. The government has adopted several pieces 
of legislation to support the transition to a ‘digital 
state’  and  to  promote  private  investment,  notably 
through  the  Development  Law  of  October  2019. 
The latter paves the  way for  a streamlining of the 
investment  licensing  procedures  and  introduces 

(8)  COM(2019)930 final. 
(9)  Eurogroup 

statement 

of 

4  December 

2019, 

https://www.consilium.europa.eu/en/press/press-
releases/2019/12/04/eurogroup-statement-on-greece-of-4-
december-2019/. 
(10)  COM(2020)100 final. 

14 

                                                           
                                                           
3. Summary of the main findings from the MIP in-depth review 

the expansion of the Athens metro system, and the 
completion of railway sections.   

a 

for 

law 

implement 

renewable 

strategic  plan 

energy 
Investment 

interconnection  projects), 

Some  progress  has  been  made  in  promoting 
investment in environmental protection, energy 
and 
efficiency, 
interconnection 
in 
projects. 
environmental  protection  is  relatively  low  and 
Greece  runs  the  risk  of  not  meeting  the  EU-wide 
recycling  target  (50%)  by  2020.  A  number  of 
investment  projects,  co-financed  by  the  EU,  are 
underway  to  improve  wastewater  treatment  in 
the  municipality  of 
in 
Western  Attica  and 
Marathonas and to improve  waste  management  in 
Peloponnese.  Meanwhile, 
4643/2019 
introduced amendments regarding the development 
of  installations  for  electric  vehicles.  An  inter-
ministerial  committee  has  been  set  up  to  design 
and 
the 
development  of  electro-mobility  in  Greece,  which 
is  expected  to  be  ready  by  June  2020.On  energy-
related  investments  (energy  efficiency,  renewable 
energy  and 
some 
progress  has  been  made.  In  December  2019,  the 
revised  2021-2030 
the 
authorities  submitted 
National  Energy  and  Climate  Plan  that  sets  out 
long-term  goals  and  strategies  in  these  areas  and 
provides  the  basis  for  further  investment.  On 
energy  efficiency,  Greece  is  on  track  to  meet  its 
2020 goals and, by 2019, investments co-financed 
by  the  EU  had  improved  energy  efficiency  for 
19,100  households.  Programmes  such  as 
the 
‘Energy saving at home’ and ‘Electra’ will further 
improve  energy  efficiency  for  household  and 
public buildings (law 4643/2019). On renewables, 
law  4643/2019 
to 
introduced 
facilitate  large  investment  projects,  including  the 
construction of hybrid plants in non-interconnected 
islands,  while  the  government  has  announced 
further  measures  to  streamline  the  investment-
licensing  framework  in  the  area  of  renewable 
energy  sources.  On  interconnection  projects,  the 
National  Energy  and  Climate  Plan  provides  a 
timeline  for  non-interconnected  islands.  The  first 
phase  of  a  major  project  connecting  Crete  to  the 
mainland electricity transmission grid is underway, 
the 
the  Crete-Peloponnese 
interconnection  is  expected  to  be  completed  in 
2020,  and  the  interconnection  of  West  Cyclades 
islands is scheduled for 2023.  

construction  of 

amendments 

There  has  been  some  progress  in  promoting 
investment  in  digital  technologies.  Greece  has 

reforms  are  advancing,  with 

changes  in  spatial  planning  to  accelerate  major 
investment projects. It also aims to increase clarity 
and transparency on land use rules for investors by 
introducing  a  ‘Single  Digital  Map’.  Meanwhile, 
land  use 
the 
completion  of  forest  maps  for  nearly  95%  of  the 
country and continued work in cadastral mapping. 
Efforts  to  fight  corruption  are  ongoing  under  the 
coordination  of  a  new  agency  and  the  reforms 
made  in  the  past  years  have  resulted  in  an 
improvement of business perceptions compared to 
previous years. The authorities have also initiated a 
more  coordinated  approach  to  promoting  the 
outward  orientation  of  the  Greek  economy  and 
have 
attracting 
significantly 
the 
privatisation  process,  which  could  have  a  positive 
impact  on  investment  in  the  future.  However, 
progress  made  on  justice  reforms  has  been  slow 
overall. 

increased  momentum 

investment, 

foreign 

and 

in 

In quantitative terms, investment appears to be 
slowly  recovering  following  a  long  period  of 
contraction.  During 
the  first  half  of  2019, 
investment increased by a mere 0.7%, as compared 
to  an  average  of  4.7%  in  the  euro  area.  In  the 
second quarter of 2019, it remained broadly flat (-
0.1%) compared to the same period in the previous 
year.  Previously,  investment  (as  a  share  of  GDP) 
had  fallen  sharply  during  the  crisis  years  2007-
2014  and  bottomed  out  in  2015,  rebounding 
somewhat to reach 11.1% of GDP in 2018.  

The  following  analysis  reviews  public  investment 
trends for the priority areas identified in the second 
CSR.  

in 

Greece has made limited progress in promoting 
investment 
transport  and 
sustainable 
logistics.  Greece  scores  poorly  in  international 
rankings  of  transport  and  logistics  infrastructures. 
Its  inland  transport  system  is  heavily  road-based 
and,  despite  sizeable  EU  financing,  the  country’s 
main railway axis remains incomplete. Although it 
is  slowly  recovering,  investment  in  transport 
infrastructures  remains  relatively  low.  With  the 
support  of  the  European  Commission  and  the 
European  Investment  Bank,  the  authorities  have 
prepared,  a  National  Transport  Master  Plan  that, 
among others, sets the  framework  for investments 
in transport infrastructure. Meanwhile, a number of 
large  investment  projects  are  delayed,  including 
the construction of the Thessaloniki metro system, 

15 

3. Summary of the main findings from the MIP in-depth review 

total 

one of the least advanced digital economies in the 
EU.  Investments  in  information  communication 
technology  (as  a  share  of 
investment) 
increased  with  some  fluctuations  in  the  first  two 
quarters of 2019 compared to the same quarters of 
2017, but rose slightly as a share of GDP. In terms 
of  policies,  the  authorities  are  working  on  a  new 
national  strategy  (‘Digital  Bible’)  that,  among 
others,  will  include  a  pipeline  of  IT  investment 
projects  for 
the  entire  public  administration. 
Meanwhile,  the  authorities  are  taking  steps  as 
regards  important  projects  (creation  of  a  unified 
platform for electronic services, introducing digital 
identity  cards  for  all  citizens,  developing  the 
infrastructure  on  5G  networks  and  increasing 
ultrafast broadband coverage). 

Some  progress  has  been  made  in  promoting 
investment  in  research  and  development.  Total 
spending on research and development, as a share 
of  GDP,  has  been  steadily  increasing  since  2010, 
reaching  1.18%  in  2018,  but  is  still  lagging 
significantly  behind  the  EU  average  (2.11%).  In 
December  2019,  the  authorities  completed  the 
evaluation  of  2,912  proposals  submitted  in  the 
context  of  the  flagship  call  “Research-Create-
Innovate”.  Overall,  the  budget  of  all  announced 
calls  regarding  research  and  development  has 
reached € 877 million.  

Progress in promoting investment in education, 
skills and employability has been limited. Public 
expenditure  on  education  accounted  for  3.9%  of 
GDP  in  2017,  among  the  lowest  in  the  EU  (EU 
average:  4.6%),  including  for  life-long  learning 
Expenditure on training was €15.5 million in 2017, 
down  from  €27.8 million  in  2016.  Nevertheless, 
with  the  help  of  the  European  Social  Fund,  a 
number of investment projects have taken place in 
recent years, among others, to reduce early school 
leaving,  expand  early  childhood  education, 
upgrade  the  vocational  education  and  training 
system,  expand  dual  learning,  and  reform  higher 

the 

education. Meanwhile, the share of companies (10 
persons  employed  or  more)  that  provide  training 
and  vocational  programmes  to  develop  and/or 
information  and  communication 
upgrade 
technology  skills  of  their  personnel  increased 
slightly  in  2019  (from  14%  to  15%),  but  remains 
well below the euro area average (25%). In term of 
policy  developments,  law  4653/2020  allowed  for 
increased  independence  of  the  Hellenic  Authority 
of  Higher  Education  and  it  helped  standardise 
university  evaluations,  which  could, 
turn, 
facilitate performance-based funding, and increase 
efficiency. 

in 

There  has  been  limited  progress  in  investment 
in  the  health  sector  and  in  social  inclusion.  In 
2017,  investment  in  the  health  sector  was  among 
the  lowest  in  the  euro  area  (0.1%  of  GDP  as 
opposed  to  0.2%  of  GDP  in  the  euro  area).  In 
recent  years,  EU  financing  though  the  European 
Social  Fund  has  contributed  to  the  reform  of 
primary  health  care  and  the  rolling  out  of  a 
network  of  local  healthcare  units  (TOMYs)  to 
strengthen  access  to  primary  healthcare.  Around 
130  units  were  in  operation  by  the  end  of  2019. 
Nevertheless, a long-term strategic investment plan 
to steer such investments remain necessary. 

Limited  progress  has  been  made  in  facilitating 
investment for promoting the renewal of urban 
areas.    Some  investments  have  been  made  or  are 
planned 
to  promote  equal  opportunities  and 
facilitate social inclusion of marginalized groups in 
disadvantages urban areas. 

Overall,  Greece  has  made  some  progress  with 
implementing  its  2019  CSRs,  and  in  several 
policy areas, it has benefited from EU-financed 
technical  support.  Since  2015,  the  Commission 
has  financed  more  than  150  projects  in  Greece  to 
support  the  implementation  of  structural  reforms 
(see also Box 2.1 for projects implemented).  

16 

Table 2.1: 

Overall assessment of progress with 2019 CSRs 

Greece 

and 

CSR  1:  Achieve  a  sustainable  economic 
recovery 
excessive 
tackle 
macroeconomic imbalances by  continuing and 
completing  reforms  in  line  with  the  post-
programme 
the 
Eurogroup of 22 June 2018. 

commitments  given  at 

the 

3. Summary of the main findings from the MIP in-depth review 

Overall assessment of progress with 2019 
CSRs: Some progress(1) 

  Greece  has  made 
addressing CSR1.  

some  progress 

in 

 

of 

the 

specific 

Implementation 
post-
programme policy commitments that are due by 
end-2019  and  embedded  in  the  first  country 
specific  recommendation  is  monitored  under 
quarterly  enhanced  surveillance  reports.  The 
Commission  considers  that  Greece  has  taken 
the  necessary  actions  to  achieve  all  specific 
reform commitments for mid-2019 and that the 
authorities  have  taken  important  steps  towards 
meeting the end-2019 commitments. 

energy 

CSR  2:  Focus  investment-related  economic 
policy  on  sustainable  transport  and  logistics, 
environmental  protection,  energy  efficiency, 
renewable 
interconnection 
projects,  digital  technologies,  research  and 
development,  education,  skills,  employability, 
health, and the renewal of urban areas, taking 
into account regional disparities and the need 
to ensure social inclusion. 

and 

  Greece has made some progress in 

addressing CSR2. 

  Limited progress in focusing investment-
related economic policy on sustainable 
transport and logistics. 

  Some progress in focusing investment-related 
economic policy on environmental protection, 
energy efficiency, as well as on renewable 
energy, and interconnection projects. 

  Some progress in focusing investment-related 
economic policy on digital technologies. 

  Some progress in focusing investment-related 

economic policy on research and 
development. 

  Limited progress in focusing investment-

related economic policy on education, skills, 
and employability. 

  Limited progress in focusing investment-

related economic policy on health. 

  Limited progress in focusing investment-
related economic policy on the renewal of 
urban areas taking into account regional 
disparities and the need to ensure social 
inclusion. 

Source: European Commission 
(1) The assessment of CSR3 does not take into account the contribution of the EU 2021-2027 cohesion policy funds. 
The  regulatory  framework  underpinning  the  programming of  the 2021-2027  EU  cohesion policy  funds has  not  yet 
been adopted by the co-legislators, pending inter alia an agreement on the multiannual financial framework (MFF). 
17 

 
 
 
 
 
   
 
 
 
 
 
 
3. Summary of the main findings from the MIP in-depth review 

Box 2.1: Commission Structural Reform Support Programme in Greece 

Upon a Member  State’s request the Commission can provide tailor-made expertise  via its 
Structural Reform Support Programme to help the country design and implement growth-
enhancing reforms. Such support has been provided to Greece since 2015 at the request of the 
Greek authorities. To date, support has been provided for more than  150 projects. While Greece 
still  needs  to  comply  with  its  commitments  under  the  enhanced  surveillance  process,  the 
implementation and completion of key reforms are showing measurable results. In 2019, several 
projects in various policy areas were successfully implemented.  
The  Commission  continues  to  assist  Greece  in  the  area  of  governance  and  public 
administration, to digitise and modernise the Greek public sector at both central and local 
levels.  This  includes  support  for:  (i)  the  human  resources  department  (to  modernise  and 
depoliticise the civil service  in particular); (ii)  the  judicial sector (with a focus on digitalisation 
and  reducing  backlogs);  (iii)  the  fight  against  corruption  (notably  to  implement  the  national 
strategy);  (iv)  better  law  making  (with  a  focus  on  evidence-based  law  making  and  improved 
coordination);  and  (v)  support  to  local  authorities  (notably  in  the  area  of  inter-municipal 
cooperation).  In  addition,  support  focusses  on  the  digital  transformation  of  the  public 
administration  and  the  wider  deployment  of  e-services.  In  2019,  the  Commission  supported 
Greece  to  strengthen  its  crisis  management  and  response  systems,  including  in  the  area  of 
migration — by increasing the administrative and operational capacity to receive asylum seekers.  
On  growth  and  the  business  environment,  the  Commission  has  helped  Greece  to  build  a 
strong  and  green  economy,  and  boost  competitiveness  and  innovation.  For  example,  the 
Commission  has  provided  Greece  with  support  to:  (i)  further  develop  its  electricity  distribution 
network,  and  its  electricity  systems  and  markets,  taking  into  account  geographical  and  regional 
disparities; (ii) develop a national transport plan; and (iii) complete the mapping of the national 
cadastre  and  set  up  cadastre  offices.  New  initiatives  were  launched  in  2019  to  further  tackle 
energy and environmental issues, including investment projects on effective waste management, 
and on clean energy to increase competitiveness in  the renewable energy  sector. Other  projects 
focus on capacity building for Public Private Partnerships, the reform of business inspections, and 
process simplification for businesses.  
Support  has  been  provided  to  improve  labour  market  and  pension,  social  welfare,  health 
and education systems. The Commission is helping Greece to: (i) implement its action plan for 
tackling  undeclared  work;  (ii)  reform  its  single  social  security  agency;  (iii)  strengthen  the 
capacity  of  its  centralised  health  procurement  agency;  and  (iv)  improve  universal  access  to 
quality  health  services.  In  2019,  support  focused  on:  (i)  reforming  the  quality  and  delivery  of 
Greece’s active labour market programmes; (ii) modernising its disability assessment system; (iii) 
promoting inclusive education; and (iv)  facilitating the  deinstitutionalisation reform. In  the area 
of healthcare, the Commission is also helping Greece establish a diagnosis-related groups system.  
Greece  has  been  receiving  support  for  revenue  administration,  tax  policy  and  public 
financial management, to further simplify and increase the efficiency of its tax framework. 
Central to this is the modernisation of the stamp duty system and the revision of the legal 
framework  on  the  liability  of  natural  persons.  In  2019,  new  projects  began  on  building 
information  technology  capacity  for  the  Ministry  of  Finance  and  the  Independent  Authority  for 
Public revenue, and supporting the setting up of a Model Collection Office.  
On finance and access to finance, the Commission is helping Greece to ensure an efficient 
allocation of capital and improve access to finance for companies.  A feasibility study on the 
setting  up  of  the  Hellenic  Development  Bank  was  completed  and  its  implementation  is  under 
way. The aim is to improve companies’ access to finance and increase investment opportunities. 
Greece received support in 2019 to design and implement a comprehensive national strategy on 
reducing non-performing loans in the banking sector. 

18 

3.  SUMMARY OF THE MAIN FINDINGS FROM THE MIP IN-

DEPTH REVIEW 

Introduction  

external  debt  exposes  the  Greek  economy  to 
external shocks and market sentiment shifts.  

review  concluded 

The  2020  Alert  Mechanism  Report  concluded 
that Greece should have a new in-depth review 
to  examine  whether  any  imbalances  persist 
(European  Commission,  2019c).  The  2019  in-
depth 
faces 
excessive  imbalances  that  should  be  addressed 
through 
chapter 
summarises the analyses of the in-depth review of 
procedure 
the  macroeconomic 
contained in various sections in this report (11). 

reforms.  This 

that  Greece 

imbalance 

structural 

Imbalances and their gravity  

Greece’s large debt stock is starting to decrease 
slowly.  A  high  level  of  non-performing  loans  in 
the  banking  system  together  with  high  public  and 
external  debt  remain  a  risk  for  the  economy  as  it 
exposes  the  country 
to  adverse  shocks.  The 
recovery  started  in  2017  but  has  not  been  strong 
enough  to  support  a  faster  deleveraging  in  the 
private and public sector.  

The  high  stock  of  public  debt 
is  slowly 
decreasing.  In  2019,  general  government  gross 
debt reached 175.2% of GDP. That is 6 percentage 
points less than in 2018, but remains the highest in 
the  EU.  Government  debt  is  expected  to  slowly 
decrease 
the  coming  years,  supported  by 
planned primary surpluses, the economic recovery 
and the debt relief measures agreed with European 
partners.  However,  refinancing  or  debt-servicing 
risks  are  expected  to  remain  limited  over  the 
medium  term,  due  to  the  special  repayment  terms 
agreed with the creditors.  

in 

The  stock  of  external  liabilities  remains  the 
second  largest  in  the  EU,  although  it  is  largely 
due  to  public  debt  held  by  creditors  at  highly 
concessional 
international 
terms.  The  net 
investment  position  stood  at  -143.3%  of  GDP  in 
2018.  It  is  composed  mainly  of  debt  instruments 
and related to the high levels of public debt. High 

(11)  Relevant  analyses  can  be  found in  the  following  sections: 
Public  finances  and  taxation  are  covered  in  Section  4.1; 
financial  sector:  banking  sector,  access 
to  finance, 
indebtedness,  non-performing  loans  in  Section  4.2;  labour 
productivity  in  Section  4.3;  and  investment:  external 
competitiveness,  private  and  public  investment,  business 
environment are covered in Section 4.4. 

The external position remains weak. The current 
account balance stood at -2.8% of GDP in 2018 as 
opposed to -1.9% in 2017. The cyclically adjusted 
current account balance (12) stood at -5.1% of GDP 
in  2018,  which  points  to  a  structural  imbalance 
even  when  taking  out  cyclical  components.  In 
contrast, the current account balance that would be 
international 
necessary 
investment  position 
the  macroeconomic 
at 
imbalance  procedure  threshold  level  of  -35%  of 
GDP was estimated at 1.8% in 2018.  

the  net 

stabilise 

to 

High  levels  of  non-performing  loans  constrain 
the  lending  capacity  of  the  banking  sector.  In 
September  2019,  42.1%  of  loans  were  considered 
non-performing, according to the Bank of Greece. 
This  affects  the  lending  capacity  of  the  banking 
sector,  limiting  the  supply  of  credit  to  the  real 
economy.  While  the  private  debt  stocks  are 
the  economic  situation  with  high 
contained, 
unemployment,  high  ageing  and  age-dependency 
ratios  and  high  public  debt,  coupled  with  a  low 
household  saving  rate, 
low  debt 
repayment  capacity  of  households  and  non-
financial corporations. 

indicates  a 

The severe and prolonged crisis has had lasting 
effects  on  potential  growth,  though  it  is  slowly 
recovering.  During  the  crisis,  in  which  Greece’s 
economy shrunk by 25% of GDP, potential output 
declined  substantially.  The  productive  capacity  of 
the economy has suffered due to the large outward 
migration  of  skilled  workers  and  the  depletion  of 
the capital stock. Total factor productivity grew by 
1.5%  in  2018,  faster  than  in  other  EU  countries, 
but coming from a low level.  

The labour market is gradually recovering, but 
unemployment  is  still  very  high  compared  to 
other  EU  countries  or  pre-crisis 
levels. 
Employment  increases  in  recent  years  have  not 
offset  yet  the  negative  impact  of  the  crisis.  The 
unemployment rate remains the highest in the EU, 

(12)  The  cyclically  adjusted  or  underlying  current  account 
balance is the current account balance that would prevail if 
all  economies  were  at  potential  output.  The  difference 
between  this  indicator  and  the  current  account  norm 
establishes the current account gap. 

19 

 
                                                           
                                                           
3. Summary of the main findings from the MIP in-depth review 

thereby 

as  does  the  long-term  unemployment  rate.  Youth 
unemployment  rate 
is  still  at  around  35%, 
prompting  young  people  to  look  for  employment 
limiting  future  potential 
abroad  and 
growth.  Furthermore,  Greece  has  one  of  the 
highest  qualification  mismatches  among  EU 
countries and one of the highest over-qualification 
tertiary  graduates,  while  skill 
rates  among 
shortages exist in energy and technology sectors.  

Evolution and prospects 

The  current  account  balance  is  expected  to 
remain  negative  as  domestic  demand  picks  up. 
After reaching -1.9% of GDP in 2017, the current 
account  balance  widened  to  -2.8%  in  2018  and  is 
expected  to  remain  below  -2%  for  the  coming 
years.  Due  to  its  high  import  content,  increasing 
domestic  demand  is  expected  to  lead  to  higher 
imports.  Against  this  background,  measures  to 
reduce  the  current  account  deficit  include:  (i) 
increasing  productivity  and  competitiveness;  (ii) 
rebalancing the economy with a stronger focus on 
tradable  sectors  and  better  framework  conditions; 
and (iii) introducing incentives for firms to export. 

The  net  international  investment  position  is 
strongly  negative,  remaining  well  below  the 
fundamental  benchmark  and  the  prudential 
threshold (13). The composition of the net external 
liabilities  with  the  overwhelmingly  large  share  of 
public  debt  mitigates  the  risk  of  a  sudden  capital 
outflow. Nevertheless, the international investment 
position should be adjusted to levels that are more 
prudential in the medium and long term.  

Following  their  strong  rebound  in  2017  and 
2018,  exports  are  expected  to  continue  to  grow 
albeit  more  slowly.  High  export  growth  in  both 
goods  and  services  supported 
the  economic 
recovery  in  Greece  in  2017  and  2018. In  addition 
to profiting from the favourable economic outlook 
of its main EU trade partners, Greece increased its 
export  market  shares  during  that  period.  As  the 
economic situation in most EU countries is cooling 
down,  Greek  exports  are  expected  to  continue  to 

(13)  The current account ‘norm’ benchmark for Greece is -48% 
and  it  is  derived  from  regressions  capturing  the  main 
fundamental determinants of the saving-investment balance 
(e.g.  demographics,  resources),  as  well  as  policy  factors 
and  global  financial  conditions.  For  details  regarding  the 
estimation of current accounts based on fundamentals, see 
Coutinho et al. (2018). 

grow,  but  at  a  lower  rate  in  the  coming  years, 
while export market shares will continue to expand 
building  on  the  competitiveness  gains  of  recent 
years.  

Diversifying  service  exports  beyond  tourism 
could  make  service  exports  less  vulnerable  to 
external  shocks.  The  tourism  sector,  one  of  the 
main service export sectors has benefited from the 
unstable  geopolitical  situation  in  main  competitor 
countries in recent years. As the number of tourists 
seems to have reached a plateau, growth appears to 
longer  stays  and  higher 
mainly  be  due 
expenditure  per  tourist.  The  concentration  of 
service  exports  in  tourism  and  transport  makes 
Greece  vulnerable  to  the  situation  in  tourists’ 
countries of origin and the situation  in competitor 
countries.  Other  sectors  such  as 
information 
technology  services,  research  and  development, 
and other business services could help to diversify 
service exports (see Box 4.4.1).  

to 

The still high public debt is expected to drop as 
a share of GDP in 2019 due to a consolidation of 
real  GDP  growth,  expected  primary  surpluses 
and  incoming  privatisation  proceeds.  This  is  in 
line  with  the  overall  trend  recorded  in  the  last 
years,  apart  from  a  one-off  spike 
in  2018, 
explained  by  the  use  of  a  large  part  of  the  last 
programme disbursement to increase treasury cash 
buffers that are now covering more than 2 years of 
expected  debt  servicing.  To  mitigate  risks  and 
increase the resilience of Greece’s public finances, 
prudent  fiscal  policy  remains  necessary.  This  will 
entail  primary  surpluses,  appropriate  cash  buffers 
and a proactive debt management policy. 

Despite slowly decreasing, the high level of non-
performing  loans  remains  a  weakness  for  the 
financial  system.  The  share  of  non-performing 
loans in total loans has been declining slowly since 
2016.  Nevertheless,  it  remains  the  highest  in  the 
EU  and  puts  pressure  on  the  banking  sector.  To 
accelerate  the  reduction  of  non-performing  loans, 
banks  and  the  authorities  need  to  make  additional 
efforts to clean out banks’ balance sheets. Creating 
a  foreclosure  and  insolvency  framework  that  is 
conducive to deleveraging is a key way to swiftly 
reduce  non-performing  loans  (see  Chapter  4.2). 
Economic  recovery  with  the  support  of  new 
lending  can  only  take  place  when  a  significant 
number  of  borrowers  has  found  sustainable 
solutions to their over-indebtedness. 

20 

                                                           
3. Summary of the main findings from the MIP in-depth review 

affected by the loss of human and physical capital 
during the crisis.  

imbalances  will  require 
The  accumulated 
further  reform  efforts  in  the  coming  years. 
Given  the  high  stock  imbalances,  positive  flow 
developments  in  recent  years  have  had  only  a 
limited  effect  in  reaching  the  macroeconomic 
imbalance  procedure  benchmarks.  Policies  that 
support  economic  growth  and 
labour  market 
recovery  are  expected  to  accelerate  the  reduction 
of imbalances,  helped along  by current and future 
the 
reforms.  During 
authorities  adopted  a  wide  range  of  measures  to 
put public finances on a sound footing, restore the 
financial  sector,  and  improve  the  functioning  of 
product  and  labour  markets,  while  strengthening 
the social welfare system. These deep institutional 
and  structural  reforms  require  many  years  of 
sustained 
to 
unfold  fully.  Further  measures  to  tackle  low 
productivity and other imbalances could set Greece 
on a path to sustainable economic growth. 

the  programme  period, 

implementation  for 

impact 

their 

Investment  growth  is  expected  to  increase 
productivity  and  potential  economic  growth. 
The  ongoing economic recovery and the 2020 tax 
package  are  expected  to  stimulate  investment  and 
domestic  consumption.  This  in  turn  can  start  a 
virtuous  cycle,  improving  the  old  and  depreciated 
capital  stock,  and  increasing  productivity  and 
potential growth. Higher productivity could sustain 
increases  in  labour  cost  since  2017  and  build  the 
foundation  for  further 
in  domestic 
demand.  

increases 

is  a  substantial 

total  employment 

levels  of  4.5 million.  Employment 

The  labour  market  situation  is  improving  but 
employment  is  still  lower  than  pre-crisis  levels. 
stood  at 
In  July  2019, 
3.9 million,  which 
increase 
compared  with  the  lowest  point  during  the  crisis 
(3.5 million  in  2013),  but  still  lower  than  the  pre-
crisis 
is 
expected to recover further in the coming years, in 
line with economic growth. Despite the substantial 
wage  increase  brought  about  by  scrapping  the 
exemption  from  the  general  minimum  wage  that 
had  been  applied  to  young  workers,  the  rate  of 
the  second 
youth  unemployment  declined 
quarter  of  2019.  Nevertheless,  the  unemployment 
rate among people below the age of 25 is still the 
highest in the EU. 

in 

Wages  increased  moderately  during  the  period 
2017-2019,  but  any  wage  growth  that  strongly 
outpaces  productivity  growth  could  harm 
competitiveness.  Wage  growth  was  in  line  with 
unemployment, inflation and productivity over the 
last  three  years.  However,  with  low  productivity 
growth and inflation well below 1%, there remains 
little  room  for  further  wage  increases  without 
labour  costs  and 
to  unit 
detrimental  effects 
competitiveness.  Against  this  background,  rising 
investment  and  updating  and 
the 
productive  capital  are  key  in  order  for  labour 
productivity developments to exceed wage growth. 

renewing 

Overall assessment  

imbalances  are  prevalent 
Macroeconomic 
across sectors in Greece, but adjustment efforts 
are  under  way.  Greece  has  made  progress  in 
adjusting 
labour 
market,  external  competitiveness  and  the  banking 
sector.  The  net  international  investment  position 
has  improved,  but  very  slowly.  Progress  has  also 
been  slow  in  productivity,  as  the  economy  is  still 

the  current  account  deficit, 

21 

3. Summary of the main findings from the MIP in-depth review 

Table 3.1: 

MIP assessment matrix — Greece 2020 

(Continued on the next page) 

22 

   Gravity of the challenge Evolution and prospects Policy response Imbalances (unsustainable trends, vulnerabilities and associated risks) External sustainability and competiveness Greece has a high stock of net external liabilities (its net international investment position was -143.3% in 2018), mainly composed of debt instruments. In spite of the high proportion of public debt to official creditors, this exposes Greece to adverse shocks or shifts in market sentiment. The current account balance widened to -2.8% of GDP in 2018 compared with -1.9% in 2017 (BoP data), which in cyclically adjusted terms represents a balance of -5.1%. This is well below what Greece would need to restore external sustainability (see Section 1). The high stock of net external liabilities is adjusting very slowly amid moderate nominal GDP growth and a current account balance that remains negative.  The current account balance has improved significantly since its trough of -15.8% in 2008, but has never reached a positive balance. Net export growth has been subdued due to a high import content of exports and investment. Greece is expected to continue to increase its world market shares in goods and services exports in the next years. Corporations (financial and non-financial) contribute the most to supporting net savings, while household savings remain low. (see Section 1) Measures have been taken during the European Stability Mechanism (ESM) programme to restore competitiveness, including sweeping the business environment and reforms to alleviate administrative burden.  In addition, product and labour market reforms during the ESM programme have increased cost competitiveness and should increase entrepreneurship and productivity gains in the future. Following the end of the programme, the new government, sworn in July 2019, has signalled its intention to pursue further efforts to modernise public administration and justice, promote e-governance and streamline the investment licensing framework. Public debt Greece has a high level of public debt, amounting to 181.2% of GDP in 2018. A large stock of public debt constrains fiscal policy and makes Greece vulnerable to changes in market sentiment. However, given the unique composition of Greece’s public debt and the debt measures agreed at the Eurogroup, Greece’s gross financing needs are expected to remain below 12% of GDP until 2033 (see Section 3.1). The public debt ratio increased by nearly five percentage points in 2018 due to the disbursement of the ESM  loan to build up a sizeable cash buffer, reaching its highest level since the end of the crisis. According to the Commission’s forecast, the public debt ratio is projected to drop to 175.2% and 169.3% of GDP in 2019 and 2020, respectively, in thanks to the ongoing economic recovery and sound public finance policies (see Section 3.1). Standard debt sustainability analysis indicates that without further consolidation measures, debt will still be above 125% in 2027 (see Box 3.1.2). Sustainability of public debt hinges on strong fiscal performance and solid nominal growth. Greece has committed to achieving primary surplus targets of 3.5% of GDP until 2022, which together with the debt relief measures agreed at the June 2018 Eurogroup meeting, will help decrease the debt-to-GDP ratio. Potential growth and productivity An ageing population and weak labour productivity indicate low potential growth, in the absence of strong effects from structural reforms.  Nominal growth, which would help to mechanically reduce debt-to-GDP ratios, is also not favoured by the still low inflation rate, which is expected to moderately increase from 0.5% in 2019 to 0.7 in 2020 (HICP growth). Potential growth is set to be around 1% in the long term, contingent on sustained implementation of sound policies. In 2018, investment had a major setback contracting by 12.2%, partly due to low public investment. Investment growth is expected to turn positive again in 2019 and to gain ground in 2020, assuming full execution of the public investment budget and in view of the gradual rebound in private investment. Productivity growth was negative since 2008, due to depleting human and physical capital arising from the migration of skilled workers and lack of investments. However, in 2018, it turned positive again (see Section 1) and investments and human capital will benefit from the economic stabilisation. In addition to measures to improve sustainability and competitiveness, an increase of competition in product markets due to recent reforms is expected to improve the productivity prospects for the future (see Section 3.4). Furthermore, the on-going simplification of procedures for setting up businesses, such as one-stop-shops for business registration, should support the entry of new competitors. Financial sector The banking sector is burdened by a high stock of non-performing exposures and provisions weigh on the profitability of banks. Bank average capitalisation is overall above current capital requirements but the quality of capital remains weak, due to the high share of deferred tax credits, leading to a persistently strong link to the Greek The non-performing loan ratios for non-financial corporations and households remain high and are declining at a relatively slow pace, despite stronger efforts in 2018, including outright non-performing loan disposals. Bank average capitalisation is slightly below 16% as of 2018 (in transitional terms). In terms of liquidity, emergency liquidity assistance was fully repaid in the first quarter of Wide-ranging measures were taken under the programme to strengthen the framework for non-performing loans resolution (see Section 4.2), including quantitative targets for reductions, as well as continued efforts to reform the judicial system and streamline foreclosure and insolvency legislation. The positive impact of these measures on non- 
 
  
 
3. Summary of the main findings from the MIP in-depth review 

Table (continued) 

Source: European Commission 

23 

  sovereign on top of banks’ government bond holdings and the State’s ownership stakes in the sector. The liquidity situation improved but, the cost of funding remains high (see Section 4.2).  Private debt stocks are below the scoreboard threshold of 133%, but the debt repayment capacity of both households and non-financial corporations in Greece remains particularly low. Household debt in particular is above both prudential and fundamentals-based benchmarks (see Section 1).  2019, while secured and interbank funding have been rising. The first issuances of long-term unsecured funding by banks after 2015 have also taken place, albeit at a high cost.  Households continue to actively deleverage, with nominal growth providing only a very limited support. The reduction of non-performing loans has been hampered by poor contract enforcement, inefficiencies in the judicial system, bottlenecks in the implementation of the foreclosure and insolvency legislation and the lack of reliable information on borrowers. Efforts to improve the repayment culture have not fully yielded results performing loans, as well as access to finance has only partially materialised at this stage.  Capital controls were fully lifted on 1 September 2019, which is expected to boost depositor confidence and support banks’ liquidity in the future.  Major efforts to improve the banks’ governance framework have taken place, as a result of the 2017 governance review. At the same time, the Hellenic Financial Stability Fund’s exit strategy was approved in 2018. Adjustment issues                                          Labour market and unemployment Unemployment in 2018 was 19.3% down from 21.5% in 2017, the highest in the EU. Youth unemployment is also the highest in the EU (39.9% in 2018) and the activity rate is relatively low (68.2% in 2018). High unemployment and subdued wage growth curb consumption growth, impair the deleveraging process, and limit the room for human capital investment. Unemployment is declining at a healthy rate, but remains very high, especially for young people and the long-term unemployed.  The recovery of cost competitiveness and reduction of unit labour costs during the programme should ensure that strong job creation will continue in the years to come. Employment growth is expected to reach 2.2% in 2019 and 2.2% in 2020 bringing the unemployment rate down to 15.4% by 2020 (see also Section 4.3). Significant measures have been taken during the programme period to improve the efficiency of labour and product markets and to regain external competitiveness. Future deviations from such policies would risk hindering the recovery process. Conclusions from the IDR analysis  Greece faces major challenges in the form of a weak financial sector, combined with high unemployment, large stocks of public debt and an unfavourable net international investment position. The high ratio of non-performing loans in the domestic banking system constrains deleveraging and banks’ profitability, reducing the amount of credit that can be channelled to the economy, which suffers from underinvestment and slow productivity growth.  While unemployment and public debt are expected to decrease in coming years, the net international investment position continues to cause of concern due to the reliance of the current account adjustment on the compression of demand. As domestic consumption and investments will pick up, corresponding increases in productivity and exports will be needed to ensure that the current account and net international investment position do not worsen again. To that end, further reforming efforts are needed in the areas of business environment, investment licensing, trade facilitation, labour and product markets. In addition, investments are recovering slowly because the private sector is deleveraging and the reduction of non-performing loans continue to be hampered by poor contract enforcement, inefficiencies in the judicial system, bottlenecks in the implementation of the foreclosure and insolvency legislation and lack of reliable information on borrowers. Wide-ranging measures were introduced during the ESM programme to improve the business environment, the foreclosure and insolvency legislation, the credit and companies' registries, prop the efficiency of the judiciary, and allow for the sale of non-performing loans. For the post-programme phase, a series of action plans are being prepared or implemented to ensure continuity and the deepening of the reforms in these areas. Combined with the improvements in cost competitiveness, the effective implementation of reforms has the potential to jumpstart the economy, spurring the creation of productive, rewarding and sustainable jobs.    
  
 
4.  REFORM PRIORITIES 

4.1.  PUBLIC FINANCES AND TAXATION 

4.1.1.  FISCAL POLICY AND FISCAL 

FRAMEWORK 

The public debt ratio is expected to decrease in 
the  future  thanks  to  solid  growth,  expected 
primary  surpluses  and  relatively  low  interest 
payments.  This  is  in  line  with  the  overall  trend 
recorded in recent years (apart from the 2018 spike 
explained  by  the  last  programme  disbursement). 
Public  debt  reached  178.5%  of  GDP  in  2016  and 
decreased  to  176.2%  of  GDP  in  2017.  Upon 
Greece’s  exit  from  the  programme  in  June  2018, 
the Eurogroup agreed to disburse €15 billion (8.1% 
of GDP) for debt servicing and building up a large 
cash  buffer  estimated  to  cover  almost  2  years  of 
the  end  of  2019.  This 
debt  servicing  at 
disbursement, 
flow 
adjustment (14),  was  a  loan  and  therefore  part  of 
Greece’s  debt,  which  climbed  to  181.2%  of  GDP 
in  2018.  Net  of  the  last  disbursement,  debt  would 
have continued falling to about 173.1% of GDP in 
2018. Graph 4.1.2 shows the drivers of public debt 
developments from 2016 onwards. 

included 

stock 

the 

in 

Achieving  the  fiscal  target  in  2020  and  beyond 
will depend on a growth-friendly tax shift from 
distortionary  to  less  distortionary  taxes.  The 
authorities  reduced  taxes  on  labour  and  capital 
(lowering production cost) significantly as of 2020 
(see Chapter 4.1.2). These cuts are compensated by 
increases in revenues from the unified property tax 
(Enfia),  value  added  tax,  and  municipal  charges. 
This  growth-friendly  tax  shift  is  expected  to 
provide a substantial boost to growth in 2020. The 
future  achievement  of  the  targets  is  likely  to  be 
underpinned  by  a  solid  growth  in  households’ 
income,  which  would  help  tax  collection,  and 
policies that limit expenditure growth, particularly 
the  public  wage  bill  and  healthcare  spending 
policies.  

In  recent  years,  Greece  has  consistently 
exceeded  its fiscal targets. Greece’s  fiscal policy 
framework  is  anchored  by  the  nominal  primary 

(14)  The  stock-flow  adjustment  (SFA)  explains  the  difference 
the 

in  government  debt  and 

between 
government deficit/surplus for a given period. 

the  change 

target  of  3.5%  of  GDP (15)  and 
surplus 
requirements of the preventive arm of the Stability 
and Growth Pact. The primary surplus targets were 
exceeded  in  all  years  of  the  European  Stability 
Mechanism programme — by a substantial margin 
for some years. 

Graph 4.1.1: 

State investment budget execution 

Note: Planned and actual expenditure from the public investment 
component of the state budget net of grants to general government. 
Source: European Commission 

The  recurrent  over  performance  was  mainly 
due  to  underspending  on  the  initial  budget 
ceilings,  for  both  the  ordinary  and  —  most 
importantly  —  the  investment  budget.  On 
average, only 61% of the public investment budget 
ceilings allocated to ministries were actually spent 
in  2017-2018  compared  to  an  average  of  94%  in 
the 
2015-2016.  This 
country’s  investment  needs  are  still  large  and 
investment  in  sectors  such  as  healthcare  remains 
significantly below the euro area average.  

is  problematic  because 

To  address  the  recurrent  underspending,  the 
authorities  designed  an  action  plan  to  improve 
the forecasting for and monitoring of the public 
investment budget. The plan includes a better and 
more  frequent  exchange  of  data  between  the 
responsible ministries, an increase in the frequency 
of 
technical 
adjustments  to  facilitate  the  preparation  of  the 
budget.  The  authorities  have  also  adopted 

forecasts,  and 

revenue 

some 

(15)  Council  Implementing  Decision  (EU)  2017/1226  of 

30 June 2017, OJ L 174, 7.7.2017, p. 22. 

24 

-0.2-0.8-1.0-1.5-0.80.00.81.52.33.0201620172018PlanOutcomeDifference 
                                                           
  
                                                           
4.1. Public finances and taxation 

Graph 4.1.2:  Debt Dynamic determinants (% GDP) 

Source: European Commission 

the  development,  management, 
legislation  on 
financing,  and  implementation  of  the  national 
component  of  the  public  investment  budget.  This 
part  of  the  public  investment  budget  will  be 
programmed through a medium-term development 
plan,  the  ‘National  Development  Plan’,  mirroring 
to  a  certain  extent  the  management  system  of  the 
EU co-financed part of the investment budget. 

The  authorities  also  took  steps  to  address  the 
sources  of  underspending 
in  the  ordinary 
budget.  The  General  Accounting  Office  revised 
the  budget  preparation  guidelines,  which  allowed 
— for the 2020 budget — to take into account the 
actual  execution  of  expenditure  (rather 
than 
starting  with  the previous  year’s budget plan) and 
imposed a requirement to assess and scrutinise the 
reasons  for  the  past  underspending.  This  will 
mitigate the risk of underspending in the future. 

Over  the  past  years,  Greece  has  established  a 
rules-based  fiscal  governance  framework,  in 
line  with  the  EU  legislation.  These  reforms 
extended the budgetary scope from the state to the 

and 

under 

strengthened 

target  monitored 

top-down 
general  government, 
budgeting, 
a  medium-term 
introduced 
budgetary  framework,  commitment  registries  and 
monitoring  mechanisms  in  all  spending  entities. 
The Organic Budget Law of 2014 also set a fiscal 
balance  rule  and  a  public  debt  rule,  as  well  as  an 
automatic  correction  mechanism.  The  primary 
surplus 
enhanced 
surveillance  ensures  that  these  rules  are  complied 
with.  Additional  reforms  were 
to 
increase  accountability,  transparency  and  enforce 
fiscal  discipline,  including  potential  sanctions  for 
spending  ministries  should  they  violate  legal 
provisions.  From  an  institutional  perspective,  the 
roles  of  the  General  Accounting  Office  and  line 
ministries  were  clarified  and  a  fiscal  council  was 
created 
the 
that 
government’s  macroeconomic 
underpins  fiscal  planning,  and  issues  semi-annual 
reports  including  on  compliance  with  domestic 
numerical rules. 

in  2015.  The  council  endorses 

introduced 

scenario 

25 

 
4.1. Public finances and taxation 

are 

reforms 

currently  being 
Important 
implemented 
in  areas  such  as  accounting, 
performance  budgeting,  cash  management  and 
expenditure  prioritisation.  These  reforms  are 
expected 
increase 
resilience  to  any  future  public  finance  shocks  in 
Greece. Chapter 4.1.4 provides further details. 

improve  outcomes  and 

to 

4.1.2.  TAXATION 

The  structure  of  the  Greek  tax  system  reflects 
the  major  reforms  implemented  under  the 
financial  adjustment  programme.  This  includes 
a  modernised  personal  and  corporate  income  tax 
system,  the  unified  property  tax  (Enfia),  and  a 
simplified value added tax system. 

The  overall 
in  Greece 
tax-to-GDP  ratio 
significantly increased during the crisis and has 
converged with the euro area average of 40.6%. 
The share of taxes and social contributions in GDP 
in  Greece  stood  at  38.9%  in  2018,  a  substantial 
increase from the pre-crisis level of 30.8% in 2009. 
The  tax  and  social  security  system  places  a  high 
tax  burden  on  corporations  and  on  low-income 
earners and households with children in particular. 
The  shares  of  indirect  taxes,  corporate  income 
taxes,  taxes  on  the  stock  of  capital,  and  property 
taxes  are  relatively  high  compared  to  other  EU 
Member States (European Commission, 2020). 

The  2020  budget  represents  a  major  start  in 
reducing  corporate  and  personal  tax  rates. 
Since  2019  (tax  year),  the  corporate  tax  rate  has 
decreased  from  29%  to  24%,  while  the  dividends 
tax  rate  has  decreased  from  15%  to  10%  for 
incomes  acquired  since  1  January  2019  and  from 
10% to 5%, for incomes acquired since 1 January 
2020.  Since  2018,  the  corporate  tax  rate  has  gone 
down  from  29%  to  24%  and  dividends  tax  from 
15%  to  5%.  These  reductions  should  assist  the 
recovery  of  investment  that  is  currently  at  a 
historically  low  level  of  11%  of  GDP.  The  2020 
budget also includes a reduction in the personal tax 
rate on incomes of up to €10 000 from 22% to 9%, 
and  increases  the  tax-free  threshold  for  taxpayers 
with  children. 
security 
In  addition, 
contributions  will  be  reduced  by  one  percentage 
point for full-time salaried persons.  

social 

tax 

and 

reform 

adopted 

The  value  added  tax  was  simplified  under  the 
programme  with  a  standard  rate  of  24%  and 
two  reduced  rates  of  6%  and  13%.  The  value 
in  2015-2016 
added 
considerably  broadened  the  tax  base  by  limiting 
the scope of reduced rates and exemptions. It also 
reduced  market 
stabilised 
distortions 
compliance  rates.  Greece’s  value  added  tax  gap, 
however,  was  among  the  highest  in  the  EU  at 
33.6%  in  2017,  but  is  expected  to  fall  back  in 
2018. The special value added tax system for five 
Aegean 
its 
elimination  is  contingent  on  the  reduction  of 
the 
migration 
minimum  qualifying  expenses 
taxpayers 
should incur via electronic payments are expected 
to help improve value added tax collection. 

islands  has  been  extended  and 

flows.  Measures 

increase 

that 

to 

A major reform of property tax zonal values is 
under  way  to  widen  the  tax  base  and  align  tax 
values  with  market  prices  by  mid-2020.  This 
will considerable increase the tax base of property 
taxes  and  improve  the  efficiency  and  fairness  of 
the  unified  property  tax.  On  the  other  hand,  the 
reform of stamp duty remains pending. 

4.1.3.  TAX ADMINISTRATION AND 

COMPLIANCE 

Combating 
tax  evasion,  and  encouraging 
voluntary  compliance  and  payment  discipline 
remain  a  significant  challenge.  A  study  carried 
out in 2016 (DiaNeosis, 2016) estimated the scale 
of tax evasion in Greece at 6-9% of GDP, mainly 
stemming  from  personal  income  tax  evasion  and 
value  added  tax  fraud.  Increasing  collection  rates 
remain a great challenge since most they are rather 
low  (between  80  and  90%).Greece  has,  however, 
continued  modernising  the  tax  administration  by 
introducing  more  advanced  and 
tax 
collection  methods.  Their  positive  results  are 
starting to become evident.  

targeted 

capacity  of 

independence  and 

The 
the 
Independent  Authority  of  Public  Revenue  are 
continuously  being  strengthened.  The  Governor 
of  the  Authority  was  reappointed  by  the  new 
government,  following his first term that ended in 
that  year.  This  was  a  major  positive  step  that 
signals that efforts to strengthen the independence 
of the Authority have started to bear fruit, and that 

26 

4.1. Public finances and taxation 

tax  collection  and  debt  targets  are  being  met  and 
actually surpassed.  

between  businesses, 
administrative burden. 

further  decreasing 

their 

enforcement 

A number of important reforms are under way, 
including  a  new  supplementary  grading  and 
wage grid for the Agency’s staff, and the ‘model 
tax  collection  office’,  which  began  its  work  in 
2019 with technical support by the Commission. 
The  model  collection  office  will  introduce  a 
comprehensive approach to tax debt, including: (i) 
streamlining 
(ii) 
consolidating the debts of a single debtor; and (iii) 
measuring  office  performance  on  a  systematic 
basis.  This  pilot  office  is  intended  to  serve  as  the 
model  for  all  of  the  country’s  tax  offices.  The 
Commission  has  also  provided  technical  support 
for business process improvement, focusing on the 
Authority’s  core  IT processes.  The  Authority  also 
plans  an  overall  upgrade  of  its  core  information 
technology  system  (TAXIS),  whose  design  is 
considered obsolete. 

processes; 

Efforts  to  improve  payment  discipline  suffered 
a  setback  in  2019,  when  an  ad  hoc  instalment 
scheme with up to 120 monthly instalments was 
introduced. Such schemes have a corrosive effect 
on  voluntary  compliance  and  payment  discipline, 
as  they  allow  tax  obligations  to  be  settled  at 
favourable  terms  compared  with  standard  rules, 
which lowers incentives to pay taxes on time. They 
also create an expectation that similar schemes will 
be  available  in  future.  The  new  government  has 
committed  not  to  create  similar  ad  hoc  schemes, 
making the only option for settlement of debts the 
revised  basic  instalment  scheme,  included  in  the 
tax  law  adopted  in  December  2019.  The  revised 
scheme allows up to 48 instalments, while linking 
the  number  of  instalments  with  payment  capacity 
and providing disincentives to dropping out of the 
scheme.  

The  Independent  Public  Revenue  Authority 
initiated  the  ‘myDATA’  project  in  2019  to 
provide legal entities with a digital platform for 
electronic  bookkeeping.  This  platform  should 
become  operational  in  2020,  allowing  users  to 
automatically  file  their  tax  returns.  It  will  also 
enable a more efficient selection of companies for 
a  tax  audit,  which  should  further  reduce  tax 
evasion  and  smuggling.  The  platform  will  also 
include an e-bookkeeping component,  which once 
invoicing 
completed,  will  enable  electronic 

increase 
Waiving  debts  below  €10  should 
efficiency.  The  Authority  plans 
to  write-off 
aggregate  debt  for  amounts  up  to  €10,  which 
should reduce the number of tax debtors by around 
14% (16). This should increase economic efficiency 
considering  the  administrative  costs  of  collecting 
these minor outstanding debts. 

To improve the coordination, a new centralised 
customs  structure  —  the  Special  Customs 
Service (17)  —  has  been  established.  This 
structure is mandated to coordinate the operational 
control units (9) and the customs audit offices (2). 
This  reform  is  expected  to  improve  the  ex-post 
control  audits  and  strengthen  the  operational 
capacity to respond swiftly to significant cases by 
assigning the needed resources. 

4.1.4.  PUBLIC FINANCIAL MANAGEMENT 
AND PUBLIC PROCUREMENT 

While  public  finance  management  reforms 
initiated  since  the  beginning  of  the  crisis  are 
under  way,  Greece’s  post-programme  reform 
strategy  now  also  focuses  on  the  quality  of 
public expenditure. The first set of public finance 
management  reforms  aimed  to  introduce  a  new 
budgetary and accounting framework, ensuring the 
clearance  of  arrears,  streamlining  the  payment 
chain  and  improving  the  liquidity  management 
(see  enhanced  surveillance  reports.  Section  public 
finance  management).  More  recently,  Greece  has 
taken 
towards  a  more 
steps 
performance-oriented  public  finance  management 
framework,  namely  through  a  new  performance 
budgeting  project  and  by  regularising  spending 
reviews across the general government.  

initial 

some 

Spending 
the  new 
reviews  are  among 
administration’s  priorities.  Greece  undertook  a 
spending  review  to  save  on  costs  by  streamlining 
ministerial  utilities. For 2018, a  targeted  spending 
review  was  initiated  in  three  ministries  and  the 
entities  they  supervise.  The  review  continued  in 

(16)  At  the  end  of  2019,  the  total  number  of  debtors  were 
4,068,908  out  of  which  571,419  had  an  aggregated  debt 
level below €10.  
(17)  OJ B-2650/01.07/2019. 

27 

                                                           
4.1. Public finances and taxation 

in 

they  still  need 

The authorities have planned some measures to 
address  deficiencies  in  health  sector  public 
procurement,  but 
to  be 
implemented.  A  number  of  challenges  persist, 
including:  (i)  a  lack  of  resources  and  specialised 
staff  in  several  contracting  authorities;  (ii)  an 
inefficient  organisation  of  purchases  leading  to 
(iii) 
last-minute  direct  awards;  and 
many 
unnecessary 
tender 
over-specification 
documents  that  limits  competition.  According  to 
Tenders Electronic Daily data (19), Greece has one 
of the lowest publication rates in the EU in health 
procurement  as  a  percentage  of  GDP  (0.1%  in 
2017  against  an  EU  average  of  0.56%).  In  2017, 
the authorities set up a central purchasing authority 
for  the  health  sector  (EKAPY).  In  order  to  fully 
operationalize the central procurement framework, 
the authorities envisage to redesign it in the course 
of 2020. In the  meantime,  with a view to phasing 
the  setback,  a  temporary  and  centralised  scheme 
that would involve the seven regional authorities is 
under  drafting.  According  to  the  authorities,  it 
would  enable  them  to  reach  the  post  programme 
target  of  30%  central  purchases  in  mid-2020  and 
40% in mid-2022. 

(19)  Tenders  Electronic  Daily  is  the  internet  facility  of  the 
Supplement  to  the  Official  Journal  of  the  EU  where 
contracting  authorities  publish  notices  related  to  public 
procurement falling under the scope of the EU Directives. 

2019, also through technical support. A major step, 
planned for the 2021 budget, will be to scale up the 
exercise to encompass all ministries. However, the 
process has so far only addressed inputs and costs 
while  outputs  and  outcomes  have  not  been 
challenged. 

of 

in 

its 

its 

the 

public 

system; 

(iii)  making 

the  norm;  and 

to 
Greece  carried  out  extensive  reforms 
improve 
public 
efficiency 
procurement,  but  there  are  still  a  number  of 
deficiencies 
procurement 
procedures,  especially  in  the  health  sector.  The 
authorities  adopted  a  set  of  measures  on:  (i) 
consolidating  and  simplifying  the  legislation  in 
place;  (ii)  improving  the  efficiency  of  prejudicial 
remedies 
electronic 
(iv)  promoting 
procurement 
centralised procurement. The country also adopted 
a national strategy in 2017 on public procurement. 
While  such  measures  should,  over  time,  make 
public  procurement  more  efficient,  rationalise 
public  spending  and  boost  growth,  the  country’s 
procurement  market  still  has  a  number  of 
deficiencies (18).  These 
limited 
competition  or  market  openness  with  a  high 
number of single bid procedures (i.e. 34% in 2018, 
compared  with  16%  10  years  ago);  (ii)  lengthy 
award procedures (236 days, compared with an EU 
average of 86 days); and (iii) a very limited use of 
quality-based  criteria  (90%  of  contracts  were 
awarded  exclusively  based  on  the  lowest  price  in 
2018,  compared  with  47%  at  EU  level),  which 
often results in excessively high discounts. 

include: 

(i) 

increasing 

Focusing on the specific measures most likely to 
address these deficiencies would contribute to a 
more  sustainable  and  efficient  use  of  public 
include:  (i) 
resources.  Such  measures  could 
improving electronic procurement and e-invoicing; 
(ii) 
and 
administrative 
professionalising  procurement  staff,  including  at 
regional and local level; and (iii) promoting central 
purchasing,  so  as  to  achieve  economies  of  scale. 
Promoting the  use of quality  criteria for awarding 
contracts  and 
the 
low  bids  could  also 
problem  of  excessively 
reinforce  the  quality  and  the  sustainability  of 
public purchases.  

systematically  addressing 

capacity 

(18) 

https://ec.europa.eu/internal_market/scoreboard/performan
ce_per_policy_area/public_procurement/index_en.htm 
(2018 data). 

28 

                                                           
 
 
                                                           
4.2.  FINANCIAL SECTOR 

4.2.1.  FINANCIAL SECTOR OVERVIEW 
AND FINANCIAL STABILITY 
ASSESSMENT (20) 

current  low  levels,  while  continuing  efforts  to 
contain operating expenses, which have resulted in 
an  average  cost-to-income  ratio  below  the  EU 
average.  

the 

the 

low 

interest 

remain 

high.  Greek 

While  the  liquidity  situation  of  Greek  banks  is 
improving  and 
large  stock  of  non-
performing  loans  decreasing,  legacy  risks  and 
banks’ 
challenges 
profitability  has  rebounded  but  is  constrained  by 
poor asset quality, a business model dependent on 
lending  growth  and 
rate 
environment.  Capital  controls  were  fully  lifted  as 
of September 2019 and banks have fully repaid the 
emergency  liquidity  assistance,  but  still  not  all  of 
them  can  fulfil  minimum  liquidity  regulatory 
requirements.  Access 
long-term  unsecured 
to 
funding  is  being  re-established  only  slowly  and 
still  at  a  high  cost.  As  a  result,  Greek  banks 
continue to rely primarily on their internal capacity 
to  generate  capital.  In  the  future,  the  Greek 
banking  sector  must  boost  its  resilience  and 
accelerate  non-performing  loans  reduction,  while 
improving its ability to finance growth based on a 
sustainable and sound credit provisioning policy. 

internally  remains 

The capital ratios of banks are above the capital 
requirements,  but  their  capacity  to  generate 
limited.  Banks’ 
capital 
tier  1  ratio  on  a 
average  common  equity 
consolidated basis was at 15.6% at the end of June 
2019, about the same as the previous year. This is 
broadly comparable with the EU average and well 
above  minimum  capital  requirements  (see  Table 
4.2.1). The common equity tier 1 ratio increased in 
the  first  half  of  2019  due  to  a  combination  of  a 
strong  performance  of 
the  marked-to-market 
sovereign  portfolio,  and  the  reduction  of  risk-
weighted  assets  due  to  loan  sales.  The  banks’ 
capital  position,  however,  remains  constrained  by 
low  recurring  profitability  and  the  still  high  level 
of  impairments.  Moreover,  the  banks’  business 
low-rate 
to 
model 
environment  due  to  their  heavy  reliance  on  net 
interest  income.  Net 
is  also 
negatively  impacted  by  the  deleveraging  of  non-
performing  loans,  given  the  high  amounts  of 
interest  income  from  these  loans.  Banks  are 
therefore trying to realign their business strategy to 
boost  non-interest  income  generation  from  its 

interest  income 

the  current 

is  exposed 

(20)  The  analysis  in  the  section  contributes  to  the  in-depth 
review under the macroeconomic imbalance procedure (see 
relevant section for a summary of main findings). 

The  quality  of  Greek  banks’  capital  remains 
weak and dependent on the state. In the first half 
of  2019,  the  amount  of  deferred  tax  credits 
decreased only marginally to €15.5 billion and still 
exceeded  57%  of  the  systemic  banks’  common 
equity  tier  1  capital.  Consequently,  the  necessary 
gradual  phasing  out  of  beneficial  transitional 
further 
prudential  arrangements  will  pose  a 
challenge  for  Greek  banks.  These  include  the 
transition  to  the  new  international  accounting 
standard  on  impairments  of  financial  assets (21) 
and  the  forthcoming  implementation  of  new  rules 
leading  banks 
to  quickly  write  down  non-
performing  exposures (22),  in  order  to  prevent  a 
build-up of non-performing loans in the  future. In 
addition,  in  the  coming  years,  banks  will  need  to 
issue  bail-inable  debt 
the 
minimum  requirement  for  own  funds  and  eligible 
liabilities set  by 
authorities, 
including any subordination requirement imposed. 
Another  piece  of  evidence  of  the  systemic  banks’ 
dependence  on  the  state  is  that  the  Hellenic 
Financial  Stability  Fund  continues  to  hold  a  stake 
in  each  of  the  four  systemic  banks,  ranging  from 
1.4% to 40.4%.  

resolution 

in  order 

to  meet 

the 

to  meet  regulatory 

After  fully  lifting  capital  controls,  banks  are 
expected  to  further  improve  their  liquidity 
situation 
targets.  The 
improving  liquidity  situation  of  Greek  banks  and 
increased depositor confidence allowed a complete 
lifting  of  capital  controls  as  of  September  2019. 
Moreover,  all  four  banks  plan  to  comply  with  the 
liquidity  coverage  ratio  requirement  by  the  first 
half  of  2020  and  the  net  stable  funding  ratio  by 
2021,  when  it  becomes  binding.  Furthermore, 
during  the  summer  of  2019,  Greek  banks  tapped 
for  the  first  time  since  2015  the  long-term 
unsecured  funding  market  with  two  Tier-II  bond 
issuances, albeit at a sizeable cost. Furthermore, in 
the summer of 2019 and in February  2020, Greek 
banks  tapped,  for  the  first  time  since  2015,  the 

(21)  International  financial  reporting  standard  9  replaced  the 
previous  accounting  standard  for  financial  instruments  as 
of 1 January 2018. 

(22)  Regulation  (EU)  2019/630  amending  Regulation  (EU) 
No 575/2013,  as  complemented  by  further  supervisory 
guidance by the European Central Bank. 

29 

 
                                                           
                                                           
4.2. Financial sector 

Table 4.2.1: 

Financial stability indicators /1 

(1) Annualised data 
Source: European Central Bank’s Consolidated Banking data; own calculations.  

long-term  unsecured  funding  market  with  Tier-II 
bond issuances, at a sizeable but decreasing cost. 

Non-performing  loan  reduction  accelerated  in 
2019  but  levels  continue  to  remain  very  high. 
From  the  peak  of  €107.2 billion  in  March 2016, 
the  stock  of  non-performing  loans  declined  to 
€75.4 billion by the end of June 2019, representing 
a  ratio  of  39.6%  of  total  loans.  Yet,  the  Greek 
banking  sector’s  non-performing  loan  ratio  is  still 
13  times  larger  than  the  EU  average  and  remains 
the  highest  in  the  EU (23). The  proportion  of  non-
performing  loans  saw  a  steeper  decrease  in  the 
consumer  and  business  loans  category  in  the  past 
year,  but  the  situation  has  only  slightly  improved 
for  residential 
loans.  The  majority  of  non-
performing  loans  are  not  expected  to  become 
performing in the near future, as half of such loans 
have  been  terminated  by  the  banks  as  non-viable 
and  are  considered  ‘denounced’,  while  re-default 
rates are still high even in loans with renegotiated 
terms. Moreover, 15% of non-performing loans are 
protected  from  enforcement  by  a  law  prohibiting 
foreclosure on borrowers’ primary residences. This 
constrains the banks’ efforts to improve the quality 
of  their  mortgage  loan  portfolio  and  adversely 
affects the overall availability and cost of credit for 
mortgages.  Primary  residence  protection  has  been 
extended  repeatedly  but  is  now  finally  scheduled 
to expire in April 2020.  

The  high  stock  of  non-performing 
loans 
requires  high  provisioning,  which  constrains 
banks’  lending  capacity.  The  coverage  of  non-
performing  exposures  by  provisions  in  the  four 
systemic  banks  decreased  year-on-year  by  2.5 
percentage  points 
the 
difficulties  in  maintaining  a  high  coverage  ratio 
while undertaking aggressive deleveraging efforts. 

to  46.3%,  highlighting 

(23)  European Central Bank data, [30 June 2019]. 

The  coverage  by  collateral  is  at  54.5%,  1.1 
percentage  points  higher  than  at  the  end  of  2018, 
while  the  ongoing  rebound  in  house  prices  since 
2018, after nine consecutive years of falling prices, 
is  a  first  sign  of  improving  collateral  values.  Yet, 
the  average  house  price  as  of  June  2019  was  still 
37% less than its 2008 level (24). 

The  secondary  market  for  non-performing 
loans  is  continuously  developing.  According  to 
the Bank of Greece, in the first half of 2019, banks 
managed  to  sell  bad  loans  of  €3.6 billion.  From 
November  2019  to  2021,  such  sales  are  expected 
to significantly increase as the four systemic banks 
plan  to  de-consolidate  non-performing  loans  of 
more  than  €30 billion  either  via  outright  sales  or 
via securitisations. After sales, write-offs remained 
an  important  driver  of  the  reduction  of  non-
performing  loans  followed  by  liquidations  and 
collections,  while  the  default  rate  of  performing 
loans has dropped marginally below the ‘cure’ rate 
of  non-performing  loans,  i.e.  the  rate  of  loans  for 
which 
restarted.  However, 
‘cured’  loans  frequently  become  non-performing 
again,  implying  that  banks  are  still  struggling  to 
restructuring 
put 
solutions.  

repayments  have 

in  place  viable 

long-term 

Systemic  initiatives,  like  the  ‘Hercules’  asset 
protection  scheme,  can  help  speed  up  the 
reduction  of  non-performing  exposures.  Under 
the  no-state-aid  scheme  (25),  banks  may  transfer 
non-performing  loans  to  individually  managed, 
private  securitisation  vehicles,  which  will  finance 
the transactions by issuing various notes. The State 
will  provide  a  guarantee  for  the  senior,  less  risky 
notes  of  the  securitisation  vehicle  under  strict 
conditions  and  against  remuneration  at  market 

(24)  Bank of Greece data, [30 June 2019]. 
(25)  State aid case SA.53519 and press release IP/19/6058. 

30 

2014q42015q42016q22016q32016q42017q12017q22017q32017q42018q12018q22018q32018q42019q12019q2Non-performing loans39.746.847.247.446.346.646.946.745.045.444.943.541.641.639.6o/w foreign entities---------------o/w NFC & HH sectors41.849.550.150.350.450.350.650.449.449.248.447.346.345.643.8o/w NFC sector44.752.553.253.953.953.453.352.651.451.149.447.946.144.542.8o/w HH sector38.545.946.546.246.346.847.547.947.147.047.346.646.546.845.1Coverage ratio43.548.548.148.248.248.147.447.246.749.549.047.848.047.746.7Return on equity(1)-10.6-24.2-15.8-9.9-7.51.3-0.4-0.3-1.30.7-2.4-0.8-0.41.62.6Return on assets(1)-1.0-2.8-1.9-1.2-0.90.1-0.10.0-0.20.1-0.3-0.1-0.10.20.3Total capital ratio14.116.518.018.217.016.817.217.217.116.416.416.316.015.616.5CET 1 ratio13.816.317.818.116.916.717.117.217.015.815.815.715.314.915.6Tier 1 ratio13.816.317.818.116.916.717.117.217.015.815.815.715.314.915.6Loan to deposit ratio79.172.374.575.575.977.278.281.883.578.878.476.074.775.874.3                                                           
                                                           
 
   
 
4.2. Financial sector 

started 

The  performance  of  e-auctions  by  banks  to 
liquidate  their  collateral  has  fallen  short  of 
expectations.  Electronic  auctions 
in 
November 2017 but have had so far limited impact 
in reducing non-performing loans. In the first half 
of  2019,  about  40%  of  scheduled  auctions  were 
suspended  or  cancelled,  due  to  procedural  issues 
and  filings  under  the  household  insolvency  law. 
Moreover, more than 60% of the executed auctions 
did  not  attract  any  bidders,  while  in  75%  of  the 
successful ones the banks ended up purchasing the 
are 
collateral 
the 
investigating  possible 
framework. 

authorities 
to 

themselves.  The 

improvements 

the 

regularly 

evaluates 

The  governance  of 
systemic  banks 
continued to improve gradually, with the active 
support  of  the  Hellenic  Financial  Stability 
Fund.  The  Fund 
the 
performance of the banks’ Boards of Directors and 
their  governance  arrangements.  As  a  result,  by 
October  2019, 
these  banks  have  mostly 
implemented  the  Fund’s  recommendations  from 
the  2017  board  performance  and  governance 
review  that  focused  primarily  on  the  banks’  risk 
management  culture,  compliance  and 
internal 
control frameworks.  

The authorities have put in place an action plan 
to  clear  the  backlog  of  claims  linked  to  state 
guarantees issued to individuals and businesses. 
The  action  plan 
the 
intends 
bureaucratic  burden  of  processing  claims  and  to 
reinforce  the  department  staff  that  manage  state 
guarantees.  The  authorities  are  seeking  ways, 
supported  by  credible  measures,  to  accelerate  the 
payment profile of called guarantees in question. 

to  streamline 

Greek  insurance  companies  are  adequately 
capitalised  but  their  exposure  to  risks  did  not 
materially  change  in  2018.  Insurer’s  total  assets 
represented only 9% of GDP as of the end of 2018. 
The  solvency  position  of  Greek 
is 
adequate.  At  the  end  of  2018,  government  bonds 
accounted  for  61%  of  the  total  investment  for 
which risk is borne by Greek insurance companies. 
This  is  twice  the  EU  average  and  entails  a 
significant home bias.  

insurers 

A  paradigm  shift  has  taken  place  in  Greece  in 
the area of card payments since mid-2015. Card 
payments  have  increased  sharply  since  2015,  as  a 
side  effect  of  the  imposition  of  capital  controls. 

terms.  The  scheme  will  run  over  an  18-month 
period,  with  a  planned  budget  consisting  of 
maximum €12 billion of guarantees and  voluntary 
participation  by  all  Greek  banks.  The  success  of 
the  scheme  will,  depend  on  the  balance  of 
regulatory 
related 
expenses  and  losses  stemming  from  the  sale  of 
notes to the investors among other factors. 

capital  gains,  guarantee 

However, the current range of tools and policies 
may not be sufficient to remove non-performing 
loans  from  banks’  balance  sheets  and  settle 
private  and  public  debt  in  the  near  term.  To 
shrink  non-performing  loan  ratios  rapidly,  the 
toolkit for reducing non-performing loans could be 
broadened,  as  it  has  been  in  other  EU  countries, 
both  through  systemic  solutions  consistent  with 
EU rules and bank-specific ‘organic’ internal loan 
workout  activities,  which  performed  below 
expectations in past years. Strategic defaulters and 
moral  hazard  represent  additional  challenges  that 
for  many  years  have  adversely  affected 
the 
payment 
in  Greece.  Resolving 
households and businesses’ over-indebtedness in a 
swift  and  sustainable  manner  will  be  instrumental 
for accelerating the economic recovery.  

discipline 

to 

To  tackle  this  challenge,  the  authorities  are 
the  multiple 
streamline 
preparing 
frameworks  for  bankruptcy  and  insolvency, 
while  taking  steps  to  address  the  backlog  of 
household 
insolvency  cases.  The  authorities 
therefore  committed  to  put  in  place  a  consistent 
and  unified  framework  for  settling  corporate  and 
household  debt,  aiming  to  limit  procedural  abuse 
by  debtors,  which  prevents  banks  from  seizing 
collateral in case of defaults. This new framework 
will transpose Directive 1023/2019 (26) and replace 
the  existing  out-of-court  workout  mechanism, 
which  attracted  relatively 
interest  from 
debtors. A related challenge is the clearance of the 
backlog  of  household  insolvency  cases  at  courts, 
which the authorities aim to speed up by providing 
specialised  training  to  judges  and  increasing  the 
number of clerical staff at courthouses. 

low 

(26)  Directive (EU) 2019/1023 of the European Parliament and 
of the Council of 20 June 2019 on preventive restructuring 
frameworks, on discharge of debt and disqualifications, and 
on  measures  to  increase  the  efficiency  of  procedures 
concerning restructuring, insolvency and discharge of debt, 
and  amending  Directive  (EU)  2017/1132  (Directive  on 
restructuring and insolvency). 

31 

                                                           
4.2. Financial sector 

some 

crisis.  Despite 

underdeveloped  and  affected  by  the  deep  and 
prolonged 
signs  of 
compression  of  the  cost  of  market  funding  for 
large  resilient  Greek  corporations,  for  the  average 
Greek company raising capital from bond markets 
remains  difficult.  This  is  due  to  country  risk,  low 
profitability and a shallow domestic investor base.  

A  number  of  initiatives  at  various  stages  of 
development,  aim  to  promote  the  non-bank 
financing  of  the  economy.  These  include:  (i) 
increasing  transparency  for  listed  companies;  (ii) 
improving  environmental  and  social  governance 
disclosure  among  listed  companies  in  the  Athens 
Stock  Exchange;  (iii)  the  growth  of  the  domestic 
market  of  collective  investment  funds,  including 
via the provision of tax incentives; (iv) improving 
the  framework  for  microcredit  provision;  and  (v) 
the  potential 
reduction  of  supervisory  and 
information  requirements  for  small  and  medium 
enterprises. Moreover, the gradual reduction of the 
dividend tax rate  from 15% to  5% will reduce the 
tax bias towards debt financing. The  development 
of  financial  innovative  products  and  services  is 
also starting to come into focus,  with the creation 
of  FinTech  innovation  hubs  by  both  Bank  of 
Greece  and 
the  Hellenic  Capital  Markets 
Commission.  
in  Greece 
Small  and  medium  enterprises 
continue  to  be  disproportionately  affected  by 
the  lack  of  access  to  finance,  despite  efforts  to 
increase  the  availability  of  funds.  This  is  also 
reflected  in  the  high  spread  between  the  interest 
rate on small (up to €250 000) and larger corporate 
bank  loans  (above  €1 million),  which  was  on 
average 150 basis points during the first 7 months 
of 2019. The importance of financial contributions 
from the EU programme for the competitiveness of 
enterprises 
and  medium-sized 
enterprises, the Hellenic Fund for Entrepreneurship 
and  Development, 
for 
the 
Reconstruction 
European Investment Bank remains significant, as 
they  represented  44%  of  total  loan  disbursements 
to small and medium companies in the first half of 
2019. Four new investment programmes were also 
announced  in  November  2018  as  part  of  the  New 
Economy  Fund  managed  by  the  Ministry  of 
Development  and  Investment,  to  inject  a  total  of 
€1 billion in Greek small and medium enterprises, 
30%  of  which  is  expected  to  come  from  private 
funds.  

the  European  Bank 
and 

and  Development 

small 

and 

This  tendency  was  further  reinforced  by  the 
mandatory  introduction  of  ‘point  of  sale’  devices 
for most merchants, and linking customers’ use of 
electronic payments to their tax-free income. As a 
result,  the  number  of  point  of  sale  terminals 
increased  significantly  from  less  than  200,000  in 
2014  to  565,000  in  2018,  the  number  of  payment 
cards increased from 12.1  million in 2014 to 15.6 
million  in  2018,  and  the  value  of  card  payments 
with  cards  issued  in  Greece  more  than  tripled. 
However,  data  for  the  first  half  of  2019  suggest 
that  this  trend  may  be  losing  momentum.  Despite 
this  impressive  growth,  card  transactions  per 
person  and  the  penetration  rate  of  plastic  cards  in 
Greece remain well below the EU average.  

4.2.2.  ACCESS TO FINANCE 

Following  years  of  contraction,  bank  lending 
remains  subdued  for  households  but  shows 
signs of improvement for companies. From 2011 
until  late  2018,  the  growth  rate  of  loans  extended 
to  non-financial  corporations  was  either  negative 
or  close  to  zero.  However,  since  December  2018, 
growth  in  credit  to  non-financial  corporations 
turned  positive  and  reached  rates  last  observed  in 
mid-2010, supported by a decline in credit risk and 
the  average  cost  of  financing.  Yet,  most  of  the 
renewed credit growth is due to large corporations 
in the energy, transport and tourism sectors. Loans 
to  households  continue 
to  contract,  although 
survey data suggest that demand has been growing 
for all categories of household credit since 2018. A 
divergence  in  trends  is  also  evident  in  terms  of 
to  non-financial 
lending 
corporations  have  been 
steadily  decreasing, 
reaching  close  to  historical  lows,  while  rates  on 
mortgage and consumer loans have remained high.   

rates.  Loan 

rates 

Information  asymmetries  between  lenders  and 
borrowers  persist.  Greece  currently  has  a 
privately  owned  credit  bureau  that  maintains  a 
database  on  the  creditworthiness  of  borrowers 
(individuals  or  ﬁrms)  and  facilitates  the  exchange 
of  credit  information  among  creditors.  However, 
the  credit  bureau  does  not  provide  its  member 
institutions  with  credit  scores  of  a  potential 
borrower’s creditworthiness.  

Non-financial 
taking 
corporations 
advantage  of  alternative  sources  of  non-bank 
financing,  but  Greek  capital  markets  are  still 

are 

32 

4.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

4.3.1.  LABOUR MARKET 

The labour market is gradually recovering, but 
the  employment  rate  remains  well  below  pre-
crisis  levels  and  that  of  other  EU  countries. 
Employment  continued  to  expand  in  2018  and 
2019.  In  the  third  quarter  of  2019,  there  were 
67,000 more people in employment than the same 
time  in  2018.  Over  that  period,  employment 
increased  in  all  sectors  except  for  agriculture  and 
construction. Employment growth was the  highest 
in industry (excluding construction), while tradable 
services  (accounting  for  about  one  third  of  the 
Greek economy) recorded the largest expansion in 
absolute terms. Nevertheless, at 61.2% in the third 
quarter  of  2019,  the  employment  rate  was  5 
percentage points lower than  before the crisis (for 
the  20-64  age  group).  Greece  continues  to  have 
one  of  the  lowest  employment  rates  in  the  EU, 
while the activity rate (73.9%) is also considerably 
lower than the EU average (78.7%). 

Graph 4.3.1:  Unemployment by duration (thousands of persons), 

2008-2019 

Source: Eurostat 

Unemployment  is  falling,  although  from  a 
markedly  high  level.  The  unemployment  rate 
dropped from 18.5% in October 2018 to 16.6% in 
October  2019,  going  thus  down  by  more  than  11 
percentage points since its peak in 2013. However, 
it remains one of the highest in the EU. The long-
term  unemployment  rate,  which  had  peaked  at 
almost 20% in early 2014, declined to 12.1% in the 
third  quarter  of  2019.  Out  of 
the  777,000 
unemployed  persons,  almost  three  quarters  have 
been  out  of  work  for  more  than  1  year,  and  of 
these, around half have been out of work for more 
than 4 years. Unemployment rates are particularly 
high  in  the  regions  of  Western  Macedonia  and  in 
Western Greece. 

employment  has 

Non-standard 
remained 
broadly stable. Most of the new jobs are full-time 
jobs  based  on  open-ended  contracts.  However, 
transition rates are relatively low, as only 22.6% of 
temporary workers moved to a permanent contract 
in 2018, below the EU average of 26%. Dependent 
employment accounts for the bulk of job creation, 
while  the  share  of  self-employed  (one  of  the 
highest  in  the  EU)  has  slightly  declined  to  27%. 
The  share  of  part-time  employment  is  well  below 
the  EU  average.  Nevertheless,  according 
to 
national  data,  more  than  half  of  new  dependent 
jobs  created  in  the  private  sector  in  2017-2018 
were  part-time  or  rotational  jobs.  The  authorities 
have  recently  taken  measures  to  limit  the  abusive 
use of part-time work, which can mask undeclared 
full-time  work. This includes higher remuneration 
for  working  hours  provided  beyond  the  normal 
part-time  schedule  and 
the 
registration of employment contracts. 

improvements 

in 

increase 

Wage  growth  remained  moderate  in  2019, 
in  the 
notwithstanding  the  sharp 
statutory  minimum  wage.  The 
statutory 
minimum wage went up by 10.9%, as of February 
2019, and the sub-minimum wage for people under 
25 was abolished, implying a 27% increase for this 
group.  As  a 
result,  an  estimated  600,000 
employees have benefited from a direct increase in 
their  salaries.  In  2018,  nominal  compensation  per 
employee increased by 1.3%, while for 2019, wage 
growth is estimated at 0.4% in nominal terms and 
at -0.4% in real terms. Wage growth is expected to 
pick  up  in  the  future,  which  highlights  the 
importance of ensuring corresponding increases in 
productivity.  

(especially 

The  economic  impact  of  statutory  minimum 
wage adjustments  should  be  closely  monitored. 
It is important to monitor wage and labour market 
developments  to  avoid  any  negative  impact  on 
for 
competitiveness,  employment 
the  young)  and 
vulnerable  groups, 
including 
undeclared  work.  To 
the  Greek 
authorities  are  planning  to  conduct  an  ex-post 
assessment  of  the  recent  minimum  wage  increase 
and  to  improve  the  information  base  that  is 
currently  available 
labour  market 
developments,  with  technical  support  from  the 
World Bank. 

that  effect, 

to  monitor 

33 

02004006008001 0001 2001 4001 6002008Q12008Q32009Q12009Q32010Q12010Q32011Q12011Q32012Q12012Q32013Q12013Q32014Q12014Q32015Q12015Q32016Q12016Q32017Q12017Q32018Q12018Q32019Q12019Q30-5 months6-11 months12-23 monthsFrom 24 to 47 months48 months or over 
   
4.3. Labour market, education and social policies 

The high number of people leaving the country 
raises  serious  concerns  about  a  ‘brain  drain’. 
Although comprehensive data  on the skills profile 
of  migrants  are  not  available,  several  sample 
studies  conducted  in  Greece  have  confirmed  that 
the  emigration  wave  during  the  crisis  primarily 
concerned  young  people  with  a  high  level  of 
education  (often  in  medicine  or  engineering)  and 
previous  work  experience  (Lazaretou,  2016). This 
has led to further decreases in fertility rates and a 
worsening  of  the  pressure  of  population  ageing. 
Many  of  those  who  left  were  able  to  advance 
professionally  and  gain  valuable  experience.  This 
could  prove  an  asset  for  the  ongoing  economic 
recovery  especially  through  innovative  start-up 
businesses  that  could  attract  those  thinking  about 
returning to Greece.  

The  government  is  taking  action  to  address 
these  adverse  demographic  challenges.  The 
Greek  authorities  are  trying  to  discourage  further 
emigration  of  highly  skilled  people  by  offering 
financial  support  to  young  scientists  at  Greek 
universities and temporary employment to tertiary 
graduates  in  the  public  sector.  To  address  low 
fertility rates (1.35% in 2017, compared to an EU 
average  of  1.59%),  and 
support  women’s 
employment,  the  authorities  have  also  adopted  a 
new  childbirth  grant  and  been  expanding 
subsidised childcare. 

the 

improvements, 

Despite 
employment 
situation  of  young  people  remains  a  challenge. 
At  13%  in  the  third  quarter  of  2019,  the  share  of 
young  people  (aged  15-24)  not  in  employment, 
education  or  training)  was  7  percentage  points 
lower  than  in  2013,  but  is  still  among  the  highest 
in  the  EU.  In  the  25-29  age  group,  the  rate  of 
young  people  who  are  not 
in  employment, 
education  or  training  reached  29.5%  in  2018,  far 
above  the  EU  average  of  17.1%.  Over  63,000 
people  not  in  employment,  education  or  training 
aged  15-29  have  so  far  benefited  from  the  youth 
employment initiative, an EU funding programme, 
which  in  Greece  offers,  among  others,  training 
programmes  in  sectors  with  growth  potential. 
Stronger  partnerships  with  employers  and  other 
stakeholders,  and  increasing  outreach  to  inactive 
people  would  further increase the effectiveness of 
such initiatives.  

The  gender  employment  gap  is  particularly 
large,  and  only  partly  attributable  to  family 
caring  responsibilities.  The  employment  rate  of 
women, at 51.3% in the third quarter of 2019, is 20 
percentage points lower than that of men. Women 
are  also  more  likely  to  be  unemployed  than  men. 
Labour  market  participation  of  women 
is 
particularly low in the 50-64 age group, also due to 
more  favourable  retirement  rules  in  the  past. 
Nevertheless,  women  aged  25-49  also  participate 
much  less  in  the  labour  market  than  men.  As 
caring responsibilities are cited as the main reason 
for  inactivity  by  around  one  fifth  of  inactive 
women 
the 
availability of high-quality childcare and long-term 
care services could improve women’s employment 
stereotypes  and 
status.  Overcoming  gender 
promoting  entrepreneurship  skills  of  women  and 
flexible  working  arrangements  is  also  particularly 
important. 

this  age  group, 

increasing 

in 

Graph 4.3.2:  Net migration by citizenship, 2013-2017 

Source: Eurostat 

Greece’s  population  is  declining,  with  more 
than  100,000  people  leaving  the  country  every 
year.  The  total  population  decreased  by  almost 
400,000  between  2010  and  2019  due  to  the 
combined  effect  of  net  emigration  and  a  negative 
natural  population  change.  Annual  emigration 
flows have risen, from about 40,000 people before 
2010, to above 100,000 in 2012-2017. In 2016 and 
2017, the overall migration balance turned positive 
due  to  large  inflows  of  non-EU  citizens,  mostly 
refugees.  However,  the  net  emigration  of  Greek 
citizens continued and people who left the country 
exceeded  those  who  returned  by  22,000  in  2017, 
although this trend has slowed since 2013.  

34 

-80 000-60 000-40 000-20 000020 00040 00060 00020132014201520162017Non-EU countriesEU countries except GreeceGreeceTotal   
4.3. Labour market, education and social policies 

appointments  with  priority  groups  of  unemployed 
are  in  a  planning  phase.  Integrated  employment 
and social support services are not provided for the 
long-term  unemployed.  To  strengthen  relations 
with  employers,  a  central  unit  catering  for  large 
businesses  was  set  up  and  employer  counsellors 
were appointed in most local offices. However, the 
number of vacancies reported by employers to the 
Public  Employment  Service  remains  low,  in  view 
of the large number of unemployed. 

Past  actions  to  combat  undeclared  work  are 
starting  to  bear  fruit.  Estimated  at  more  than 
20% of GDP (Schneider, 2015), informal work has 
been a longstanding feature of the Greek economy, 
which is characterised by a very high share of self-
employment  and  small-sized  enterprises.  In  a 
recent Eurobarometer survey, 27% of respondents 
in Greece admitted to having purchased undeclared 
goods or services in the past  year. The authorities 
took  a  number  of  measures  to  combat  undeclared 
work  under  a  three-year  action  plan  launched  in 
2017.  Intensified  inspections  helped  reduce  the 
incidence  of  undeclared  work  in  high-risk  sectors 
from 13.5% in 2016 to 9% in 2018 (SEPE, 2019).  

The transition from education to work remains 
difficult  and  skills  mismatch  is  high.  Graduates 
of  both  upper  secondary  and  tertiary  education 
show very low employment rates during the first 3 
years  after  completing  their  studies  (57.5%  and 
48.7%  respectively,  age  group  20-34,  compared 
with  69.6%  and  63.5%  for  the  cohort  overall). 
Career  orientation  services  and  traineeships  or 
apprenticeships  remain  underdeveloped,  which 
weighs  on  the  transition  to  the  labour  market. 
Graduate  tracking,  cooperation  with  business  on 
study programme development as well as rigorous 
quality control are areas for action. Relative to the 
current  low  share  of  skill-intensive  industries, 
Greece  has  one  of  the  highest  over-qualification 
rates  of  tertiary  graduates  and  one  of  the  highest 
qualification  mismatches  among  all  EU  countries, 
according  to  the  European  Skills  Index.  Skills 
shortages  are  particularly  high  in  the  energy  and 
technology 
information 
sectors (SEV, 2019). 

communication 

and 

literacy 

Adult  learning  is  limited  and  performance  in 
the 
remains 
digital 
challenging world of work requires upskilling and 
reskilling,  the  adult  learning  system  continues  to 
be  highly  fragmented  and  participation  in  adult 

low.  While 

in  active 

investment 

More 
labour  market 
policies,  along  with  a  broader  reform  of  the 
system would help the unemployed get jobs.  As 
a  percentage  of  GDP,  Greece  spends  less  than 
most  other  EU  Member  States  on  active  labour 
market  policies  and  coverage  is  low.  Direct  job 
creation through public works and hiring subsidies 
to  businesses  account  for  the  bulk  of  activation 
programmes  (66%  and  28%  of  expenditure 
respectively  in  2017).  Training  programmes  have 
become  more  limited  recently,  mostly  targeting 
young people under the Youth Guarantee. The new 
training  programmes, 
quality 
legislated  in  2018,  which,  among  others  benefits, 
introduces  accreditation  of  training  curricula,  has 
not  yet  been 
the 
comprehensive  monitoring  and  evaluation  of 
active labour market policies is at an early stage of 
development.  

implemented.  Similarly, 

framework 

for 

Current activation programmes do not provide 
jobseekers  with  a  prompt  and  tailor-made 
approach.  Except  for  hiring  subsidies,  activation 
programmes  are  not  regularly  available  but  are 
launched  through  ad hoc  project  calls.  Jobseekers 
registered in the Public Employment Service apply 
for these programmes independently and selection 
of  participants  is  based  on  objective  —  mainly 
social  —  criteria.  Based  on  common  practice  in 
other EU countries, the authorities are introducing 
a new delivery model, which comprises permanent 
activation programmes and a strong role for Public 
Employment  Service  counsellors  to  guide  the 
unemployed into jobs or training adapted to his or 
her profile and needs. The transition to this model 
started in 2019 with a small pilot project, but it has 
a  long  way  to  go  until  it  is  fully  implemented  at 
national level. 

is 

reinforced,  but 

The capacity of the Public Employment Service 
has  been 
still  not 
commensurate  to  the  unemployment  challenge. 
At 74.4% in 2018, the share of unemployed people 
using the Public Employment Service to find a job 
was  among  the  highest  in  the  EU  and  has  been 
increasing  since  2013.  The  Service  has  deployed 
new  tools  to  assess  the  profiles  and  skills  of  the 
unemployed  and  has  recruited  over  300  new  job 
counsellors during the last 2 years. Still, with more 
than  2,000  jobseekers  per  counsellor  in  some 
areas,  individualised  support  and  regular  follow-
ups are difficult to achieve. So far, counselling has 
taken  place  only  on  request,  while  pre-scheduled 

35 

4.3. Labour market, education and social policies 

4.3.2.  EDUCATION AND SKILLS 

to 

in 

granted 

low-income 

More  children  have  access  to  early  childhood 
education  and  care.  Between  2016  and  2018, 
enrolment  rates 
formal  childcare  sharply 
increased:  from  8.9%  to  40.9%  for  children  aged 
0-3. It remains to be seen whether this remarkable 
improvement, which has placed Greece high above 
the EU averages (35.1%)  is permanent,  as sudden 
increases 
followed  by  sharp  declines  were 
observed  in  the  past.  A  positive  indication  is  the 
significant  increase  in  the  number  of  childcare 
families 
vouchers 
(regardless of the parents’ employment status) that 
aim  to  support  women’s  employment  and  the 
social  inclusion  of  vulnerable  groups.  Greece  has 
also extended mandatory pre-school attendance by 
another  year  to  cover  four  year-olds,  which  could 
contribute to better outcomes in subsequent stages 
of  education,  in  particular  for  children  from 
disadvantaged  backgrounds.  However,  the  full 
roll-out  of  the  reform  in  the  next  school  year 
2020/2021  may  prove  challenging,  given  capacity 
constraints.  In  2017,  the  enrolment  rate  for  pupils 
between  4  years  old  and  the  starting  age  of 
compulsory  education  was  81.5%,  far  below  the 
EU  average  of  95.4%.  Effective  targeting  of 
investment  would  require  comprehensive  data  on 
voucher 
and 
needs 
programme. 

demand 

beyond 

the 

learning,  at  4.5%  in  2018  (against  EU  average  of 
11.1%)  remains  particularly  low.  Only  51%  of 
people  aged  16-74  appear  to  have  at  least  basic 
digital  skills,  below  the  EU  average  of  58%.. 
Literacy  and  numeracy  skills  of  adults  are  also 
lower than in most other EU countries as shown by 
the OECD Survey of Adult Skills.  

is  scope  to  further 

There 
improve  social 
dialogue  and  develop  civil  society.  Social 
dialogue in Greece is conducted formally (through 
standing institutions, or by committees and bodies 
that  are  set  up  in  specific  policy  areas)  and 
informally  (through  bilateral  consultation  and 
other  dialogue  processes).  However,  some  of  the 
committees  where  social  partners  participate 
convene  sporadically.  Also,  social  partners  report 
that consultation on new policies and legislation is 
often more of a formality and that it does not have 
an  impact  on  policy  making.  National  social 
partners  have  recently  addressed  a  request  to  the 
Ministry  of  Labour 
to  activate  a  Tripartite 
Consultation  Council  to  formalise  and  strengthen 
the  role  of  social  dialogue  in  policymaking.  The 
impact  of  the  recent  law  on  investment  (Law 
4635/2019)  on  sectoral  collective  bargaining  will 
also  have  to  be  monitored.  Meanwhile,  civil 
society 
become  more 
prominent  since  the  economic  and  refugee  crises, 
but  their  capacity  and  impact  are  weakened 
because  of  the  lack  of  appropriate  regulatory 
framework, among other factors. 

organisations 

have 

36 

4.3. Labour market, education and social policies 

Box 4.3.1: Social Pillar 

The European Pillar of Social Rights is a compass for renewed upward convergence towards better 
working  and  living  conditions  in  the  EU.  It  sets  out  20  essential  principles  and  rights  in  the  areas  of 
equal  opportunities  and  access  to  the  labour  market,  fair  working  conditions,  and  social  protection  and 
inclusion.  

The  Social  Scoreboard  supporting  the  European  Pillar  of  Social  Rights  points  to  a  number  of 
employment and social challenges in Greece. While the overall and long-term unemployment rates have 
been decreasing in line with the economic recovery, they remain well  above the pre-crisis levels  and far 
above  the  EU  average.  The  employment 
rate  for  women  is  about  21  pps  below 
that  of  men.  This  very  large  gender 
employment 
partly 
attributable  to  caring  responsibilities  of 
women. Encouragingly, there has been a 
remarkable 
childcare 
enrolment  rates  in  recent  years.  The 
legacy  of  the  economic  and  financial 
crisis,  with  still  high  unemployment  and 
only  moderate  wage  growth  since  2017 
(after  a strong downward adjustment), is 
reflected in poor performance on income 
indicators.  

increase 

only 

gap 

in 

is 

Recent  social  welfare  system  reforms 
are  gradually  improving  the  social 
situation  in  Greece.  These  reforms, 
which  notably  introduced  a  guaranteed 
minimum  income  scheme  in  2017,  have 
boosted  revenues  for  people  with  lower 
incomes  and  increased  the  impact  of 
social  transfers  on  poverty  reduction. 
Strengthened  family  benefits  and  a  new 
rent  subsidy,  introduced  in  2018  and 
2019  respectively  (therefore  not  yet 
captured in the statistics), are expected to 
further  increase  the  impact  of  social 
transfers. Income inequality has declined 
markedly and is now below its pre-crisis 
level.(1)  Efforts  to  expand  access  to 
primary  healthcare  have  helped  reduce 
self-reported unmet medical care needs. 

The  employment  situation  of  young 
people  is  still  a  problem.  Despite  a 
continued  decline,  the  share  of  young 
people  not  in  education,  employment  or 
training remains among the highest in the 
EU. Of particular concern is the situation 
for  the  25-29  age  group,  which  has 
almost  double  the  number  of  people  not 
in  education,  employment  or  training  as 
the  15-24  age  group.  The  remarkably  low  share  of  early  school  leavers  may  partly  reflect  a  lack  of  job 
opportunities  for  young  people.  Performance  on  basic  skills  continues  to  be  weak,  while  self-reported 
digital skills have recently improved.(2)  

(1) The better-than-average performance on the respective indicator (S80/S20) is due to its significant change over time; 
in absolute terms, the indicator still implies a higher income inequality in Greece compared to the EU as a whole. 
(2) Similar to the S80/S20 indicator, the better-than-average performance on digital skills is due to the increase of the 
respective indicator between 2017 and 2019, while Greece’s performance remains considerably below the EU average. 

37 

(including  2,522 

School  education  continues  to  suffer  from 
numerous  deficiencies.  The  system  is  highly 
centralised  and  focused  on  input  control  rather 
than  on  monitoring  outputs.  The  continuing 
professional  development  of  teachers  decreased 
significantly during the last decade and was almost 
entirely provided through programmes co-financed 
by  the  European  Social  Fund.  There  is  little 
accountability in schools, as school self-evaluation 
has  yet  to  be  implemented  and  teacher  evaluation 
was  abolished  in  2014.  The  strong  reliance  on 
substitute  teachers,  with  an  additional  37,000 
in  special  needs 
teachers 
education)  hired  by  November  2019,  impacts  on 
the  quality  of  education.  Challenges  also  exist  in 
small  schools,  mostly 
in  rural  areas,  where 
teachers  have  to  teach  several  subjects  while  not 
having  adequate  credentials.  The  share  of  young 
people  (18-24)  who  left  school  early  was  —  at 
4.7%  in  2018  —  among  the  lowest  in  the  EU. 
However,  the  share  was  much  higher  among  the 
foreign-born  population  (17.9%)  and  the  gap 
between  them  and  native-born  people  widened. 
in 
The 
implementation  of  digital  education, 
is 
particular  as  a  cross-curricular  method, 
insufficient  due  to  the  content-heavy  curriculum, 
inadequate infrastructure and in-school support.  

Underachievement  in  basic  skills  remains  high 
and  heavily  affected  by  the  socio-economic 
background  of  students.  According  to  the  2018 
OECD  Programme 
International  Student 
for 
Assessment  the  share  of  low  achievers  among  15 
year-olds  remains  —  at  30.5%  in  reading,  31.7% 
in  science  and  35.8%  in  maths  —  among  the 
highest in the EU, having increased since 2009 in 
all  three  fields.  Moreover,  underachievement  is 
highly affected by the socio-economic background 
of students. In reading, 46.4% of students from the 
lowest socio-economic quartile are underachievers 
compared  to  15.2%  from  the  highest  quartile  — 
25.5 percentage points higher than the EU average. 
Among  students  with  a  migrant  background, 
48.3%  are  low  achievers  compared  to  27.4% 
those  without  a  migrant  background. 
among 
of 
performance 
Meanwhile, 
approximately 2 years of schooling between public 
and private schools is among the highest in the EU 
and  city  schools  outperform  rural  schools  by 
between  one  and  two  years  of  schooling.  These 
considerable  inequities  point  to  the  need  for  a 
comprehensive  long-term  strategy  that  will  take 

difference 

a 

into account the growing diversity among learners 
and the changing labour market needs.  

Public  spending  on  education  is  relatively  low, 
and  is  being  compensated  by  sizeable  out-of-
pocket  payments  by  households.  Public 
expenditure  on  education  accounted  for  3.9%  of 
GDP in 2017, below the EU average of 4.6%, and 
for  8.2%  of  total  government  expenditure,  one  of 
the lowest shares in the EU. At the same time, an 
estimated  20%  reduction 
in  student  numbers 
between  now  and  2040  and  an  ageing  teaching 
workforce, with half of teachers set to retire within 
the  next  decade,  represent  both  challenges  and 
opportunities  that  call  for  more  efficiency  and  a 
shift 
to  output-focused 
spending patterns. In 2014, total private  spending, 
including private tutoring, was estimated at 35% of 
public  education  expenditure  (KANEP,  2017). 
Households’ out-of-pocket payments in secondary 
education are especially high and largely spent on 
tutorial schools teaching regular school curriculum 
subjects.  

input-oriented 

from 

schools  when  upgrading 

Though  a  large  proportion  of  students  go  to 
university, none of Greece’s universities feature 
in  the  top  100  European  universities,  and  the 
tertiary  system  suffers  from  systemic  flaws. 
Tertiary educational attainment of 30-34 year-olds 
rose from 25.7% in 2008 to 44.3% in 2018, above 
the  EU  average  of  40.7%.  While  Greek 
universities  perform  well  in  terms  of  research 
output,  they  underperform  on  teaching  quality 
(Hellenic  Quality  Assurance  and  Accreditation 
Agency,  2019).  The  creation  of  new  departments 
and 
technological 
education institutions into universities added to an 
already  fragmented  higher  education  landscape. 
The  authorities  have  started  introducing  measures 
to address these shortcomings in higher education, 
such  as  upgrading  the  quality  assurance  authority 
The 
(European 
attractiveness  of  vocational  education  and 
training  is  low, although  graduates  have  better 
employment  prospects.  The  proportion  of  upper 
vocational 
secondary 
education  and  training  was  far  below  the  EU 
average  (28.8%  compared  with  an  EU  average  of 
47.8%  in  2017)  and  has  been  decreasing  since 
2013.  Following  the  adoption  in  2016  of  the 
for  upgrading 
national 
strategic 
vocational  education  and 
including 
through  apprenticeships,  significant  steps  have 

Commission, 

framework 

training, 

enrolled 

students 

2020). 

in 

38 

 
4.3. Labour market, education and social policies 

face 

and  28%  of  people 
severe  material 
deprivation). In-work poverty also remains among 
the  highest  in  the  EU,  although  the  share  of 
employed  people  at  risk  of  poverty  declined  from 
12.9% in 2017 to 11% in 2018. 

Graph 4.3.3: 

Proportion of population at risk of poverty or social 
exclusion per age groups, 2005-2018 

Source: Eurostat.  

The  capacity  of  the  welfare  system  to  protect 
against  poverty  has  improved.  In  2018,  social 
transfers (other than pensions) were able to reduce 
the  risk  of  poverty  by  20.3%,  which  is  a  marked 
improvement (in the years prior to the introduction 
of  the  Social  Solidarity  Income,  the  impact  was 
around 16%), but still far from the average impact 
in  the  EU  (33.2%).  The  poverty-reducing  impact 
of the child benefit introduced in 2018 and the rent 
benefit  introduced  in  2019  is  still  to  be  seen.  The 
income 
flash  estimates  of  2018 
indicate  a 
continued 
relative  monetary 
in 
poverty (29). 

decrease 

Income  inequality  has  declined  but  remains 
higher than in the EU as a whole. While in 2017 
the  disposable  income  of  the  richest  20%  was 
6.1 times  that  of  the  poorest  20%  (EU  average: 
5.1), this ratio dropped to 5.5 in 2018, implying a 
reduction in income inequality. This improvement 
was partly due to the social benefits system whose 
corrective  power  has  increased  following  recent 
reforms,  although  it  remains  well  below  the  EU 
average. 

(29)  Experimental  flash  estimates  produced  by  Eurostat  for 

income year 2018. https://bit.ly/34HOcIG. 

been taken to improve the training content and the 
quality  of  teaching,  as  well  as  to  expand  dual 
learning,  which  combines  learning  at  school  with 
the 
working  as  an  apprentice. 
employment  rate  of  recent  vocational  education 
and  training  graduates  was  5  percentage  points 
higher  than  that  of  graduates  from  general  upper 
secondary education. 

In  2018, 

Efforts are under way to strengthen links to the 
labour  market  in  vocational  education  and 
training.  The  flagship  initiative  of  a  nine-month 
apprenticeship for graduates from upper secondary 
vocational schools has been expanding every year. 
In  the  2018/2019  school  year,  3,700  graduates 
enrolled  in  apprenticeships,  with  48%  of  the 
placements  in  the  private  sector.  Quality  training 
of  teachers  in  vocational  education  and  training 
and trainers remains a key challenge. There is still 
room  to  better  align  vocational  education  and 
labour  market  developments, 
training  with 
including  by  updating  the  occupational  profiles 
(setting  out  the  required  skills)  and  using  the 
outputs  of  the  national  mechanism  for  diagnosing 
labour market needs. 

4.3.3.  SOCIAL POLICIES 

The social situation is improving overall, partly 
reflecting  the  strengthening  of  the  welfare 
system, but remains very difficult, especially for 
children and working-age people. Between 2017 
and 2018, the share of people at risk of poverty or 
social exclusion declined from 34.8% to 31.8% (27) 
and the share of people affected by severe material 
deprivation (28)  dropped  from  21.1%  to  16.7%, 
partly in response to the roll-out of the guaranteed 
minimum 
(Social  Solidarity 
Income)  in  2017.  Nevertheless,  poverty  remains 
among  the  highest  in  the  EU  with  children  and 
working-age people being more affected than older 
people (see Graph 4.3.3). Moreover, there are large 
differences between regions, with Western Greece 
showing particularly high poverty rates (44.6% of 
people  are  at  risk  of  poverty  or  social  exclusion 

income  scheme 

27   Poverty and income inequality indicators in this chapter are 
based  on  EU-SILC  data,  which  refer  to  incomes  recorded 
in the previous year (i.e. 2017 incomes for SILC 2018). 
(28)  Severe material deprivation in an EU-Statistics on Income 
and  Living  Conditions  indicator  defined  as  the  enforced 
inability to pay for some items considered by most people 
to be desirable or even necessary to lead an adequate life. 

39 

05101520253035404520052006200720082009201020112012201320142015201620172018Children (<18y)Working age (18-64)Elderly (65+)                                                           
  
                                                           
4.3. Labour market, education and social policies 

in  2017  (about  6%  of 

Declining  unemployment  and  rising  incomes 
are  leading  to  a  reduction  in  the  number  of 
Social  Solidarity  Income  beneficiaries.  As  the 
eligibility threshold has remained unchanged since 
the  launch  of  the  scheme,  and  incomes  have 
continued  to  rise,  the  number  of  beneficiaries  of 
the  Social  Solidarity  Income  declined 
from 
the  Greek 
660,000 
population)  to  480,000  in  2019.  Increasing  the 
level of the guaranteed income would improve the 
adequacy  of  the  minimum  income  support,  which 
was  already  below  the  EU  average  in  2017 
(European  Commission,  2019d).  The  work 
incentives  embedded  in  the  Social  Solidarity 
Income  could  be  reinforced  by  increasing  the 
earnings that are disregarded in the means test (30). 
Finally,  excluding  the  child  benefit  from  the 
calculation  of  income,  as  is  done  is  several  other 
Member  States,  would  increase  eligibility  for  the 
scheme  and  contribute  to  lowering  child  poverty. 
See Box 4.3.2 for simulated scenarios on possible 
changes in the scheme and their impact on poverty 

reduction  as  well  as  monetary  incentives  to 
working (31). 

Greece  is  expanding  access  to  local  social 
services. Community centres  now operate  as one-
stop  shops  for  social  services  in  3  out  of  4 
municipalities.  They  provide  information  to  the 
public  and  facilitate  access  to  social  benefits  and 
complementary  services.  Branches  dedicated  to 
supporting families and better coordinating elderly 
care  will  start  opening 
in  2020.  Regional 
observatories  for  social  policies  are  also  being 
rolled  out.  The  labour  market  activation  of  the 
Social  Solidarity  Income  scheme’s  beneficiaries 
who  are  able  to  work  and  are  formally  obliged  to 
register  as  unemployed,  was  piloted 
in  32 
in  2019.  Closer  coordination 
municipalities 
between  the  community  centres  and  the  local 
employment  offices  would  help  beneficiaries 
overcome  the  various  barriers  that  prevent  them 
from participating in the labour market.  

(30)  At  present,  20%  of  net  income  from  salaried  services, 
public  works  or  any  other  activation  programme  is 
disregarded in the calculation of the benefit. 

31   European Commission, Joint Research Centre, based on the 
EUROMOD model (version I2.0+) and Jara, H.X., Gasior, 
K, and Makovec, M. (2019. 

40 

                                                           
                                                           
 
4.3. Labour market, education and social policies 

(Continued on the next page) 

41 

Box 4.3.2: Possible adjustments to the Guaranteed Minimum Income scheme in Greece The Social Solidarity Income benefit (SSI) complements the household’s income from other sources so that the total income reaches a predetermined guaranteed level. Since the introduction of the scheme in February 2017, the guaranteed minimum income has been set at 200 EUR for the first adult in the household, increased by 100 EUR for each additional adult and 50 EUR for each child in the household (100 EUR for the first child in a single-parent household). To incentivise work, 20% of net employment income is disregarded in the income test for eligibility. For example, for a couple with one child, the guaranteed minimum income is 200 + 100 + 50 = 350 EUR per month. If this hypothetical household earns 300 EUR of net labour income per month and as they are also entitled to a child benefit of 70 EUR per month, they will receive an SSI benefit equal to 350 – 300*0.8 –70 = 40 EUR per month. Six scenarios of possible changes to the scheme are simulated below with the EUROMOD model (1): 1) increase the employment income disregard from 20% to 40%; 2) uprate the guaranteed amount by 10% 3) exclude the child benefit from the income test, 4) combination of 1+2, 5) combination of 1+3, 6) combination of 1+2+3. The first chart below shows the impact on the number of beneficiary households and on the total SSI expenditure. The simulated baseline numbers are very close to the official figures in 2019. The second chart shows the effect in terms of at-risk-of-poverty reduction, for the poverty line fixed at 60% of baseline’s median equivalised disposable income. In the most ambitious scenario combining all the three changes, the number of SSI households increases by 66% (from 251,000 to 417,000) and the annual expenditure by 74% (from 592 million to 1,026 million EUR). However, as market incomes in Greece continue rising, the actual figures at the time when the reform is introduced are likely to be lower. The share of people who are at risk of poverty decreases by 1.4 percentage points (from 17.5% to 16.1%) overall and by 2.9 percentage points (from 21.2% to 18.3%) for children in this scenario. Graph 1: Guaranteed minimum income scheme reforms    Source: European Commission, Joint Research Centre, based on the EUROMOD model Financial work incentives of SSI beneficiaries can be assessed with using theparticipation tax rates (PTRs). They indicate what share of the gross earned income is “taxed away” by the loss of benefits and increase of taxes, when moving from unemployment/inactivity to work. In Greece, almost three in four SSI beneficiary households declare zero labour income. The higher the PTR, the lower the incentive to start working. The charts below compare the PTRs (in percentage) in the baseline scenario and the reform scenario 6 for three household compositions. The incentives generally improve in case of lower earnings (gross wages of up to 400-500 EUR) due to the increase in the employment income disregard. In case of higher earnings, they remain about the same for single adults and worsen for households with children, which is mainly due to the exclusion of child benefits from the income test. The earned income is from dependent employment in these simulations. For self-employment the situation is quite different: for lower 0%10%20%30%40%50%60%70%80%Number of householdsTotal SSI expenditure (EUR)Increase of beneficiary households and public expenditure by reform scenario (%)1231+21+31+2+30.00.51.01.52.02.53.03.5Total populationChildren (0-17)Reduction of at-risk-of-poverty rates by reform scenario (percentage points)1231+21+31+2+3 
 
 
  
 
4.3. Labour market, education and social policies 

Box (continued) 

to  affordable  housing  remains  a 
Access 
significant  concern.  In  2018,  almost  40%  of  the 
total population (far above the EU average of 10%) 
spent more than 40% of their disposable income on 
housing costs, with tenants in rented housing being 
particularly  affected.  In  2019,  a  means-tested 
lump-sum  rent  benefit  was  introduced,  covering 
about  6%  of  the  Greek  population.  A  separate 
support  mortgage  holders  was 
subsidy 
established  under  the  revised  primary  residence 
protection  framework,  but  this  remains  severely 
underused.  There  are  several  programmes  that 
provide temporary accommodation and emergency 
services 
refugees. 
to  homeless  people  and 
However,  there  is  currently  no  social  housing 
scheme  in  place  that  provides  more  permanent 
solutions for low-income households.  

to 

A  specific  challenge  is  the  integration  of  third-
country  nationals,  including  recently  arrived 
refugees.  People  with  a  migrant  background  in 
Greece  have  lower  employment  rates  (especially 
women), are more affected by social distress, have 
worse  educational  outcomes,  and  drop  out  of 

school  early  more  often  than  the  native  born  and 
their children. The non-EU born represent 8.7% of 
the  total  population  in  Greece,  above  the  EU 
average  of  7.5%.  With  the  intensification  of 
migrant inflows in 2019, the integration of people 
benefiting  from  international  protection  will  be  a 
major  challenge.  An  estimated  112,300  refugees 
and  asylum  seekers  were  hosted  in  Greece  in 
December 2019 (UNHCR, 2019). 

to  address 

their  needs, 

accommodation 

are  unaccompanied  minors. 

A  large  proportion  of  refugees  and  asylum 
seekers 
In 
there  were  around  5,300 
December  2019 
in  Greece.  Measures 
unaccompanied  minors 
including 
intended 
sustainable 
or 
supported  independent  living  and  a  guardianship 
system,  are  facing  delays.  The  national  strategic 
plan for reception has been updated to increase the 
country’s reception capacity. The national strategy 
for the integration of migrants was finalised in July 
2019.  It  sets  out  a  comprehensive  approach  to 
support  their  social  and  economic  inclusion  with 
both  short-  and  long-term  measures.  Under  this 

shelters 

in 

42 

earnings the PTRs are very high (close to or even above 100) in all scenarios, since they are strongly affected by the minimum social insurance contribution (145 EUR per month).  Graph 2: Guaranteed minimum income scheme reforms    Source: European Commission, Joint Research Centre, based on the EUROMOD model (1) EUROMOD is the tax-benefit microsimulation model for the EU. It simulates individuals' and households' benefit entitlements and tax liabilities (including social security contributions) according to the rules in place in each Member State. Simulations are based on representative survey data from the 2017 European Statistics on Income and Living Conditions (EU-SILC) and cover the main elements of direct taxation, social contributions and non-contributory benefits. Incomes reported in the EU-SILC of 2017 refer to 2016 and are uprated with 2019 uprating factors.  0204060801005651251852453053654254855456056657257851 adultBaseline1+2+30204060801005651251852453053654254855456056657257851 adult + 1 childBaseline1+2+30204060801005651251852453053654254855456056657257852 adults + 2 childrenBaseline1+2+3 
  
 
 
4.3. Labour market, education and social policies 

unemployed,  on  whom  spending  remains  lower 
than in other EU countries. 

However,  there  was  a  roll-back  of  some  2012, 
2014  and  2016  measures  in  the  recent  year.  In 
2019,  the  authorities  repealed  important  elements 
of  the  previous  pension  reforms,  which  led  to  an 
increase  in  spending  on  pensions  as  a  share  of 
GDP.  This  pertains  to  the  repeal  of  the  2016 
reform  of  the  survivors’  pensions  that  had  been 
modernised and aligned with standard practices in 
other EU Member States and the reinstatement of a 
permanent  13th  pension,  which  had  been 
eliminated in 2012. This will be paid once a year at 
a  level  of  30%-100%  of  current  pensions  (the 
highest  percentage  applying  to  pensions  below 
€500 per month and the lowest to pensions above 
€1  000  per  month)  and  will  cost  as  much  as 
€0.8 billion.  Meanwhile,  the  Council  of  State  has 
made  an  important  ruling  on  the  2014  and  2016 
pension  reforms,  according  to  which  but  some  of 
their  elements  will  need  to  be  adjusted  (European 
Commission,  2019b;  European  Commission, 
2020).  

for 

that 

the  replacement  rates 

In  order  to  comply  with  the  Council  of  State 
decision  on  the  2016  pension  reform,  new 
(increased)  accrual  rates  for  careers  above  30 
years  are  set  to  be  introduced  retroactively  as 
from  1  October  2019.  This  adjustment  is  to 
ensure 
long 
insurance periods will be slightly higher than 50% 
as requested by the Council of State. According to 
the  actuarial  projections  by 
the  authorities, 
expenditure  should  remain  virtually  unchanged  as 
a  share  of  GDP  until  2047  compared  with  the 
trajectory  before  this  adjustment.  This  is  because 
the projected impact of the new measures is below 
0.5%  of  GDP  and  the  authorities  plan  to  finance 
this by eliminating the annual one-off benefit (i.e. 
the  13th  payment  to  pensioners  introduced  in 
2019) to finance the additional costs. The measure 
will lead to very high average replacement rates by 
European standards. This is especially the case for 
those  with long careers  with  pensionable earnings 
at or below the average wage. 

the 

HELIOS 

framework, 
integration 
programme (32)  launched  in  July  2019  aims  to 
provide  autonomous  housing,  employment  and 
integration  courses  for  refugees.  By  September 
2019  almost  3,500  refugees  had  enrolled  in  the 
programme. 

Integrating  recently  arrived  migrants  into  the 
Greek  education  system  has  so  far  primarily 
focused on schools. In the 2018/2019 school year, 
substantial efforts were made to provide schooling 
for 12 867 refugee children, while teacher training 
in  secondary  education  and  upgrading  teaching 
material  started  in  2019.  However,  integrating 
refugee  children  into  education  remains  an  uphill 
struggle,  considering  that  an  estimated  28,000 
refugee children reside in Greece (UNICEF, 2019). 
Access  to  education  for  older  children  and  young 
adults  is  also  a  challenge  (Tzoraki,  2019).  To 
facilitate  their  integration  onto  the  labour  market, 
Greece  has  taken  part  in  the  Council  of  Europe’s 
‘European  qualifications  passport’  that  assesses 
refugees’ higher education qualifications. 

leading 

to  a  reduction 

Pension  spending  in  Greece  is  expected  to 
decrease substantially over the  medium to long 
term,  while 
in 
inefficiency  and  inequalities.  At  15.5%  of  GDP, 
pension spending in Greece was one of the highest 
in  the  EU  in  2018.  Nevertheless,  according  to 
projections  (European  Commission,  2018a)) (33) 
that  have  been  reviewed  by  the  Economic  Policy 
Committee’s working group on ageing populations 
and  sustainability,  the  reform  legislated  in  spring 
2016  is  projected  to  reduce  public  spending  on 
pensions to just above 13% by 2030, which is the 
euro-area average. The reform not only ensured the 
pension  system’s  sustainability  over  the  -medium 
to  long-term,  while  reducing  inefficiency  and 
inequalities, it also improved actuarial fairness and 
improved  incentives  to  declare  work  and  pay 
social  contributions  and  work  for  longer,  where 
appropriate.  Finally,  the  reforms  helped  to  create 
the  fiscal  space  to  rebalance  social  spending  and 
introduce policy measures targeted at those groups 
most  at  risk  of  poverty,  namely  the  young  and 

(32)  An  integration  project  implemented  by  the  International 
Organisation  for  Migration  and  its  partners,  with  the 
support  of  the  Greek  government  and  funding  from  the 
European Commission. 

(33)  These figures reflect the most recent measures legislated up 
to September 2019 and update projections published in the 
2018 Ageing Report.  

The  authorities  have  developed  an  action  plan 
to remedy the delays with the completion of the 
setup  of  the  Single  Social  Security  Fund 
(EFKA).  An  ambitious  action  plan  for 
the 
digitalisation  of  the  Single  Social  Security  Fund 
will start to be implemented in the coming months. 

43 

                                                           
4.3. Labour market, education and social policies 

The  authorities’  action  plan  envisages 
the 
unification  of  the  IT  systems  of  all  the  previous 
funds and the digitalisation of all services provided 
by  the  end  of  2020.  The  digitalisation  of  pension 
awards  should  be  completed  by  June  2021.  The 
authorities  have  also  announced  the  decision  to 
merge  the  Supplementary  Pension  Fund  into  the 
Single  Social  Security  Fund  in  order  to  improve 
the  efficiency  of  the  pension  system  also  through 
reduced administrative costs.  

4.3.4.  HEALTH AND LONG-TERM CARE 

Greece has significantly improved the efficiency 
of  its  healthcare  system  but  can  be  further 
developed.  Efforts  started  under  the  Economic 
Adjustment Programme have been consolidated in 
recent  years.  Issues  like  fragmentation  of  benefits 
and  coverage,  excessive  pharmaceutical  spending, 
inefficient  procurement  and  weak  primary  care 
have  been,  or  are  in  the  process  of  being, 
addressed  and  Greece  has  launched  an  ambitious 
set of reforms to improve health system efficiency 
and  reduce  waste.  However,  results  in  terms  of 
rationalisation  of  expenditure,  have  not  achieved 
full  potential  and,  as  a  result,  a  third  of  health 
expenditure  is  borne  by  households,  one  of  the 
highest rates in the EU.  

the 

Equal access to medical care continues to be an 
issue.  Despite 
introduction  of  universal 
coverage  ‒an  ambitious  programme  commitment 
extending access to health care goods and services 
to  uninsured  citizens  and  other  vulnerable 
categories‒  in  2018,  Greece  still  had  one  of  the 
highest  levels  of  self-reported  unmet  needs  for 
medical  care  in  the  EU,  with  a  wide  gap  between 
the lowest and the highest income group as well as 
between  employed  and  non-employed  people. 
Access to medical care also appears to be lower for 
third country nationals and there are concerns that 
it  may  affect  migrants,  and  in  particular,  asylum 
seekers  and  refugees.  Nevertheless,  the  share  of 
population  declaring  unmet  needs  declined  from 
13.1% in 2016 to 8.8% in 2018, after having risen 
for six consecutive years.  

Households’  out-of-pocket  payments  are  high. 
In total, 35% of healthcare expenditure is financed 
out-of-pocket by households (among the highest in 
the  EU).  This  is  largely  due  to  co-payments  for 
pharmaceuticals.  Given  the  persistent  pressure 

exerted  by  supply-induced  demand,  the  structure 
of co-payments, despite being in line  with the EU 
in  terms  of  patient  participation  rates,  may  not 
from 
sufficiently  protect  vulnerable  groups 
financial hardship and may  warrant a revision, for 
instance,  as  regards  the  lack  of  means-tested 
exemptions. 
co-payments 
Concerning 
composition, it appears that a considerable share of 
the  co-payments  amount  is  due  to  the  preference 
for off-patents over generics expressed by patients 
and  seemingly  encouraged  by  providers.  Despite 
the extent of the services covered, direct payments 
for  items  outside  the  benefit  package,  visits  to 
private  providers  (diagnostic  centres  and  clinics), 
nursing  care  and  dental  care  also  add  to  out-of-
pocket  spending.  Informal  payments  represent 
more  than  a  quarter  of  out-of-pocket  payments, 
raising serious concerns about equity and access to 
healthcare services.  

Strong  primary  care  is  crucial  for  an  efficient 
and  accessible  health  system.  Historically,  the 
health system has been reliant on hospital care and 
specialist  care  to  the  detriment  of  developing  a 
more comprehensive primary care system. In 2017, 
after a number of unsuccessful attempts, the focus 
shifted  to  a  primary  care  reform  with  the  aim  to 
provide access  to essential, quality  services in the 
short term. Building a strong primary care system 
with an effective gatekeeping function is the main 
longer-term  goal.  A  comprehensive  network  of 
primary  healthcare  units  was  being  rolled  out 
under  the  previous  government  and  was  then 
suspended.  Recently,  progress  resumed  following 
a  redesign of the system. This has led to delays to 
the  planned  timeline,  and  fundamental  features 
such  as  compulsory  registration  and  gatekeeping 
have  not  yet  been  introduced,  but  are  planned  by 
the end of 2021. 

the 

Plans  for  a  new  public  health  Bill  aim  at 
reaching  Sustainable  Development  Goals  for 
health.  Life  expectancy,  at  81.4  years,  is  just 
above  the  EU  average.  Stroke,  heart  disease  and 
treatable  cancers  (breast,  colorectal  and  cervical) 
leading  causes  of  death.  Systematic 
are 
screening  programmes  would  help  reduce  current 
inequities  in  cancer  prevention.  The  absence  of  a 
nationwide  cancer  registry  does  not  allow  for 
quality data on cancer incidence and survival rates. 
Greece  has  one  of  the  highest  incidences  of 
infections  with  antibiotic-resistant  bacteria  in  the 
EU,  resulting  in  over  1  600  deaths  per  year 

44 

4.3. Labour market, education and social policies 

than 2% of total healthcare spending). In 2015, for 
every 100,000 inhabitants there were only 17 long-
term  care  beds  in  nursing  and  residential  care 
facilities,  the  lowest  ratio  in  the  EU.  Day-care 
centres  for  the  disabled  and  elderly  exist  and 
numerous home care schemes are operated by both 
public and non-governmental providers. However, 
the initiatives are fragmented and lack appropriate 
coordination 
standards.  A 
comprehensive long-term care policy is  not  yet in 
place, which is a concern also in view of the rapid 
population ageing. The transition from institutional 
for  people  with 
to  community-based  care 
disabilities, 
is  also  a 
challenge. 

in  particular  children, 

quality 

and 

(Cassini  et  al.,  2019).  Application  of  clinical 
guidelines  and  treatment  protocols  is  low.  Greece 
has  recently  reinforced  tobacco  control  policies 
and  announced  a  new  bill  on  public  health 
touching upon risk factors, social determinants and 
inequalities.  This  will 
the 
achievement of the SDG 3 (see Annex E). 

contribute 

to 

A  sustainable  solution  to  control  the  health 
spending  is  yet  to  be  devised.  In  2017,  public 
spending  on  health  was  just  under  5%  of  GDP. 
However,  in  reality,  public  spending  on  health  is 
higher  than  what  official  figures  report  by  about 
1%  of  GDP  (OECD,  2019).  This  is  due  to  the 
clawback mechanism, which applies to a large part 
of the National Health Fund budget. According to 
this mechanism, in order to meet healthcare needs 
the state can provide goods and services in excess 
of 
later 
the  expenditure  ceiling,  which  are 
recovered  from  providers.  The  clawback  was 
intended as a temporary solution until the reforms’ 
effects  —namely  increased  efficiency  and  waste 
reduction  —  started  to  materialise  and  it  was 
intended  to  protect  access,  supporting  the  recent 
implementation of  universal coverage  which  now, 
also  thanks  to  this  mechanism, affordably  covers 
uninsured  citizens.  The  continued  increase  in  the 
amounts to be clawed back is therefore becoming a 
matter  of  concern.  Pharmaceutical  spending  and 
patient  consumption  of  reimbursed  medicines  still 
regularly  exceed  the  set  ceiling  by  about  a  third. 
Indeed,  the  total  clawback  and  rebate  value  for 
outpatient and inpatient pharmaceuticals amounted 
to €1.2 billion in 2017, which reached €1.3 billion 
in 2018. A spending level that is overall below the 
EU average and reports of operational disruptions 
in  some  hospitals  may  be  indicative  of  a  need  to 
increase  the  financial  envelope.  The  budget  of 
public  hospitals  appears 
to  have  become 
inadequate  to  continuously  meet  the  needs  of  the 
population.  Available 
a 
and 
represent 
redistribution  of 
potential  tools  to  alleviate  this  pressure  and  to 
ensure uninterrupted patient access to high-quality 
services.  

spending 

social 

space 

fiscal 

Long-term care services are inadequate to meet 
the  increasing  needs  in  Greece.  While  the  share 
of people (aged 65+) who face serious difficulties 
in  personal  care  and/or  household  activities  is 
considerably  higher  than  the  EU  average  (34.7% 
against  26.3%  in  2014,  the  latest  available  year), 
public spending on long-term care is very low (less 

45 

 
4.4. COMPETITIVENESS, REFORMS AND INVESTMENT 

4.4.1.  INVESTMENT AND PRODUCTIVITY 

economic 

Greece’s  protracted 
crisis  has 
resulted  in  major  investment  gaps  in  several 
sectors. Investment accounted for  more  than 25% 
of  GDP  in  two  of  the  pre-crisis  years  (2003  and 
2007),  with  Greece’s  average  performance 
standing  at  24.1%  of  GDP  between  2000-2007 
(above  the  EU  average  of  22.3%  in  the  same 
period)  (Figure  4.4.1).  This  contributed  to  the 
build-up  of  macroeconomic  imbalances,  as  high 
public  investment  during  this  period  led  to  an 
overheating  of  the  economy  and  an  accumulation 
of  public  debt.  Once  both  domestic  and  foreign 
funding  dried  up  in  the  aftermath  of  the  global 
financial  crisis,  private  investment  plummeted, 
notably  residential  investment.  Public  investment 
also dropped sharply. Investment slowly started to 
recover  since  2015,  with  the  exception  of  2018. 
Still,  at  11.1%  of  GDP  in  2018,  it  remains  the 
lowest in the EU. Investment continues to be held 
back by the ongoing deleveraging process of firms 
and  banks,  which,  among  other  factors,  hinders 
investments by small and medium sized enterprises 
in high-technology sectors (Centre of Planning and 
Economic Research, 2019). 

to  start  bridging 

Total factor productivity growth is positive, but 
too  low  for  Greece  to  catch  up  with  living 
standards  in  other  euro  area  countries  in  the 
near  term.  Total  factor  productivity  growth  was 
just  over  1.5%  in  2018,  higher  than  the  euro  area 
the 
but  not  high  enough 
accumulated productivity gap. The weak aggregate 
productivity profile can be largely attributed to the 
non-tradable  and  non-market  sectors.  While 
investment has been slowly picking up since 2015, 
remaining  bottlenecks  in  the  administrative  and 
regulatory  framework,  as  well  as  the  outflow  of 
to  weigh  on 
skilled 
productivity 
future.  Low 
in 
productivity  growth  is  also  linked  to  the  structure 
of the economy. The average firm size in Greece is 
smaller  than  in  the  EU,  implying  a  relatively 
limited capacity to exploit economies of scale and 
to innovate. This distributional effect accounts for 
around  a  third  of  the  productivity  difference  with 
respect  to  the  EU  benchmark.  Addressing  the 
remaining  structural  bottlenecks  would  be  key  to 
improving  non-cost  competitiveness  (European 
Commission, 2020). 

labour  will  continue 
the 

growth 

in 

investment 

Low 
intangible  assets  also 
undermines productivity growth. This is mainly 
the result of the low level of non-national accounts 
intangible  investment,  which  includes  assets  such 
as  design,  brand,  organisational  capital  and 
training,  which  have  a  major  role  in  production. 
Investment in these is insufficient to cover capital 
depreciation, therefore leading to capital shrinking. 
Against  this  background,  the  benefit  of  additional 
investment is high, which indicates that Greece has 
a great opportunity to invest more into these assets. 

of 

the 

account 

The  economic  adjustment  undertaken  since 
2010 is gradually helping Greek exporters to re-
gain access to foreign  markets. Export levels, in 
part  aided  by  increased  cost  competitiveness, 
reached 36.1% of GDP in 2018, contributing to the 
deficit. 
decrease 
current 
Furthermore,  Greece’s  export  performance 
in 
relation  to  the  rest  of  the  world  has  improved,  as 
reflected  in  export  market  shares  gains  recorded 
over  the  last  2  years.  However,  trade  openness 
continues to be among the lowest in the euro area. 
Rebalancing  the  economy  towards  high  value-
tradable  sectors  would  help  Greece’s 
added 
economic  model  become  much  more  export 
oriented (Box 4.4.1). 

Graph 4.4.1:  Investment as a percentage of GDP 

Source: Eurostat 

A  number  of  flagship  projects  to  attract  fresh 
capital  and  stimulate  job  creation  are  being 
implemented.  One  of  the  most  significant  is  the 
forthcoming  Hellenikon  investment  project  in 
Athens  that  will  convert  the  former  international 
airport  into  one  of  the  largest  urban  development 
projects in Europe,  which is  estimated to increase 
GDP  by  2  percentage  points  and  create  some 
90,000  jobs  in  the  next  15-20  years.  Private 
investment in the Piraeus port led to an increase in 

46 

0510152025302000200220042006200820102012201420162018GreeceEU 
  
4.4. Competitiveness, reforms and investment 

continued  to  be  the  largest  contributor  to  total 
spending,  which  amounted  to  0.57%  of  GDP,  of 
which  two  thirds  came  from  the  service  sector 
(OECD, 2017).  

in 

research 

employment 

While 
and 
development  activities  is  increasing,  the  loss  of 
skilled  human  capital  is  a  major  challenge  for 
the  Greek  research  and  innovation  system.  In 
2018,  the  number  of  people  engaged  in  research 
and  development  activities  increased  by  about 
7.4%  overall;  the  increase  for  researched  was 
notably  4.7%  (European  Commission,  2018d, 
provisional). However, the brain drain continues to 
be  one  of  the  most  important  challenges  (see  also 
Chapter  4.3  and  Amanatidou  et  al,  2020).  Policy 
initiatives such as the establishment of the Hellenic 
Foundation  for  Research  and  Innovation, 
to 
promote 
research  activity  and  support  new 
researchers,  and  the  Knowledge  Bridges,  which 
the  profiles  of  highly  skilled  Greek 
maps 
professionals abroad and supports networking, are 
steps in the right direction. 

Links  between  academia  and  the  productive 
sector  remain  weak.  While  Greek  universities 
perform well in terms of research output, this is not 
converted into productive uses, as demonstrated by 
the  comparatively  low  number  of  patents (35). 
Furthermore,  private  funding  for  public  research 
and development as a percentage of GDP is slowly 
increasing (0.041% in 2017 from 0.031% in 2016). 
Nonetheless,  the  level  of  public-private  scientific 
co-publications remains comparatively low (2.3%, 
as a percentage of total  number of publications in 
2018, compared to the EU average of 5.6%). As a 
the 
policy 
in 
‘Research-Create-Innovate’  funding  scheme 
2017 to encourage business research, development 
and innovation and knowledge transfer.  

the  country 

response, 

launched 

freight  traffic  by  600%  in  2009-2018  and  is 
expected  to  lead  to  new  investment  of  close  to 
0.5%  of  GDP  and  more  than  30,000  new  jobs  by 
2025.  Similarly,  privatisation  of  the  Thessaloniki 
port  is  expected  to  increase  freight  turnover  by  a 
third  and  bring  in  additional  investments  of  0.2% 
of  GDP  over  a  10-year  period  (Foundation  for 
Economic and Industrial Research, 2016a, 2016b). 
The  award  of  the  regional  airports  concession 
should  result  in  new  investments  amounting  to 
0.2%  of  GDP  by  2021,  which  will  substantially 
increase  airport  capacity  in  Thessaloniki  and  the 
Aegean islands.  

Research and development 

Although  Greece  has  improved  its  innovation 
performance,  it  continues  to  be  a  ‘moderate 
innovator’. Creation and diffusion of innovation is 
a key driver of productivity growth. Greece ranked 
among  the  lowest  countries  in  the  Commission’s 
2019  European  Innovation  Scoreboard  (European 
Commission, 2019e). It performs particularly well 
on innovation in small and medium enterprises and 
on  the  linking  of  these  enterprises  with  others. 
Greece is also doing well in increasing its share of 
employment  in  fast  growing  innovative  sector 
businesses  and  in  knowledge-intensive  activities. 
However, Greece lags behind in terms of creating 
an  innovation-friendly  environment  with  adequate 
levels of finance and support. 

Public  and  private  spending  on  research  and 
development  as  a  percentage  of  GDP  has  been 
steadily 
increasing  since  2010,  but  is  still 
relatively  low.  At  1.18%  in  2018,  Greece  is 
approaching  its  national  target  of  research  and 
development  intensity  of  1.30%  of  GDP  set  for 
2020 (34).  Despite  this  increase,  Greece  remains 
(European 
below 
sector 
Commission, 

the  EU  average 

2019j).  The 

business 

(2.11%) 

(34)  The  target  was  set  in  Greece’s  2019  national  reform 
programme and was revised upwards from 1.2% of GDP. 

(35)  11  Patent  Cooperation  Treaty  patents  per  population  in 

2014 versus an EU average of 102. 

47 

                                                           
 
                                                           
4.4. Competitiveness, reforms and investment 

Box 4.4.1: Export promotion and trade facilitation strategies 

Greece’s  economy  remains  relatively  closed,  given  its  small  size.  Despite  a  persistent  trend  towards 
greater openness, reflected in a  doubling of the exports’ share to GDP since 2003, in 2018 Greek exports 
still stood at 36.1% of GDP, versus a euro area average of 48%. Greece’s significant gap in trade openness 
compared  to  its  euro  area  counterparts  (see  Graph  4.4.2)  is  even  more  striking  given  the  size  of  the 
economy, as smaller economies are typically more open. With exports and imports at 73% of GDP in 2018 
(vs  a  euro  area  average  of  92%),  Greece  ranks  closer  to  the  biggest  EU  economies,  for  which  domestic 
demand and the domestic  market bear a greater  weight than in smaller economies. Evidence suggests that 
despite major improvements in cost competitiveness in recent years, factors, such as barriers to competition 
and  the  underlying  institutional  deficit  (including  limited  national  branding  and  fragmentation  of  export 
promotion  tools/agencies),  limit  Greece’s  export  growth.  Furthermore,  the  exceptionally  tight  credit 
conditions observed over the past decade have been a major impediment. 

The persistent trade  deficit points to chronic structural weaknesses, which imply increased costs for 
businesses and competitiveness losses. While imports are being compressed by the slack in the economy, 
the incomplete adjustment in Greece’s trade balance signals impediments to export growth. Despite reforms 
that have reduced the regulatory  burden, according to the OECD’s latest  Product Market Regulation data, 
Greece  is  performing  relatively  poorly  in  trade  facilitation  (i.e.  the  simplification  and  harmonisation  of 
international trade procedures) and treatment of foreign suppliers. Furthermore, it is often difficult for small-
scale producers, which are predominant in Greece, to enter international markets and global value chains. 

Graph 4.4.2: Trade openness and Greek goods and service exports by destination in % of GDP 

(1) Trade openness is defined as the share of exports and imports in GDP 
(2) Goods and services exports by destination country (top 20 trading partners for Greece) 
Source: European Commission based on United Nations’ Commodity Trade Statistics Database 

Greece’s  export  profile  comprises  54%  in  goods  and  46%  in  services.  The  biggest  shares  of  goods’ 
exports  are  in  mineral  products  (31%),  raw  materials  (13%),  chemicals  (9%)  and  foodstuffs  (9%).  In 
manufacturing,  Greek  exports  are  predominantly  of  medium-low  technology.  In  services,  travel  and 
transport have the highest export shares,  at 53% and 31%, respectively.  Greece’s  main partners for goods 
exports are EU countries (53% share) and non-EU neighbouring countries (25% share). The top 10 Greek 
export destinations are  mainly either markets  with relatively low  dynamism  —  whose imports grow  more 
slowly  than  world  imports  —  or  markets  where  Greece  has  a  low  competitiveness  advantage,  implying  a 
lower growth of Greek exports than the overall growth of imports in that destination (see Graph 4.4.3).  

Greece’s export specialisation does not bode well for its future export performance. Greek exports are 
concentrated  in  products  with  low  value-added  and  low-technological  content,  which  face  strong 
competition  from  countries  with  lower  labour  costs.  High  and  medium-high  technology  products,  which 
grow  faster  in  terms  of  their  global  market,  still  account  for  only  a  quarter  of  total  exports.  This  limits 
Greece’s  participation  in  global  value  chains.  Furthermore,  growth  for  product  groups,  such  as  mineral 
products and raw materials, for which Greece enjoys a comparatively higher share of world exports, can be 

48 

0,00,51,01,52,02,53,03,5GermanyItalyUnited KingdomUSATurkeyCyprusFranceChinaBulgariaNetherlandsLebanonSpainEgyptRomaniaSingaporeAustraliaSwitzerlandNorth MacedoniaBelgiumRussian FederationGoods and services exports (2)GoodsServices30%40%50%60%70%80%90%100%199519971999200120032005200720092011201320152017Trade openness (1)ELEA-19  
4.4. Competitiveness, reforms and investment 

expected  mostly  from  emerging  economies,  while  Greek  exports  are  currently  concentrated  on  more 
developed economies (see Graph 4.4.2). Lastly, Greece strongly relies on tourism, which is a key asset and 
has  shown  resilience  in  recent  years,  but  which  can  also  be  vulnerable  to  volatile  international  demand, 
especially in the absence of innovation. 

Graph 4.4.3: Competitiveness and dynamics of Greek export markets and Greece’s export market shares of goods. 

(1) The size of the bubbles indicates the weight of the destination country on total Greek exports. Market dynamism stands for the difference 
between the annualised growth rates of total imports per destination country and global world imports. Competitiveness stands for the 
difference between the annualised growth rates of Greek exports per destination country and world imports per destination country. 
Source: European Commission based on United Nations’ Commodity Trade Statistics Database 

Export performance would benefit from a greater focus on sectors with high growth prospects and for 
which  Greece  has  a  comparative  advantage.  Greece’s  strong  points  currently  include  its  natural  and 
physical  assets  (e.g.  coastline,  biodiversity  and  infrastructure),  human  capital,  cultural  heritage  and 
geographic position. These create sizeable investment opportunities in sectors such as tourism, logistics and 
transport,  energy,  information  and  communication  technology,  and  agro-food.  Thus  far,  Greece  has  not 
reaped the full benefits of smart specialisation at regional level (see Section 4.4.1). Supporting small local 
innovative start-ups and business acceleration initiatives could help sectors such as agro-food and tourism to 
develop. Greater use of the public-private partnerships framework, in line with recently enacted legislation, 
would  allow  the  realisation  of  large-scale  projects,  such  as  in  infrastructure  networks,  energy  and  public 
sector digital infrastructure, including for public transportation. 

Policy measures on key sectors include: (i) upgrading regional infrastructure (e.g. regional airports, cross-
border  railways,  marinas  and  ports)  to  access  growing  markets  in  the  broader  region;  (ii)  upgrading  the 
traditional tourist products into more sophisticated and higher-value products (e.g. thematic tourism) so as to 
increase spending per stay; (iii) exploiting growing trends in information and communication technology by 
setting up assembly facilities for high-tech products and devices, software product development and service 
centres;  (iv)  transforming  Greece  into  a  European  gateway  for  natural  gas,  electricity  and  oil  resources 
through major infrastructure projects; and (v) building of clusters to increase scale for agro-food producers, 
brand  biodiversity  and  promote  the  uptake  of  ‘quality  label’  certification,  as  well  as  expanding  tradable 
sectors through common cross-cutting policies. Lastly, the consolidation of the Ministry of Foreign Affairs’ 
institutional reforms  and  the  new  economic  diplomacy  strategy  are  crucial  to  provide  the  coordination  for 
addressing the existing fragmentation of export promotion tools.   

Innovation  performance  in  Greece  has  not  yet 
reached  its  full  potential.  Greece  has  integrated 
smart  specialisation  strategies  in  its  innovation 
policy  framework  (36).  According  to  the  latest 

(36)  Smart  specialisation  is  set  as  an  ex-ante  conditionality  in 
the  cohesion  policy  (2014-2020)  policy  framework, 

requiring  every  Member  State  and  region  to  have  a  well-
developed strategy in place as a pre-requisite for receiving 
any  EU  Structural  Funds  support  for  their  planned 
innovation  measures.  In  this  context,  Greece  developed  a 
centrally  administered  national  research  and  innovation 
smart  specialisation  Strategy  (RIS3),  and  13  regional 
strategies, which were approved in 2015. 

49 

0.00.20.40.60.81.0Machinery & ElectricalArms & AmmunitionFootwear & HeadgearMiscellaneousPulp of Wood & PaperChemical ProductsPlastics &  RubberStone, Cement, Ceramic…TextilesRaw Hides, Skins, Leather…MetalsVegetable ProductsAnimal & Animal ProductsFoodstuffs & TobaccoFats And OilsMineral ProductsWorld market share (%)Export market share of Greek exports (2)20072017ItalyGermanyTurkeyCyprusBulgariaLebanonUKUSAEgyptSpain-15-10-505101520-40-200204060Market Dynamism (percentage points)Competitiveness (percentage points)Competitiveness and market dynamism of Greek export markets (1)  
 
                                                           
                                                                                   
4.4. Competitiveness, reforms and investment 

in 

to 

the 

Survey 

lack  of 

Innovation 

remain,  due 

Community 
(European 
Commission,  2019f),  57%  of  Greek  businesses 
engage  in  innovative  activity  (above  the  EU 
average  of  51%),  pointing  to  a  relatively  high 
engagement  of  businesses 
innovation 
process.  However,  large  disparities  in  innovation 
capacities 
robust 
governance, including low administrative capacity 
and  weak  coordination  mechanisms.  In 
this 
context, Greece is faced with particular challenges 
in developing adequate responses for the territories 
most  likely  to  be  affected  by  the  industrial 
transition towards sustainability (37). Only 3 out of 
13  regions  established  a  Smart  Specialisation 
Technical  Office,  and  only  one  is  operating. 
Business mobilisation also remains low at regional 
level.  Finally,  innovation  and  growth  enabling 
finance remains limited, as supply of seed, start-up 
and  ‘later  stage’  venture  capital 
investment 
remains  around  half  of  the  EU  average:  0.02%  of 
GDP  in  2018,  compared  to  0.05%  of  GDP  in  the 
EU  (Invest  Europe,  2019,  Flachenecker  et  al., 
2020). 

in 

information 

investments 

Integration  of  digital  technology  by  businesses 
is also relatively slow, with the exception of the 
use  of  big  data  and  electronic  information 
sharing, which are higher than the EU average. 
In  2018, 
and 
communications  technology  as  a  share  of  GDP 
grew  by  17%,  exceeding  the  growth  rate  in  the 
euro  area  by  approximately  5  times.  Nonetheless, 
Greece is still well behind the EU average in terms 
of integration of digital technology by businesses. 
In  particular,  only  7%  of  businesses  use  cloud 
computing  compared 
the  EU. 
Meanwhile,  a  relatively  low  share  of  small  and 
medium  sized  enterprises  in  Greece  (11%)  sells 
online, with turnover from e-commerce accounting 
for  only  4%  of  total  turnover.  However,  Greece 
advancing  new  digital 
has 
technologies  in  line  with  the  Digital  Europe 
artificial 
Programme 
(supercomputing, 
intelligence,  cybersecurity)  and 
investing 
strategically  in  digital  technologies  through  EU-
coordinated programmes (38). 

committed 

to  18% 

to 

to 

in 

Digital economy 

to 

in 

the  EU.  According 

Greece  has  one  of  the  least  advanced  digital 
economies 
the 
Commission’s 2019 Digital Economy and Society 
Index  (European  Commission,  2019g),  which 
captures performance in the areas of connectivity, 
human capital, use of internet services, integration 
of  digital  technology  by  businesses  and  digital 
public 
significant 
challenges,  despite  some  progress  in  recent  years. 
Improving performance in these areas  is  therefore 
critical for economic development. 

services,  Greece 

faces 

In the area of connectivity, the transition to fast 
and  ultrafast  broadband  in  Greece  is  much 
slower  than  in  the  rest  of  the  EU.  Although  the 
national  broadband  plan  has  been  updated,  there 
are  considerable  delays  in  project  implementation 
and the absorption of allocated funds remains low. 
The use of internet services is picking up, although 
from  a  markedly  low  level.  Moreover,  regional 
disparities  in  terms  of  access  to  internet  are 
particularly high.  

(37)  During  the  2021-2027  European  Regional  Development 
Fund programming period, all Member States will have to 
demonstrate preparedness to manage industrial transitions. 

Digital  skills  are  not  widespread  across  the 
is  evidence  of  skill 
population  and  there 
shortages  in  the  labour  market.  As  shown  in 
Chapter  4.3,  half  of  the  Greek  population  lacks 
basic  digital  skills  whereas  around  90%  of  jobs 
require such skills. While a growing percentage of 
Greek  businesses  provided 
information  and 
communications  technology  training  to  their  staff 
in  2018  (a  17%  increase  in  2018,  well  above  the 
5% increase in the euro area), the private  sector’s 
digital  capability  is  insufficient  to  fully  take 
advantage of trends such as the rise of e-commerce 
and  reap  operational  efficiencies.  Meanwhile,  at 
1.8%,  Greece  has  the  lowest  share  of  information 
and communications technology specialists in total 
employment in the EU (EU average: 3.9%), which 
is partly due to outward migration, as information 
and  communications  technology  graduates  are,  as 
a  proportion,  comparable  to  the  EU  average. 
Shortages  in  advanced  digital  skills  weigh  on 
productivity, as they delay the uptake of advanced 
digital technologies.  

Greece  ranks  among  the  lowest  EU  Member 
States  for  the  provision  of  online  public 

(38)  Greece  has  signed  the  Declaration  on  cooperation  on 
the  Declaration  of  European 
Artificial 
Blockchain Partnership and it is a member of the EuroHPC 
(High-Performance Computing) Joint Undertaking. 

Intelligence, 

50 

                                                           
                                                           
services.  Performance  in  terms  of  open  data  is 
rather satisfactory and in line with the EU average. 
However,  the  supply  of  digital  public  services 
remains relatively limited, as reflected in the rather 
low availability of pre-filled forms (25% compared 
with  an  EU  average  of  59%),  the  low  share  of  e-
government  users  (39%  vs  67%),  and  the  low 
provision  of  digital  public  services  for  businesses 
and for health and care users.  

investing 

in  worker’s  skills, 

A  strategic  approach  to  accelerating  the  use  of 
digital  technologies  across  all  economic  sectors 
including 
and 
digital ones, would help bridge the productivity 
gap  with  euro  area  countries.  A  more 
pronounced  focus  on  educational  and  vocational 
training  of  workers  on  digital  skills,  regardless  of 
age,  and  improving  the  attractiveness  of  relevant 
academic  studies  and  encouraging  graduates  to 
search  for  employment  within  the  country  would 
boost  both  employability  and  the  capacity  of 
businesses  to  innovate.  Greater  private  and  public 
investment  into  integration  of  digital  technologies 
would  also  modernise  the  public  administration 
and  also  help  businesses  to  compete  in  global 
markets. 

To respond to these challenges, the government 
places  the  development  of  the  digital  economy 
and  society  high  on  its  policy  agenda.  The 
government  has  adopted  legislation  to  support 
digital public administration and has set up a  new 
Ministry  for  Digital  Governance  that  takes  a 
leading  role  in  coordinating  relevant  government 
measures and delivering several major information 
technology  projects 
(European  Commission, 
2020). These efforts, which aim to bring Greece’s 
particularly  low  digital  performance  in  line  with 
the EU average within the next 4 years, are a step 
in the right direction. 

4.4. Competitiveness, reforms and investment 

4.4.2.  MARKET FUNCTIONING 

the  crisis 

Investment and productivity depend heavily  on 
the  healthy  functioning  of  product  markets. 
High  regulatory  burden  and  weak  framework 
conditions in Greece had held back innovation and 
productivity  growth,  and  hindered  business 
(business 
investment  even  before 
investment  averaged  7%  of  GDP  in  2003-2008 
compared to 12.5% in the EU). This resulted in the 
current predominance of small and inward-looking 
businesses with relatively low investment intensity 
and  low  capacity  to  export.  As  evidenced  by  the 
relatively  low  and  declining  proportion  of  high-
growth 
face 
difficulties  to  grow  (Flachenecker  et  al.,  2020) 
(Table 4.4.1). 

firms,  Greek  businesses 

still 

Table 4.4.4: 

Share of high growth enterprises (1) 

(1) Measured as the proportion of high-growth enterprises in the total 
number of active enterprises with at least 10 employees. High growth 
firms are firms with at least 10 employees in the beginning of their 
growth and average annualised growth in number of employees greater 
than 10% per annum over a 3-year period. 
Source: Eurostat 

Greece  has  one  of  the  lowest  levels  of  business 
dynamism in the EU. In terms of firm churn rates 
between 2015-2017, i.e. the sum of the birth rates 
and  death  rates  of  firms  over  this  period,  Greece 
ranks amongst the last in the EU. Distortions in the 
level-playing  field,  high  tax  and  labour  costs, 
financing  constraints,  regulatory  barriers  and 
weaknesses  in  the  insolvency  framework  also 
adversely affect firm creation, expansion and exit. 
Creating  an  open,  dynamic  and  competitive 
business  environment  would 
foster 
therefore 
business dynamism, and boost productivity. 

51 

2017Δ 2017-2016Greece6.7-6.9%EU average11.33.6%Lowest 5 Member States 2.9-2.1%Top 5 Member States 16.51.1% 
 
  
 
4.4. Competitiveness, reforms and investment 

Box 4.4.5: Investment challenges and reforms in Greece 

Macroeconomic perspective  
Greece  has  accumulated  a  sizeable  investment  gap  during  the  near-decade  of  recession.  Despite  the 
return  to  growth  since  2017,  extensive  structural  reforms,  and  a  recent  upswing  in  the  business  climate, 
investment remains less than half of its pre-crisis level and the lowest in the euro area (11.1% of GDP in 
2018). While domestic savings appear insufficient to meet Greece’s investment needs, there have been gains 
in inflows of foreign direct investment since 2016, aided by privatisation proceeds. Regional disparities in 
terms of the ability to offer an attractive and sustainable environment for businesses and residents persist.  

Assessment of barriers to investment and ongoing reforms 

Several  factors  impinge  on  Greece’s  investment  potential,  both  in  the  corporate  and  public  sectors. 
Inefficiencies in managing EU funds remain (see Section 4.4.5). Strengthening the governance of public 
investment  and  its  complementarity  with  private  investments  is  a  priority.  Credit  constraints,  increases  in 
unit labour cost, high taxation and energy costs, as well as restrained demand weigh negatively on private 
sector investment. Furthermore, there are persisting weaknesses in the public administration and the judicial 
system. Given the lack of investment capacity, it is important to develop a pipeline to prioritise and manage 
projects of strategic and national importance, including infrastructure networks and energy, as well as Greek 
private  sector  and  foreign  direct  investment  projects  in  the  context  of  privatisation  and  public  private 
partnerships.  

Selected barriers to investment and priority actions underway  

1. Following years of pronounced contraction, bank lending to firms shows signs of improvement but 
overall  access  to  credit  remains  low,  as  cost  and  collateral  requirements  continue  to  be  challenging. 
Small and medium sized enterprises continue to be disproportionately affected (see Section 4.2.2). Efforts to 
accelerate  the  clearing  of  banks’  balance  sheets  and  to  improve  household  insolvency  frameworks  would 
help  provide  certainty  to  bank  lending  and  support  the  next  upswing  in  business  credit.  Against  this 
background,  the  importance  of  alternative  financing  is  increasing,  including  through  EU  programmes, 
international organisations and the Hellenic Development Bank, which is currently being established.  

2. Despite extensive structural  reforms, the  administrative and regulatory burden remains high and 
continues  to  dampen  the  private  sector’s  growth  potential  (see  Section  4.4.1).  The  authorities  have 
therefore taken initial steps to improve the regulatory framework, ease licensing requirements and accelerate 
the  preparation  of  local  spatial  plans,  as  well  as  to  develop  tools  to  facilitate  investments.  They  are  also 
preparing a new national growth strategy. An ambitious agenda on digitalisation projects is also under way. 
Nonetheless, a more pronounced approach to streamlining and expediting the licensing process — especially 
for  the  environmental  permit  process,  fast  tracking  strategic  investments  and  promoting  the  sustainable 
development of the Attica region would help the authorities achieve their investment objective. 

52 

Regulatory/ administrative burdenTaxationPublic administrationAccess to financePublic procurement /PPPsCooperation btw academia, research and businessCSRJudicial systemFinancing of R&D&ICSRInsolvency frameworkBusiness services / Regulated professionsCompetition and regulatory frameworkRetailEPL & framework for labour contracts ConstructionWages & wage settingDigital Economy / TelecomCSREducation, skills, lifelong learning CSREnergyCSRTransportCSRLegend:No barrier to investment identifiedSome progressCSRInvestment barriers that are also subject to a CSRSubstantial progressNo progressFully addressedLimited progressPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
 
  
 
4.4. Competitiveness, reforms and investment 

Graph 4.4.5: 

Economy-wide Product Market Regulation index (a 
lower value indicates lighter regulation) 

Note: The colour coding indicates: barriers to trade and investment (dark 
blue), barriers in service and network sectors (light grey), simplification 
and evaluation of regulations (dark grey), involvement in business 
operations (orange) and public ownership (light blue). 
EU average concerns the 22 EU Member States that are also OECD 
Members. 
Source: Organisation for Economic Co-operation and Development 

Graph 4.4.6: 

Ease of doing business ranking (a higher ranking 
denotes worse performance) 

in 

in  widely-used  market 

Greece  still  lags  considerably  behind  its  EU 
peers 
functioning 
indicators. Notwithstanding a comparatively good 
performance in certain areas such as the process to 
start a business, the OECD’s 2018 product market 
regulation data  (39),  point  to  the  existence  of 
comparatively  high  barriers 
to  domestic  and 
foreign  entry  of  firms  into  Greek  markets,  and 
market  distortions  induced  by  the  state.  This 
mainly stems from complex regulatory procedures 
and  weaknesses 
simplification  and 
the 
evaluation of regulations (Graph 4.4.5). Moreover, 
according to the World Bank’s latest (2020) Doing 
Business report, Greece is ranked only 79th out of 
190  countries  in  ‘ease  of  doing  business’  (Graph 
4.4.6)  (40).  While  Greece  has  made  progress  in 
areas  such  as  reducing  the  time  to  register  a 
business  and  strengthening 
the  protection  of 
minority investors, the rankings point to persisting 
weaknesses  for  registering  property,  enforcing 
contracts  and  resolving  insolvency.  There  is  also 
significant  room  for  improvement  in  terms  of 
accessing  credit,  paying  taxes  and  trading  across 
borders. 

(39)  The  OECD’s 

sectoral  Product  Market  Regulation 
indicators  measure  regulatory  barriers  to  firm  entry  and 
competition at the level of individual sectors, with a focus 
on  network  industries,  professional  services,  and  retail 
distribution.  Due 
the 
to  considerable 
calculation  methodology  in  2018  compared  to  previous 
assessments,  only  cross-country  (and  not  over  time) 
comparisons can be made (OECD, 2018). 

revisions 

in 

(40)  Year-to-year  changes  in  the  number  of  indicators  and 
changes in methodology affect the comparability of World 
Bank  rankings  of  prior  years.  Rankings  are  based  on  the 
assessment  of  10  topics:  starting  a  business,  dealing  with 
construction  permits,  getting  electricity, 
registering 
property, getting credit, protecting investors, paying taxes, 
trading  across  borders,  enforcing  contracts  and  resolving 
insolvency. Revised rankings for 2011 are used to take into 
account  changes  in  the  set  of  topics  under  assessment  in 
relation  to  the  next  year  and  to  reflect  data  revisions. 
Depicted rankings are controlled for changes in the number 
of economies, as all new economies included in the sample 
in 2011-2020 ranked below the countries being assessed. 

Source: World Bank  

legislative 

Restrictiveness  remains  relatively  high 
in 
economically important professions and sectors. 
Notwithstanding 
and 
extensive 
administrative  reforms (41),  certain  economically 
important  professional  services  are  characterised 
by  a  higher  than  average  level  of  regulation.  This 
has been highlighted by the European Commission 
assessment (42) and confirmed by the OECD 2018 
the 
product  market  regulation  data.  Notably, 

(41)  The  reforms  were  based  on  three  competition  assessment 
reviews  (‘toolkits’)  conducted  between  2013  and  2016  by 
the  OECD  and  the  Hellenic  Competition  Commission  to 
improve  the  overall  regulatory  framework.  In  total  773 
reforms  were  recommended  in  14  economic  sectors  to 
reduce  entry  barriers  and  increase  competition,  and  their 
implementation was launched under the European Stability 
Mechanism programme. 

(42)  Communication on reform recommendations for regulation 
in  professional  services  COM(2016)  820  final  and 
SWD(2016) 436 final 

53 

0204060801001202011201220132014201520162017201820192020CyprusGermanyGreeceItalySpain                                                           
 
 
  
                                                           
4.4. Competitiveness, reforms and investment 

factors  limit  consumer  choices  and  may  result  in 
higher prices.  Furthermore, the  regulatory tools to 
prevent barriers to trade in the internal market are 
not  adequately  exploited  (44).  This  suggests  that 
Greece  is  missing  an  opportunity  to  increase  the 
positive impact of integration on its economy. 

carries 

surveillance.  Greece 

Greece does not dedicate adequate resources to 
market 
out 
inspections in less than half of the product sectors 
covered and its spending on market surveillance is 
below  the  EU  average.  In  the  platform  for 
cooperation  and  information  sharing  on  market 
surveillance among Member States, the number of 
entries made by the Greek authorities is among the 
lowest in the EU. The comparatively low level of 
detection  of  dangerous  products  and  the  low 
numbers  of  non-compliance  findings  shared  with 
other  Member  States  affect  the  entire  single 
market, given that non-compliant products entering 
the  Greek  national  market  may  be  subsequently 
marketed in other Member States. 

4.4.3.  INFRASTRUCTURE INVESTMENT 

Energy 

relatively 

structure, 

The Greek energy market is characterised by a 
concentrated 
high 
wholesale  prices  and  a  reliance  on  fossil  fuels, 
particularly lignite for electricity generation, as 
well  as  imported  oil  and  gas.  The  incumbent 
Public Power Corporation remains responsible for 
the majority of generation and supply. Prices were 
liberalised  in  July  2013  and only  social  tariffs  for 
those  in  need  are  still  in  place,  though  market 
distortions  (such  as  the  Public  Service  Obligation 
and  certain  discounts)  has  kept  the  link  between 
wholesale  and  retail  electricity  weak,  though 
recent  reforms  of  energy  bills  taken  by  the 
authorities  will  strengthen  this  connection.  This 
negatively  affects  the  competitiveness  of 
the 
economy, the climate and the local environment. It 
also 
on 
consumers leading to incidences of energy poverty. 
Greece  has  started  to  carry  out  a  number  of  key 
reforms towards a more modern model, including a 

increases 

financial 

burden 

the 

(44)  In  the  area  of  the  Single  Market  Transparency  Directive 
(EU) 2015/1535, Greece notified 100 out of the total 2196 
notifications  in  2016-2018,  whilst  the  number  of  formal 
reactions issued by the Commission and Member states on 
these was high (117). 

law 

and 

limit 

shareholding 

requirements 

highest  levels  of  restrictiveness  are  observed  for 
lawyers  and  notaries,  as  well  as  for  the  retail 
distribution  and  retail  sales  of  medicines  sectors 
(Graph  4.4.7).  Certain  regulatory  requirements, 
including 
and 
restrictions  on  multidisciplinary  activities  for 
lawyers 
innovation, 
firms, 
competition and responsiveness to changing client 
requirements.  There  is  also  potential  for  helping 
new businesses to enter regulated sectors, such as 
tourist  guides  or 
services. 
Implementation  further  reforms  to  ease  entry  into 
certain  regulated  professions  and  sectors  on  the 
basis  of  an  assessment  of  the  proportionality, 
appropriateness  and  necessity  of 
intervention 
would  help  increase  competition  and  a  more 
efficient allocation of resources in such areas. 

leisure 

sailing 

Graph 4.4.7: 

Product Market Regulation index for retail and 
professional services (a lower value indicates lighter 
regulation) 

Note: The EU average refers to 22 EU Member States that are also 
members of the Organisation for Economic Co-operation and 
Development. 
Source: Organisation for Economic Co-operation and Development 

Due  to  these  distortions,  Greece  struggles  to 
integrate  in  the  EU  single  market,  especially 
with  respect  to  trade  in  goods.  In  2017,  Greece 
was  among  the  lowest  ranking  countries  in  the 
Commission’s 
Scoreboard 
(European Commission, 2019h) (43), reflecting low 
performance  in  integration  into  European  value 
low 
chains  as  well  as 
levels  of  openness, 
internal  demand.  These 
competitiveness  and 

Single  Market 

(43)  The  indicator  is  based  on  the  percentage  of  a  country’s 
GDP  that  is  represented  by  goods  trade  with  other  EU 
countries (average of imports and exports). 

54 

 
                                                           
                                                           
4.4. Competitiveness, reforms and investment 

still have to be set up in accordance with the body 
of EU law on electricity.  

for 

electricity, 

While  mainland  Greece  has  a  good  level  of 
interconnection 
additional 
investment  is  needed  in  particular  to  complete 
the  interconnections  with  the  Cyclades  islands, 
and  to  create  interconnections  with  Crete  and 
neighbouring 
countries.  Better  uptake  of 
renewable  energy  and  the  discontinuation  of  the 
polluting  and  inefficient  diesel-based  generation 
on  islands  depend  on  such  investments.  Adequate 
interconnection  is  necessary  for  more  responsive 
pricing, which in turn encourages investment.  

The  gas  market  is  small,  but  growing.  Gas 
currently  provides  about  35%  of  electricity 
generation capacity, and the share has increased in 
recent  years.  Supplier switching  has been allowed 
since 2018. The consumer market for natural gas is 
still  quite  small.  Greece  lags  behind  EU  averages 
for  connected  households  and  some  areas  of  the 
country  have  no  connection.  Investment  in  grids 
should help this share to grow, and the  successful 
sale  of  the  transmission  grid  is  an  encouraging 
sign. 

The potential for deploying renewable energy is 
very high across all sectors. Greece put in place a 
new  tendering  scheme  for  renewable  energy  in 
2018 and under the European Stability Mechanism 
programme  it  focused  on  keeping  its  Renewables 
in  surplus.  The  framework 
Special  Account 
conditions offer encouragement as they favour new 
investments  in  the  Greek  renewables  sector.  The 
domestic 
responded 
positively  to  this  new  regulatory  environment, 
particularly  in  wind  energy.  The  development  of 
other 
sources  was  comparatively 
moderate  until  2018.  Finally,  a  large  part  of  the 
newly-awarded  capacity  under  the  renewables 
tendering scheme will be realised after 2020.  

sector  has 

renewables 

renewable 

in  Greece 

consumption 

slightly 
Energy 
increased 
in  2018  and  2019,  putting  the 
achievement of the 2020 energy efficiency target 
at  risk.  Article  7  of  the  Energy  Efficiency 
Directive  requires  savings  of  1.5  %  of  the  annual 
energy  sales  to  final  customers.  A  preliminary 
comparison of the cumulative savings reported for 
2014-2017  to  the  estimated  cumulative  energy 
savings for 2014-2017 based on the average yearly 
delivery shows that Greece achieved less than 80% 

plan  to  move  away  from  lignite-based  generation 
(on  the  National  Energy  and  Climate  Plan,  see 
below in chapter 4.5 on energy and environmental 
sustainability). Effective delivery of these reforms 
will be crucial. 

Competition  levels  in  the  electricity  market 
remain  low.  Although  competition  has  increased 
in recent years, the Public Power Corporation still 
holds a 74% share of the retail market as of August 
2019 (45)  (down  from  80  %  in  June  2018).  For 
wholesale,  its  share  is  about  55%  of  installed 
capacity, but this figure is higher (around 70%) for 
baseload energy such as coal lignite and hydro, not 
taking  account  of  renewable  energy  sources  that 
intermittently produce power.  

to 

lead 

consumers’ 

Supplier  switching  in  the  market  is  still  rather 
limited  in  Greece,  in  particular  in  the  high-
voltage  and  low  voltage  levels (46),  indicating 
that  consumers  may  not  be  fully  reaping  the 
benefits  of  liberalisation.  Smart  meters  will 
eventually 
increased 
engagement  in  the  market  and  enable  them  to 
participate  in  and  benefit  from  energy  efficiency, 
and 
schemes. 
However,  current  plans 
involve  only  pilot 
installations. One major concern to be addressed is 
the issue of arrears. Many customers are behind on 
their  payment  obligations,  and  collection  while 
improving  is  still  slow.  The  authorities  have 
recently  announced  various  measures  to  improve 
collection and payment culture. 

response/flexibility 

demand 

At  regional  level,  Greece  is  taking  steps  to 
implementing  the  internal  market  rules  for 
electricity as soon as possible. This should allow 
the  country  to  couple  its  wholesale  markets  with 
Italy  and  Bulgaria  and,  and  with  its  neighbouring 
Energy Community Countries in the future. Close 
cooperation with the South Eastern region and the 
Energy  Community  is  crucial  here.  The  Hellenic 
Energy  Exchange,  established 
is 
accelerating 
this  process.  Other  coordination 
bodies,  such  as  a  Regional  Coordination  Centre, 

in  2018, 

(45)  Monthly wholesale and retail penetration and market share 
report  (August  2019)  of  the  Greek  market  operator,  page 
49, 
http://www.enexgroup.gr/fileadmin/groups/EDSHE/ 
FEP/MonthlyReports/FEPAS_MonthlyReport_201908_EN
_V01.pdf  

(46)  Idem;  Public  Power  Corporation  supplied  97%  of  high 
voltage  costumers,  78%  of  low  voltage,  and  54%  of 
medium voltage customers in August 2019. 

55 

                                                           
4.4. Competitiveness, reforms and investment 

20  years,  the  country’s  principal  railway  axis 
Patras-Athens-Thessalonica  remains  incomplete. 
The  capacity  of  railway  lines  is  limited  in  both 
cargo  and  passenger  traffic.  The  share  of  rail  in 
freight 
transport  remains  negligible  at  1.3% 
compared  to  an  EU  average  of  16.6%.  For 
passenger  traffic,  the  share  of  rail  transport  in 
passenger  traffic  (based  on  passenger-kilometres) 
is  1%  compared  to  an  EU  average  of  7.6%.  The 
key  steps  for  developing  competitive  rail  freight 
and  passenger  transport  services  and  unlocking 
further 
the 
the  Piraeus-Thessalonica-
modernisation 
Eidomeni  railway  axis,  the  implementation  of  the 
logistics  strategy  and  the  operation  of  Thriasio 
Pedio freight complex.  

opportunities 

investment 

are 

of 

Greece’s  competitive  advantages  in  maritime 
transport  implied  by  its  geographical  position 
are not fully exploited. As shown by considerable 
foreign investments, Piraeus and Thessaloniki have 
the  potential  to  evolve  into  gateway  ports  to 
Southeast  and  Central  Europe,  if  long  distance 
reliable  railway  connections  are  established  and 
that  the  country’s  seaports  system  is  further 
developed  to  improve  the  competitiveness  of  the 
domestic economy. The privatisation of the Port of 
Thessaloniki  creates  the  opportunity  for  Northern 
Greece  to  become  a  major  logistics  and  industrial 
hub, serving neighbouring countries. This requires 
close  coordination  of  new  port  investments  with 
other public  sector investment schemes (e.g. local 
road access) and the modernisation of cross-border 
rail  linkages.  Supportive  planning  policies  and 
investment 
the 
conditions for socially inclusive growth and urban 
regeneration. 

in  human  capital  can  create 

the 

these 

Despite 
logistics’ 
dynamics, 
performance of Greece is average on the world 
market. In 2018 Greece ranked 42nd in the World 
Bank’s Logistics Performance Indicator. The swift 
implementation of the national logistics action plan 
and  the  operation  of  the  Thriasio  freight  complex 
could give a further boost to the sector.  

Infrastructure  projects  in  Greece  suffer  from 
systematic  slippages  in  preparation,  execution 
and  operation.  The 
loss  of  investment  and 
business opportunities due to distortive regulation, 
lack  of  capacity  of  project  promoters  and  poor 
preparation  costs  Greece  an  estimated  0.8%  of 
GDP (PwC,  2019).  Ongoing  projects  such  as  the 

in 2017. Additional efforts are therefore needed to 
ensure 
the  EU  energy 
efficiency target.  

the  achievement  of 

and 

Accelerating  the  agreed  reforms  will  ensure 
that  the  energy  sector’s  growth  potential  is 
unlocked.  The  reforms  include  introducing  more 
environmentally-friendly 
efficient 
technologies  for  electricity  production  plants.  The 
interconnection of islands to the mainland needs to 
be  accelerated  and  technologies  for  innovative 
renewable energy sources need to be developed in 
non-interconnected  islands.  These  reforms  will 
also  allow  Greece  to  fully  benefit  from  its 
its  sizeable 
comparative  advantages,  such  as 
its  strategic 
renewable  energy  potential  and 
terms  of 
in 
location,  particularly 
geographic 
current  and  future  interconnection  networks.  This 
is expected to have a positive effect on all sectors 
through reduced production costs. 

Transport and logistics 

The  Greek  transport  system,  which  is  largely 
road-based,  lacks  competitiveness  and  scores 
low  on  carbon  emissions  performance,  road 
safety  and  service  quality.  According  to  the 
Global  Competitiveness  Report  2019,  Greece 
ranks 39th in transport infrastructures globally and 
18th  among  EU  Member  States  (World  Economic 
Forum, 2019). The Greek fleet is among the oldest 
in  Europe,  in  particular  the  medium-  and  heavy-
duty vehicles (18.7 years in Greece versus an EU-
average of 11.7), which contributes to the transport 
system’s heavy dependence on oil and the low use 
of  renewables,  which  accounted  for  only  1.7%  in 
2016,  against  an  objective  of  10%  by  2020.  Low 
systems 
penetration  of 
contributes to the generally low scores for Greece 
in the digital economy. Meanwhile, the number of 
road fatalities in Greece is still considerably higher 
than  the  EU  average  (64  fatalities  per  million 
inhabitants in 2018, against an EU average of 49). 
Particular  problems  include  speeding  and  the 
safety of powered two-wheelers. 

intelligent 

transport 

The  rail  network  remains  incomplete,  which 
limits 
its  transport  capacity,  hampers  the 
multimodality  of  the  transport  system,  and 
impacts  negatively  on  mobility  and  transport 
costs.  Despite  the  sizeable  investment  from  EU 
funds 
railway 
the  modernisation 
infrastructures, in excess of €3 billion over the last 

of 

in 

56 

4.4. Competitiveness, reforms and investment 

Given  the  size  of  the  sector,  investments  into 
more  efficient  production  methods,  promotion 
of  producer  organisations  and  cooperatives, 
and  re-orientation  to  products  with  higher 
added  value  could  turn  the  sector  into  a 
significant  driver  of  growth  and  exports  going 
ahead.  Trade  balance  for  agricultural  products  is 
negative  (€-657.4 million  in  2018)  but  the  deficit 
has narrowed in recent years. Greece has a positive 
trade balance with countries outside the EU but the 
intra-EU 
is  negative.  A  key  strategic 
objective  for  the  agro-food  sector  is  to  focus  on 
gradually  shifting  the  production  model  towards 
quality  products  and  products  with  an  identity, 
whose prices are higher and where Greek products 
can  compete  favourably.  The  promotion  of  well-
functioning  collective  agricultural  organisations 
(cooperatives,  farmers  groups)  is  also  key  to 
boosting the agricultural income. 

trade 

the 

aware  of 

In the past couple of years, Greece has launched 
the  procedure  for  the  establishment  of  a  farm 
advisory  system.  This  will  help  farmers  become 
more 
relationship  between 
agricultural practices and management of farms on 
the  one  hand,  and  a  wide  range  of  regulatory 
standards  (relating  to  the  environment,  climate 
change,  and  good  agricultural  condition  of  land, 
food  safety,  public  health,  animal  health,  plant 
health and animal welfare).  

Environment 

several 

Environmental  legislation  in  Greece  suffers 
problems (47). 
from 
interrelated 
Environmental  legislation  remains  non-codified, 
and there is lack of digital tools for monitoring its 
implementation,  which  limits  its  accessibility  to 
citizens  and  businesses.  Moreover,  administrative 
acts  required  for  the  implementation  of  laws  are 
issued  with  significant  delays  or  not  at  all.  Laws 
previous 
are 
evaluation,  and  without  any  discernible  factual 
basis. Finally, where the use of public consultation 
is  not  required  by  EU  law  (i.e.,  in  the  case  of  an 
Environmental  Impact  Assessment),  the  use  of 
public  consultation 
faces  problems  such  as 
constricted time-limits or limited publicity.  

changed  without 

frequently 

(47)  See  for  instance  World  Wide  Fund  for  Nature  Annual 
report  on  environmental  legislation  in  Greece,  December 
2019. 

Haidari–Piraeus  metro  line  extension  and  the 
Thessalonica metro are facing continued slippages, 
while  there  are  persistent  delays  in  the  contracts 
for  new  projects  (Athens  Metro  line  4,  Patra-
Pyrgos  and  Amvrakia-Aktion  motorway  sections, 
Kiato–Rododafni  rail  line  electrification,  and  the 
connection  of  the  Thessalonica  port  to  the Patras-
Thessaloniki  motorway).  The  lack  of  a  single 
independent  road  agency  and  sustainable  urban 
mobility  plans  for  the  relevant  geographical  areas 
are key bottlenecks to investment in this sector. 

the 

above 

address 

challenges, 

the 
To 
authorities,  with  the  support  of  the  European 
Commission  and  the  European  Investment 
Bank,  have  prepared  a  National  Transport 
Master  Plan  for  Greece.  The  Plan  provides  the 
basis  for  sustainable  transport  infrastructure  and 
service development in Greece over the medium to 
long-term  horizon,  covering  both  organisational 
and  institutional  interventions  and  investments  in 
transport infrastructure. Investments considered for 
the  future  include  (i)  the  completion  of  the 
modernisation  of  the  rail  network,  (ii)  increased 
multi-modality  for  freight  transport  by  improving 
rail  connections 
to  Trans-European  Networks 
ports, (iii) logistics platforms and industrial zones, 
(iv)  road  safety  investments,  and  (v)  redesign  of 
the  coastal  shipping  network  to  create  regional 
nodes  that  will  allow  faster  transfer  to  smaller 
ports and islands across the Aegean Sea. 

Agriculture and rural development 

is 

less 

Agriculture  in  Greece  is  based  on  small-sized, 
family-owned  dispersed  units,  while  the  extent 
of  cooperative  organisation  stays  at 
low 
comparative  levels.  The  market  share  of  Greek 
agricultural  cooperatives 
than  20%. 
However,  a  significant  number  of  Producers 
Organisations  was  established  in  2019.  The  small 
size  weights  on  the  productivity  but  also  offers 
opportunities 
to  develop  variety  and  product 
differentiation and in some mountainous regions, it 
is  the  only  feasible  structure.  Greek  agriculture 
employs  about  500 000  farmers,  corresponding  to 
12%  of  the  total  labour  force,  earning  relatively 
low income (on average 73% of average wage over 
the  long  run).  The  majority  of  the  employment  is 
covered  by  the  owners  of  the  farms  and  members 
of their families. 

57 

                                                           
4.4. Competitiveness, reforms and investment 

The management of solid waste continues to be 
a  major  structural  challenge.  Greece  relies 
heavily  on  landfilling  (80%  compared  to  an 
average 24% in the EU) and mechanical-biological 
treatment  as  opposed  to  more  modern  techniques. 
According  to  the  European  Commission’s  2018 
‘early  warning  report’,  Greece  runs  a  risk  of  not 
being  able  to  meet  the  EU  reuse  and  recycling 
targets  (50%  by  2020),  as  only  17%  of  municipal 
waste is currently recycled against an average 46% 
in  the  EU (48).  Moreover,  it  will  need  significant 
efforts in reaching the revised recycling targets for 
the  future  (up  to  65%  by  2035).  Particularly 
problematic  is  the  situation  in  Attica,  which 
produces half of total of solid waste in the country, 
and  on  many  islands  where  handling  capacity  is 
scarce. In spite of a decrease in recent years, there 
are  still  large  numbers  of  illegal  landfills  in 
operation,  for  which  the  country  has  been  paying 
fines.  Two  infringement  procedures  for  non-
compliance  with  EU  law  on  illegal  landfills  and 
hazardous  waste  management  resulted  in  large 
fines.  

systems (for instance septic tanks, storage units or 
individual  treatment  plants)  and  needs  upgrading. 
Moreover,  the  necessary  information  to  analyse 
compliance  with  the  directive  in  these  systems  is 
missing.  Significant  investments  are  also  still 
required 
the  Water 
fully  comply  with 
Framework  Directive  and  the  Floods  Directive  in 
order to proceed with important actions such as the 
removal  of  obstacles  to  fish  migration,  the  re-
naturalisation  of  the  flow  of  rivers,  and  measures 
for flood prevention and mitigation.  

to 

Air pollution continues to cause severe concerns 
in  Greece,  with  significant  health  impacts. 
Around 11.7 years of life lost per 1 000 inhabitants 
in  2016  were  attributable  to  exposure  to  fine 
particulate  matter.  Greece  is  yet  to  submit  their 
National  Air  Pollution  Control  Programme.  The 
recent  announcement  to  close  down  all  lignite 
plants is a bold and ambitious plan. Whilst driven 
its 
by  energy  market  and  climate  concerns, 
implementation  could  have  positive  effects  on  air 
quality. 

to 

institutional  steps 

Some  progress  has  been  made  through  legal 
and 
increase  waste 
recycling  and  the  expansion  of  Extended 
Producer’s Responsibility schemes. The strategic 
framework for waste management is now in place, 
with  the  adoption  of  the  national  and  regional 
Waste  Management  Plans.  These  plans  are 
expected  to  be  updated  by  July  2020,  to  take  into 
account the new requirements of waste legislation. 
In most cases these plans and associated legal tools 
were  supported  by  LIFE, 
the  EU’s  funding 
instrument for the environment and climate action, 
or  the  European  Regional  Development  Fund. 
However,  to  date,  very  few  are  formally  adopted 
and implemented. The use of financial instruments 
to  incentivise  prevention,  reuse  and  recycling  is 
insufficient  and 
schemes  are 
performing poorly.  

the  existing 

Investments  are  needed  to 
improve  water 
treatment,  also  with  a  view  to  respecting  the 
the  Urban  Waste  Water 
guidelines  of 
Treatment  Directive.  In  fact,  only  about  90%  of 
the  generated  load  is  connected  to  collecting 
systems, representing slightly more than half of the 
treated 
Greek  agglomerations.  The 
individual  or  appropriate 
exclusively 

through 

rest 

is 

(48)  European Commission (2018b). 

4.4.4.  REGIONAL DISPARITIES 

Regional  disparities  have  started  to  diminish 
since 2013, following years of divergence. This is 
happening  against  a  background  of  strongly 
decreasing  GDP  per  head  in  all  Greek  regions, 
with growth rates in 2010-2017 between -2.1% and 
-4.2%  (national  average:  -3.2%).  The  recent 
evidence  for  regional  convergence  is  due  more  to 
the  higher  contraction  of  more  developed  regions 
than  to  growth  in  the  less  developed  ones.  Attiki, 
the  capital  city  region,  is  the  only  Greek  region 
with  a  GDP  per  head  above  75%  of  the  EU 
average,  although  even 
its  performance  had 
decreased  substantially  during  the  crisis  (2017: 
92%  of  the  EU  average,  down  from  124%  in 
2009).  

Disparities  in  labour  productivity  between  the 
Greek  regions  have  been  widening  ever  since 
2004, albeit  slowly. After 2004, a double process 
of divergence can be observed: both for the Greek 
national  labour  productivity  vis-à-vis  the  EU 
average,  and  for  the  internal  labour  productivity 
gaps between the Greek regions.  

Large  disparities  exist  also  at  regional  level 
when  it  comes  to  unemployment  rates  and 

58 

                                                           
investment.  The  unemployment  rate  is  highest  in 
Western Macedonia (27.0% in 2018) and Western 
Greece  (24.1%),  and  lowest  in  Kriti  (13.4%). 
Chapter 4.3 provides further analysis. The ratio of 
investment  over  GDP  varies  significantly  across 
regions,  with  large  investment  needs  in  many 
sectors.  There  are  important  gaps  across  regions 
research  and 
also 
development: 
development 
expenditure ranges from 1.53% of GDP in Kriti to 
as  low  as  0.19%  in  Notio  Aigaio.  This  low 
intensity  of  research  and  development  weighs  on 
Greece’s growth potential. 

investment 
research 

regarding 

in 
and 

Graph 4.4.8:  Real gross value added per worker (thousands € per 

employed) 

4.4. Competitiveness, reforms and investment 

tools  made  the  process  more  efficient  in  all  six 
cities  than  anywhere  else  in  the  EU.  On  the  other 
hand,  there  are  significant  disparities  among  the 
cities  when  it  comes  to  dealing  with  construction 
permits,  getting  electricity,  registering  property 
and enforcing contracts.  

and 

growth-friendly 

Because  of  the  crisis,  Greece  reduced  public 
investment 
public 
expenditure (49)  between  2008  and  2017  (more 
than  public  expenditure  as  a  whole,  which  hardly 
went  down).  This  applies  equally  to  national  and 
levels  of  government.  Both  for 
sub-national 
general and growth-friendly expenditure, there has 
not been any major shift between central and local 
government  levels:  public  gross  fixed  capital 
formation  went  down  at  all  levels.  Further  post-
crisis 
the 
investment backlog. 

investments  are  needed 

to  clear 

Source: European Commission 

Public administration 

4.4.5.  PUBLIC ADMINISTRATION AND 

JUSTICE 

The  2019  Regional  Innovation  Scoreboard 
considers  nearly  all  of  the  Greek  regions  as 
“moderate  innovators”.  In  line  with  the  low 
intensity  of  research  and  development,  the  Notio 
Aigaio  region  is  assessed  as  only  a  “modest 
innovator”,  while  Kriti  stands  out  as  a  “strong 
innovator”.  

The  2019  Regional  Competitiveness  Index 
paints a very gloomy picture of competitiveness 
of Greece’s regions. With the exception of Attiki 
(rank 180 out of 268), all the Greek regions are at 
the bottom of the Regional Competitiveness Index 
ranking,  between  positions  239  and  268.  Most 
worryingly,  when  compared  to  their  peer  regions, 
all  Greek  regions  underperform  in  many  key 
dimension of competitiveness from institutions and 
technological readiness, to innovation. 

Recent  reforms  have  improved  the  business 
environment. The World Bank Doing Business in 
the  European  Union  2020  report  compares  the 
regulatory hurdles that Greek entrepreneurs face in 
six  cities  when  they  establish  their  business  and 
found  that  recent  reforms  that  streamlined  the 
registration  process,  plus  the  roll-out  of  digital 

its  entry 

into  office, 

Following 
the  new 
government  proceeded  with  a  restructuring  of 
ministries. This entailed the merge of the Ministry 
of  Administrative  Reform  with  the  Ministry  of 
Interior,  as  well as the creation of a new Ministry 
of  Digital  Governance.  In  the  expanded  Ministry 
of  Interior,  the  Secretariat  General  for  Human 
Resources  of  the  Public  Sector  is  responsible  for 
various 
the  public 
administration. 

to  modernise 

reforms 

of 

human 

including  proceeding  with 

Five  priority  areas  have  been  identified  by  the 
the 
authorities, 
establishment 
resources 
a 
management  system,  efficient  staffing,  capacity 
building  and  strengthen  transparency  and 
integrity.  As  concerns 
the  human  resources 
management  system,  work  on  two  main  building 
blocks,  namely  completion  of  digital  organigrams 
and  job  descriptions,  is  progressing  well.  Once 
finalised, 
resources  management 
the  Commission  provides 
system,  for  which 

the  human 

(49)  Growth-friendly  public  expenditure  is  calculated based  on 
the  functions  of 
the  data  on 
the  classification  of 
government.  Public  expenditures  considered  growth 
friendly  include  basic  research  and  economic  affairs 
(education, health and environment protection).  

59 

3035404550556065700001020304050607080910111213141516Capital regionOther NUTS2 regionsEUNational average  
                                                           
4.4. Competitiveness, reforms and investment 

technical support, and will allow for efficient data 
collection 
as 
processing 
interoperability  with  existing  systems,  such  as  the 
census database and the single payment authority.  

as  well 

and 

is  welcomed, 

The  new  government’s  ambitious  reform 
agenda  to  continue  modernising  the  public 
as  Greece 
administration 
maintains  a  low  ranking  in  various  indicators 
measuring 
the  public 
administration.  As  a  result,  due  to  the  relatively 
low  capacity  of 
the  public  administration’s 
institutional capacity, a low degree of trust remains 
between the public sector and the citizens (Spanou, 
2018). 

efficiency  of 

the 

The  Greek  public  administration  will  face  a 
high degree of turnover in the next 10-15 years. 
As  a  side  effect  of  the  large  downsizing  of  the 
public  sector  over  the  past  decade,  which  was 
mainly  achieved  through  strict  hiring  limits,  the 
average age of the public officials rose. Currently, 
close  to  45%  of  its  permanent  staff  are  above  the 
age  of  50.  This  will  pose  a  challenge  in  terms  of 
securing  institutional  continuity  in  the  medium 
term.  The  authorities  have  identified  the  need  to 
replace a significant part of its work force as a key 
challenge  and  are  taking  steps  towards  a  more 
strategic  multi-annual  hiring  plan.  The  authorities 
are also designing actions focusing on the training 
needs of the ageing workforce and plan to support 
alternative working patterns, as e.g. currently only 
around  2%  of  employed  persons  (aged  15-64)  are 
usually  working  from  home,  compared  with  the 
EU average of 5% (Eurostat, 2017). 

Graph 4.4.9:  Distribution of public officials by age group 

Source: Greek authorities (census database) 

Greece  has  continued 
implementing  and 
improving  a  number  of  reforms,  such  as 
mobility and the  performance assessment, with 
technical support provided by the Commission. 

has 

process 

planning 

As  concerns  the  mobility  cycle,  the  link  with  the 
recruitment 
been 
strengthened. The performance assessment process 
has  a  steady  participation,  but  its  relevance  is 
currently limited by the relatively weak link to the 
public  official’s  career.  The  high  frequency  of 
awarding top ratings reduces its utility as a tool for 
managing human resources. 

A significant development was the adoption of a 
comprehensive  law  concerning  the  functioning 
of the central administration level. Symbolically, 
this  law,  which  is  in  fact  a  codification  law  that 
brings together and updates a number of laws, was 
the first major piece of legislation brought forward 
by  the  new  government.  The  law  addresses  a 
number of issues seen as long-standing weaknesses 
of the Greek public administration. 

To  empower  central  coordination,  the  law 
strengthens  the  role  of  the  Government’s 
Presidency Office, which will have a key role in 
coordinating  and  monitoring  the  government’s 
work. To enable efficient monitoring, it introduces 
annual  programming  plans  for  each  ministry, 
including  the  annual  hiring  plan,  and  includes 
guidance  on  how  the  annual  programme  will  be 
regularly  assessed.  The 
includes  human 
resources  provisions,  where  it  sets  out  new  job 
classifications  (e.g.  public/digital  policy  analysts 
and legal drafters) that are expected to staff up the 
new  ‘executive’  structures  at  each  ministry  that 
will  contribute  in  implementing  and  monitoring 
the adopted government policies. 

law 

facilitate 

The  law  delegates  a  significant  number  of 
decisions  from  the  political  to  administrative 
level,  which  is  ground-breaking  step  to  further 
shelter  the  public  administration  from  political 
influence  and  to  enhance  its  efficiency.  This 
should 
the  ongoing  depoliticisation 
process,  which  was  an  important  objective  of  the 
stability 
support  programme,  and  underpin 
administrative  continuity,  which  has  been  one  of 
the  key  weaknesses  of  the  Greek  administration. 
This  is  important,  as  one  of  the  most  frequent 
criticism  of  public  administration  reforms  is  their 
‘on  and  off’  nature,  where  reforms  undertaken  or 
ongoing are cancelled or drastically changed when 
a  new  administration  takes  over  (see  e.g.  Spanou, 
2018). 

60 

0%5%10%15%20%25%30%35%40%050 000100 000150 000200 000250 000-2930-3940-4950-5960-Number of public officials (lrh)% in age bracket out of overall staff (rhs)  
4.4. Competitiveness, reforms and investment 

these 

processes 

The  cancellation  of  specific  selection  processes 
for  senior  management  posts  provides  a  more 
worrying signal as concerns the ongoing efforts 
the  public  administration. 
to  depoliticise 
Although, 
had 
selection 
experienced  significant  problems  and  delays, 
reverting  to  a  system  where  these  posts  are 
ministerial  appointments  does  not  seem  to  be 
aligned  with  the  new  administration’s  position  to 
continue  and  enhance  the  depoliticisation.  Since 
the adoption of these provisions covering the legal 
entities of public and private  law, the  government 
has stated that it plans to reintroduce an open and 
improved  selection  process 
these  posts, 
including  hospital  managers.  Related  to  this,  the 
government plan to adopt a new law to strengthen 
the Supreme Council for Civil Personnel Selection. 

for 

provisions 

introduced 

Finally, to improve the law making process the 
law 
concerning 
improving  the  scope  and  quality  of  the  impact 
assessment  and  the  legal  codification  process. 
To strengthen the transparency and integrity of the 
public  administration  covering  issues  relating  to 
conflict  of  interest  for  political  appointees  and 
cooling  off  period,  the  law  also  established  the 
National Authority for Transparency (see below). 

Administrative  capacity 
Structural and Investment Funds 

to  manage  European 

Greece  benefits  from  extensive  experience  with 
implementation  of 
the  management  and 
Cohesion  Policy.  It  disposes  of  competent  staff 
with considerable skills and knowledge, a  reliable 
management  and  control  system  and  generally 
competent  managing  authorities.  Yet,  the  design 
implementation  of  European  Structural 
and 
Investment  Fund 
by 
inefficiencies in the project cycle and by lack of an 
efficient  coordination.  Another  problem  is  the 
limited  capacity  of  beneficiaries  notably  in  the 
case  of  small  municipalities,  utilities  and  other 
local beneficiaries, and in some sectors such as the 
railways. 

hampered 

often 

is 

The  simplification  of  the  2021-2027  regulations 
provides  an  excellent  opportunity  to  build  up 
efficient and effective simplified procedures and 
mechanisms.  The  key  challenges  for  2021-2027 
are the following:  

& 

cycle, 

management 

simpler  mechanism 

in  the 
Clearer  division  of  responsibilities 
and 
programming, 
including  a  much 
implementation 
for 
streamlined  and 
thematic  policy  coordination  and  monitoring. 
The  practice  of  cross-delegating  fund/programme 
management  was  reduced  in  2014-2020  when 
compared  to  the  previous  period.  However,  its 
continuous  presence  in  some  sectors  (such  as 
wastewater 
creates 
solid 
dysfunctionalities,  avoidance  of  responsibility  and 
implementation  blockages.  The  specialisation 
stage  in  the  programming  as  it  is  done  causes 
additional 
little 
demonstrable value added; and the executive units 
set  up  in  2014-2020  which  were  intended  to 
provide  policy  coordination  for  particular  sectors, 
have  proliferated  all  over  the  system,  acquiring 
roles  going  beyond  policy 
functions 
coordination,  which  has  often  contributed 
to 
implementation blockages.  

layers  of  complexity  with 

waste) 

and 

Simpler coordination mechanism that avoids 
overlaps  and  acts  faster, 
including  the 
governance  architecture.  This  is  considered 
in the context of an Organisation for Economic 
Co-operation  and  Development  study  on  post 
2020  regional  policy,  whereas  the  governance 
architecture  including  the  composition  and 
orientation of programmes related to small and 
medium-sized 
smart 
enterprises 
specialisation  strategies  is  the  subject  of  a 
another study. 

and 

  Reduction in the administrative burden and 
red  tape  and  simpler  management  and 
control  systems.  Greece  is  expected  to  set 
targets  to capture efficiency and simplification 
(like  reduction  of  the  number  of  signatures  or 
reduce  the  periods  for  selection  and,  approval 
of  proposals;  introduce  a  simplified  project 
submission process for small projects; develop 
a lighter implementation process especially for 
territorially 
(e.g. 
sustainable  urban  development),  which  are 
currently  hampered by lengthy procedures and 
involvement  of  many  authorities;  consider 
ways to simplify the award of contracts and the 
state  aid  clearance,  which  currently  create  a 
scale 
disproportionate  burden 
projects.  

interventions 

focused 

small 

for 

61 

 
4.4. Competitiveness, reforms and investment 

administration  of 
(iv)  enabling  and 
justice, 
encouraging  the  recourse  to  alternative  dispute 
resolution  mechanisms  and  (v)  reforming  and 
consolidating  outdated  and  often  fragmented  as 
well as overly complex legislation.  

While  Greece  has  adopted  a  number  of  key 
reforms in the field of justice, it is important to 
assess  their  impact  and  propose  improvements 
where necessary. For example, the authorities are 
in  the  process  of  completing  an  evaluation  of  the 
implementation  of 
the  new  Code  of  Civil 
Procedure,  which  entered  into  force  on  1  January 
2016. It is crucial to assess whether the new Code 
of  Civil  Procedure  has  succeeded  to  improve 
efficiency  in  civil  and  commercial  litigation.  Key 
elements of this reform include a shift from oral to 
written  procedures,  stricter  procedural  discipline 
through  clear  time-frames  and  a  limitation  of 
possibilities to postpone hearing dates.  

The authorities have announced their intention 
to create special chambers within courts to deal 
with  various  categories  of  cases  considered  of 
high  relevance  to  economic  development.  This 
would  e.g.  concern 
investment-related  cases, 
competition  cases,  significant  commercial  cases, 
and could contribute to improve efficiency.  

The Greek justice system also continues to face 
challenges  as  regards  its  effectiveness.  Recent 
judicial  statistics  show  that  in  particular  the  civil 
court system continues to face mounting efficiency 
challenges as the time  needed to resolve civil and 
commercial disputes in first instance has increased 
again,  staying  significantly  above  pre-crisis  levels 
(559  days  in  2018  vs.  190  days  in  2010).  In 
addition, the productivity of first instance courts is 
falling  as  regards  the  resolution  rate  for  litigious 
civil  and  commercial  cases,  which  means  that 
Greece  is  facing  a  clear  risk  of  building  up  new 
backlogs (graph 4.4.10). The administrative branch 
of  courts  continues  to  improve  its  performance, 
maintaining  a  high  resolution  rate  (163.5%  in 
to  resolve 
2018),  reducing 
instance  and 
administrative  disputes 
lowering  existing  backlogs  by  resolving  more 
cases than incoming new cases. However, both the 
time needed to resolve administrative cases in first 
instance  (601  days  in  2018)  as  well  as  existing 
backlogs  remain  comparatively  high  and  require 
further  attention  by  the  authorities  (European 
Commission, forthcoming). 

time  needed 
in  first 

the 

regional, 

interregional 

  Higher technical and organisational capacity 
of certain categories of beneficiaries need to 
be  strengthened.  This  can  be  done  with 
flexible  administrative  arrangements,  such  as 
pools  of  engineers  and  experts  by  region, 
possibly  based  on 
technical  services 
the 
formerly organised at prefecture level, common 
or 
at 
projects 
training  and 
intraregional 
level,  common 
support  actions  and  peer 
reviews  and 
exchanges  between  beneficiaries  and  with 
organisations 
outside  Greece.  Technical 
targeted, 
support  can  be  provided 
systematic  and  efficient  way  through  a)  the 
setup  of  Project  Preparation  Facility  for  big 
scale projects, b) specific units to be mobilised 
final 
at 
beneficiaries  and  c)  the  central  service  of 
Management 
of 
Organisation 
Development  Programmes  on  a  structural 
basis.  

supporting 

regional 

in  a 

level 

Unit 

for 

  Development  of  sectoral  action  plans  would 
help  broaden  the  operational  programmes, 
which  are  often  framework  plans  limited  to 
programming  and  administrative  targets. 
For  a  number  of  sectors  like  wastewater, 
energy efficiency, flood protection and circular 
economy Greece is expected to establish action 
plans  (per  region  where  possible),  create  a 
steering  committee  with  key  stakeholders  and 
set  up  a  technical  secretariat  to  implement  the 
action  plan  and  follow  up  progress.  Such  a 
model was applied successfully in the course of 
2018  in  the  field  of  wastewater  and  was 
positively  received  by  the  competent  Greek 
authorities.  

Justice 

The  Greek  justice  system  continues  to  face 
challenges  and  requires  sustained  reform 
efforts,  as  this  will  contribute  to  unlock 
investment  and  to  improve  the  functioning  of 
the  financial  system  as  well  as  the  business 
the 
environment.  Reforms 
economic  adjustment  programmes  have  been 
mostly implemented in a partial manner and much 
work remains to be done concerning the following 
areas: (i) the adoption of organisational changes to 
courts,  (ii)  addressing  operational  issues  in  the 
efficient  management  of  courts,  (iii)  the  adoption 
the 
of  measures 

the  acceleration  of 

adopted  under 

for 

62 

4.4. Competitiveness, reforms and investment 

Graph 4.4.10:  Efficiency of the Greek justice system 

Hellenic  Republic  Asset  Development  Fund  –  the 
privatisation  agency,  and  the  Public  Properties 
Company  – 
the  real  estate  subsidiary.  The 
overarching  objective  of  the  Corporation  is  to 
effectively  manage these assets, preserve, develop 
and  ultimately  maximise  their  value,  and  to 
enhance the quality of the services provided to the 
Greek  people  as  well  as  to  contribute  to  reducing 
the financial obligations of Greece.  

Note: As measured based on clearance rate, i.e. pending versus resolved 
cases, also taking into account the nature of the backlogs (static or 
increasing).   
Source: European Commission 

In  terms  of  quality,  the  Greek  justice  system 
lags  behind  in  a  number  of  aspects.  This 
concerns  in  particular  areas  such  as  electronic 
filing and processing of documents and electronic 
communication between courts and court users, the 
justice 
availability  of 
system,  both  for  the  general  public  as  well  as 
specific  user  groups  or 
the  use  of  surveys 
conducted among court users or legal professionals 
(European Commission, forthcoming). 

information  about 

the 

State 

Newly  adopted  measures  defining  legislating 
procedures  and  methods  should  contribute  to 
raising the  quality and  systematic coherence  of 
law (50) 
legislation.  The  Executive 
introduced  a  comprehensive  reform  of  legislating 
procedures,  based  on  good  legislation  principles 
and techniques, with an emphasis on improving the 
impact assessment survey. The law also created an 
scientific  evaluation  body,  and 
independent 
strengthened 
legal 
institutional  setup  for 
the 
codification  and  reform.  The  activation  of  the 
newly  created  bodies  and  the  strict  and  effective 
implementation  of  the  principles  and  techniques 
stipulated by the law will be the next crucial stages 
towards  attaining  the  ambitious  targets  of  the 
reform. 

Management of public assets 

The  Hellenic  Corporation  of  Assets  and 
Participations,  established  in  2017,  plays  a 
crucial  role  in  improving  the  management  of 
public  assets.  It  holds  a  significant  portfolio  of 
assets 
state-owned 
enterprises.  Its  direct  subsidiaries  include  the 

shareholdings 

and 

in 

(50)  Law 4622/2019 (OJ A 137/07.08.2019)  

is 

the 

and 

direct 

subsidiaries 

focused  on 

The  Hellenic  Corporation  of  Assets  and 
Participations  has 
improving 
governance as a source of value creation. Key to 
this 
establishment  of  professional 
management  within the Corporation’s  subsidiaries 
(its 
state-owned 
enterprises).  By  the  end  of  2019,  the  Corporation 
had appointed close to 65 Board Members for the 
state-owned  enterprises  under  its  portfolio.  The 
Corporation  has  also  focused  on  the  enhancement 
of  the  roles  and  responsibilities  of  the  Audit 
Committees 
its  subsidiaries,  and  set  key 
performance  indicators  for  its  direct  subsidiaries 
and  the  non-listed  state-owned  enterprises  with 
majority  participations.  These  aim  to  enhance 
economic  and  public  value,  as  well  as  improve 
financial  performance,  corporate  governance, 
service  quality,  operational 
and 
innovation.  

efficiency 

in 

Achieving  the  full  potential  of  the  real  estate 
portfolio  remains  a  key  challenge  for  the 
Corporation and should be a primary source of 
value  creation.  Given  the  importance  of  the  real 
estate  portfolio,  the  Public  Properties  Company 
has  been  provided  with  a  set  of  performance 
targets  during  2019,  covering  asset  registry, 
maturation and exploitation, portfolio management 
and 
targets  are 
monitored  by  the  Hellenic  Corporation  of  Assets 
and Participations on a regular basis. Over the past 
months,  some  progress  has  been  made  on  real 
estate valuations and increasing the book value, as 
well  as  on  the  improvement  of  lease  revenue 
collection. However, the performance of the Public 
Property Company is still to reach its full potential. 

revenue  enhancement.  The 

The  ongoing  process  of  privatisation  aims  at 
making the economy more efficient, stimulating 
investment  and  providing  financial 
private 
resources  to  the  State.  The  new  administration 
has committed to continuing the implementation of 
the  privatisation  programme  as  reflected  in  the 

63 

6704795591086735601020040060080010001200201620172018Duration of civil and commercial cases infirst instance (days)Duration of administrative disputes in firstinstance (days)7580859095100201620172018Productivity of civil andcommercial cases in firstinstance court  
                                                           
4.4. Competitiveness, reforms and investment 

by 

different 

followed 

previously 
bodies: 
investigation  of  corruption,  prevention,  and 
improving public awareness. The Authority is also 
the  designated  Greek  Anti-Fraud  Coordination 
Office. As far as the investigation and audit role of 
the  agency  is  concerned,  it  merges  five  sectoral 
inspection  bodies  existing  until  now,  which  is  a 
the  previous 
major  step  forward  considering 
fragmentation of the different audit bodies and the 
need  to  streamline  competences  and  allocate 
resources  more  efficiently.  Raising  awareness 
around  the  benefits  of  strengthening  integrity  in 
both public and private  sectors is part of National 
Transparency  Authority’s  mission  on  corruption 
prevention.  

implementation  of  the  national  anti-
The 
corruption  action  plan  appears  to  be  on 
schedule,  but  some  actions  require  more 
attention. There are more than 100 National Anti-
Corruption  Action  Plan  actions.  Their  vast 
majority  of  the  over  100  actions  in  the  plan  have 
been  launched,  are  completed  or  are  continuous 
actions.  The  reformed  asset  declaration  system  is 
now  fully  operational.  Greece  also  has  a  new 
modern system of party financing after a series of 
reforms. However, the competent audit committee 
of 
imposed 
administrative  sanctions  related  to  party  financing 
to  date.  The  coordination  mechanism 
for 
corruption  and  other  financial  crimes  remains  a 
pending  issue  in  need  of  immediate  attention. 
According to an evaluation report the coordination 
procedure  for  combating  financial  crimes (53)  is 
fully  operational  but  the  number  of  cases  and 
values  reported  from  the  tax  administration  to 
judicial  authorities  has  decreased  since  March 
2018. Lobbying also remains largely unregulated. 

the  Parliament  has  not  yet 

Shortcomings in criminal legislation potentially 
affect  the  treatment  of  corruption  cases.  The 
amendments  passed  in June  2019,  downgrading 
main active bribery offence, have been repealed in 
November  2019,  following  criticism  from  the 
Organisation  for  Economic  Co-operation  (OCDE) 
and  Development  and  the  Council  of  Europe 
Group of States against Corruption (GRECO), and 
as also flagged by the European Commission in its 
post-programme  enhanced  surveillance  review  of 
(see  European  Commission,  2019). 
Greece 
Nevertheless, a number of ongoing cases will still 

(53)  Law 4512/2018, article 388 

have 

Asset Development Plan of the Hellenic Republic 
Asset  Development  Fund.  Several  projects  in  the 
progressed 
programme 
privatisation 
the  Hellinikon 
including 
significantly, 
on 
transaction.  Maintaining 
the  momentum  and 
finalising  flagship  privatisation  projects  –  such  as 
Hellinikon, Egnatia and Public Gas Corporation of 
important 
Greece  – 
investments  in  the  assets  and,  moreover,  give  an 
important  positive  signal 
to  potential  future 
investors.  

is  expected 

lead 

to 

to 

Fight against corruption 

Perceptions  of  corruption  remain  high,  but 
indicators  show 
improvement  compared  to 
previous years.  Greece’s  score on the Corruption 
Perception  Index (51) has  improved  by  3  points  in 
2019 (from 45 to 48/100). More than half (58%) of 
business  representatives  say  that  corruption  is  a 
problem  for  their  company  when  doing  business, 
according to a Eurobarometer survey of 2019. This 
is  a  significant  decrease  compared  to  2015  (74%) 
but it is still the 3rd highest in the EU. Businesses 
perceive  corruption  to  be  rather  widespread  in 
public procurement (72%), with 83% of businesses 
citing  tailor-made  specifications  as  a  particular 
issue. Companies appear to be rather pessimistic as 
regards the criminal justice response to corruption, 
especially  involving  high-level  or  senior  officials, 
with  only  20%  considering  that  people  caught  for 
bribing  a  senior-official  are  adequately  punished. 
In  general,  32%  of  respondents  think  that  people 
engaged  in  corruption  are  likely  to  be  caught  by 
police, 37% that they are likely to face charges and 
go to Court and 34% that significant sanctions will 
be applied, all below the EU average (52). 

The  anti-corruption  institutional  framework 
was  streamlined  as  a  new  authority  was 
to  enhance 
established 
in  August  2019 
the 
cooperation  and  coordination  among 
different  audit  authorities  and 
inspection 
bodies.  The  National  Transparency  Authority  has 
replaced 
for  Anti-
the  General  Secretariat 
endowed  with  greater 
corruption 
institutional  capacity  to  fight  corruption.  It  is 
expected to become fully operational by 2020. The 
agency  brings  together  a  number  of  functions 

and 

is 

(51)  Transparency  International  (2020).  Corruption  Perception 

Index 2019 

(52)  European Commission (2019i). 

64 

                                                           
                                                           
4.4. Competitiveness, reforms and investment 

accordance  with  EU  regulations.  For  this  project, 
the  Authority  is  receiving  technical  support  since 
November 2019. Building on the support provided, 
the  Authority  is  expected  to  establish  a  holistic 
action  plan  to  strengthen  the  role  and  capacity  of 
the  Anti-Fraud  Coordination  Office.  As  regard 
protection  of  whistle-blowers,  the  authorities  plan 
to  adopt  the  national  law  transposing  the  EU 
Directive (55) by end-March 2020.  

The  authorities  have  announced  plans  to 
develop  a  coherent  national  framework  for 
integrity  in  public  institutions  jointly  with  the 
National Authority for Transparency. As part of 
establishing this framework, various existing tools 
will be reviewed (e.g. Code of Ethics) and to new 
tools  introduced  (e.g.  a  network  of  certified 
integrity advisors across the public administration, 
registry  for  lobbyists).  In  this  context,  it  is  noted 
that 
includes 
provisions relating to conflict of interest and other 
integrity  issues  for  political  appointees,  senior 
officials at independent authorities and other legal 
entities as well as for non-permanent officials. The 
same  law  also  establishes  units  responsible  for 
internal control. 

the  Executive  State  Law (56) 

(55)  Adopted the 16 April 2019  
(56)  Law 4622/2019 (OJ A 137/07.08.2019) 

be  affected (54)  and  some  other  issues  in  criminal 
legislation require  further attention and  have  been 
subject to GRECO recommendations.  

Progress  has  been  made  to  eliminate  obstacles 
to the prosecution of high-level corruption. The 
constitutional  provisions  regarding  the  immunity 
regime for Members of Parliament and of serving 
or  former  Ministers  have  been  modified  in  2019. 
The  special  statute  of  limitations  has  also  been 
abolished, 
legal 
lifting  some 
hurdles to the prosecution of high-level corruption, 
notably  also  as  regards  the  removal  of  the  time 
limit  for  the  Parliament  to  adopt  a  motion  for 
prosecution  against  serving  or  former  Ministers. 
These  modifications  will  help  address 
long-
standing GRECO recommendations on the matter. 

important 

thus 

The  National  Transparency  Authority  plans  to 
take  important  steps  in  the  field  of  detecting 
and tackling fraud.  It  will be responsible  for the 
fight  against  fraud  in  both  the  national  and  the 
European  Union  budget.  The  Authority  plans  to 
undertake  four  work  streams,  including  a  project 
on  enhancing  the  functioning  of  the  European 
Anti-Fraud  Coordination  Office  in  Greece  in 

(54)  This is due to the lex mitior principle applicable in criminal 
law in Greece. See Ad hoc Report on GREECE (Rule 34) 
its  84th  Plenary  Meeting 
adopted  by  GRECO  at 
(Strasbourg, 2-6 December 2019).  

65 

                                                           
                                                           
 
4.4. Competitiveness, reforms and investment 

Box 4.4.6: EU funds and programmes to address structural challenges and to foster growth and 
competitiveness in Greece 

Greece is one of the countries that benefits the most from EU support. The financial allocation 
from the EU cohesion policy funds1 for Greece amounts to€20.5 billion in the current multiannual 
financial  framework,  equivalent  to  around  1.6%  of  its  GDP.  By  the  end  of  2019,  Greece  had 
allocated around 93% of this amount to projects, while spent some €6.6 billion on them, showing a 
level of implementation below the EU average2. 

While  bringing  about  a  more  harmonious  development  through  reducing  economic,  social 
and territorial disparities, EU cohesion policy funding also significantly supports structural 
challenges in Greece. The cohesion policy programmes for Greece have allocated €3.1 billion for 
smart  growth,  €7.8  billion  for  sustainable  growth  and  sustainable  transport  and  €4.8  billion  for 
inclusive  growth.  In  2019,  following  a  performance  review3  €946  million  have  been  made 
available for the well performing priorities of the cohesion programmes in Greece. 

EU cohesion policy funding helps to transform the Greek economy by promoting growth and 
employment. By 2019, investments driven by the European Regional Development Fund and the 
Cohesion  Fund  had  improved  energy  efficiency  in  19  100  households,  and  42  800  people 
benefitted  from  a  modern  water  supply  and  wastewater  facilities.  So  far,  financial  support  to  18 
600 businesses has generated 6 300 direct jobs; projects worth €1 billion have been approved for 
co-financing in the field of innovation and research; the regions of Western Macedonia and Epirus 
completed  projects  for  the  management  of  solid  waste  by  means  of  public  private  partnerships. 
The  European  Social  Fund  (ESF)  has  provided  key  support  for  young  people  and  improved  the 
services  offered  by  social  and  employment  administrations.  Over  63,000  young  people  not  in 
employment,  education  or  training  (NEETs)  benefitted  from  the  Youth  Employment  Initiative 
(YEI).  The  ESF  supported  the  implementation  of  the  minimum  income  scheme  through  the 
financing of 241 Community Centres, which have already served 350 000 citizens with guidance 
on social benefits and services. As part of the reform of the primary healthcare, a network of 127 
local health care units (TOMYs) has been established. 

Agricultural  and  fisheries  funds  also  help  address  the  country’s  investment  needs.  Greece 
benefits  from  the  European  Agricultural  Fund  for  Rural  Development  (EARDF)  with  €5  billion 
and the European Maritime and Fisheries Fund (EMFF)  with €523 million. It also benefits from 
other EU programmes such as the Connecting Europe Facility, which contributes €575 million to 
strategic  transport  networks  and  Horizon  2020,  which  has  allocated  €1  billion  to  research  and 
innovation actions.  

EU funding  helps  mobilise  key  private investment.  Greece receives some €970  million in the 
form  of  loans,  guarantees  and  equity,  which  is  expected  to  leverage  an  additional  €624  million. 
The  Equity  Fund,  with  an  allocation  of  €400  million,  supports  the  creation,  growth  and 
competitiveness of innovative SMEs and is already fully subscribed. 

EU  funds  already  invest  substantial  amounts  on  actions  in  line  with  the  Sustainable 
Development Goals. In Greece, the European Structural and Investment Funds support 13 out the 
17 SDGs and up to 92% of the funds’ expenditure is contributing to those.  

1 European Regional Development Fund, Cohesion Fund, European Social Fund, Youth Employment Initiative.  
2 https://cohesiondata.ec.europa.eu/countries/GR 
3 The performance review is regulated by art 22 of the Regulation (EU) No 1303/2013, whereby 5–7 % of overall 
resources allocated are released to performing priority axes of the operational programmes.  The  amount  refers to 
EU co-financing. 

66 

 
4.5.  ENVIRONMENTAL SUSTAINABILITY 

the 

framework 

Establishing 
for 
right 
environmental  sustainability,  going  hand  in 
hand  with  economic  growth  and  institutional 
reforms,  is  fundamental  to  Greece’s  future 
progress.  This  chapter  looks  at  how  Greece  is 
facing  its  particular  sustainability  challenges,  in 
the  fields  of  energy,  transport  and  prevention  of 
natural  disasters.  In  the  context  of  the  green 
transition,  fundamental  changes  will  be  taking 
place  in  Greece  in  coming  years  in  the  energy 
sector  with 
and 
opportunities.  For  the  continued  investment  and 
sustained  policy  support  necessary  to  implement 
such  changes,  the  social  impacts  of  reforms  also 
have to be carefully considered and managed. 

challenges 

associated 

enterprises 

Sustainable  development  has  a  potential 
competitive  advantage  for  the  Greek  economy 
in  sectors  such  as  tourism,  agro-food  and 
renewable  energy  sources.  Greek  small  and 
environmental 
enterprises’ 
medium-sized 
performance  lags  behind  the  EU  averages,  but 
Greece has been catching up in recent years. Small 
and  medium-sized 
strongly 
investing in resource efficiency in order to reduce 
productions costs. Many SMEs are also beginning 
to offer green products and Greece is amongst the 
EU  leaders  in  terms  of  numbers  of  EU  ecolabels. 
However, there are many further opportunities for 
expansion.  Greek  eco-innovation  lags  behind  the 
EU average, but has been catching  up over recent 
years. Additional investment in resource efficiency 
and new products is essential to support economic 
recovery in Greece. 

are 

Key  local  environmental  issues  for  Greece  are 
management  of  solid  waste,  water  treatment, 
and  air  pollution,  as  noted  in  chapter  4.4  on 
Environment.  Greece  relies  a  lot  on  landfilling. 
Investment 
financial 
is  needed  here  but 
instruments  to  aid  this  are  performing  poorly. 
Water  collection  needs  to  be  improved  to  comply 
with the Water Framework Directive. Air pollution 
has  significant  health  impacts.  Here,  investments 
in  more  sustainable  transport  and  a  shift  to  green 
energy can yield large improvements. 

Towards  a  more  sustainable  energy  system  – 
modernising  the  electricity  market  and  improving 
energy efficiency 

As per the Regulation on the Governance of the 
Energy  Union  and  Climate  Action,  (57)  Greece 
provided its National Energy and Climate Plan 
(NECP)  by  31  December  2019.  In  its  June  2019 
recommendation  on  the  draft  NECP  (58)  the 
Commission  called  on  Greece  to  analyse  and 
include in its final Plan more concrete information 
and  measures  in  order  to  fulfil  the  targets  of  the 
Energy  Union.  Greece  raised  its  ambitions,  in 
particular  regarding  the  country’s  contribution  to 
the  EU  2030  target  for  renewable  energy  (e.g. 
share in gross final energy consumption of at least 
35%  against  31%  in  the  draft  NECP)  and  the 
energy efficiency targets (at least 38% reduction in 
final energy consumption based on 2007 forecasts 
against 32% in the draft NECP). The Commission 
will  assess,  in  the  course  of  2020,  the  final 
National  Energy  and  Climate  Plans  submitted  by 
Member States. 

structural  challenges  of 

the  Greek 
Two 
electricity  market  are  concentration  and  a 
reliance on lignite, and efforts are underway to 
deal  with  these.  As  part  of  its  energy  strategy, 
Greece recently announced the early closing down 
of  its  lignite-based  electricity  generation  as  part  a 
transition process towards greener energy sources. 
Combined  with  other  reforms,  this  will  also  help 
with  the  competitive  element,  opening  up  the 
market 
to  new  electricity  generation,  both 
renewable and fuel-based.  

is 

largely  due 

Greece’s  regions  suffer  from  high  rates  of  air 
to  electricity 
pollution.  This 
production with fossil fuels. More than 38% of the 
country’s  electricity  comes  from  lignite  mined  in 
two 
(286,000 
inhabitants),  most  notably  the  Kozani  prefecture 
(150,000 
the  much  smaller 
Megolopolis area of the Peloponnese region (6,000 
inhabitants). 

areas:  Western  Macedonia 

inhabitants)  and 

(57)  Regulation  (EU)  2018/1999  of  the  European  Parliament 
and  of  the  Council  of  11  December  2018  on  the 
Governance of the Energy Union and Climate Action. 
(58)  Commission  Recommendation  of  18.6.2019  on  the  draft 
integrated  National  Energy  and  Climate  Plan  of  Greece 
covering the period 2021-2030, SWD(2019) 261 final. 

67 

 
                                                           
4.5. Environmental sustainability 

solutions.  Experience  from  other  locations  that 
underwent  similar  transitions  in  the  past  highlight 
the  importance  of  strong  partnerships  among 
relevant 
regional  and 
stakeholders,  e.g.  small  and  medium  sized 
enterprises,  the  education  sector,  and  professional 
and civil society associations.  

local  authorities  and 

to 

Designing  tailor-made  support  for  local  small 
businesses  directly  and  indirectly  affected  by 
the  closure  of  the  lignite  sector  will  be  vital  to 
ensure  a  just  transition.  In  this  respect,  any 
lignite-based  generation  will 
alternative 
probably not be able to directly counterbalance the 
negative  employment  effects  of  closing  down  the 
lignite  sector  in  the  affected  regions.  Mitigating 
negative  social  consequences  will  be  important  to 
gain  political  support  for  the  project.  Possible 
solutions  could  involve  focusing  the  same  local 
economy  on  different  forms  of  energy,  such  as 
hydroelectricity,  or  on  energy  storage  systems. 
However, this may raise social and environmental 
concerns for the region. Efforts towards re-skilling 
and 
laid-off 
workers  will  be  important.  The  challenge  is  not 
unique  to  Greece,  as  some  other  Member  States 
will be facing similar challenges. 

targeted  schemes 

re-employ 

to 

the  security  of  supply  perspective, 
From 
reducing the output of lignite suggests a need to 
replace  it  with  sufficient  alternative  capacity. 
As  noted  in  Chapter  4.4  on  energy,  Greece  has 
considerable  potential  for  deploying  renewable 
energy  and  the  framework  for  investments  in  this 
area has improved in recent years. Greece’s special 
renewable energy sources account and its auctions 
will  be  important  in  this  respect.  So  while 
their 
renewables  have  some  space 
intermittency causes problems at least in the  mid-
term. Therefore the authorities expect that gas will 
also play an important role.  

to  grow, 

Gas  already  represents  about  a  quarter  of 
installed capacity, and the  share appears  set to 
grow  further.  Although  there  is  investments  in 
this area, distortions in the electricity market have 
a  negative 
the  relevant  business 
decisions. Competitors struggle to enter the market 
and  financial  problems  faced  by  the  incumbent 
Public  Power  Corporation  have  left  no  room  for 
investments from the company in recent years. 

impact  on 

Greece’s  energy  mix,  in  terms  of  installed 
capacity,  is  dominated  by  lignite,  gas  and 
hydroelectric  power.  The  respective  shares  in 
2019  stood  at  22%  lignite,  28%  gas,  18%  hydro, 
with various renewables  making  up the remaining 
share.  Lignite-based  generation 
carbon-
intensive, and with increasing carbon credit prices 
it becomes progressively less economical. It is also 
incompatible  with  Greece’s 
for 
decarbonisation.  A  core  reason  for  this  large 
amount  of  lignite  is  that  Greece  sources  its  own 
lignite,  which  means 
the  activity  has 
implications  for  energy  security  and  the  related 
economic activity.  

targets 

that 

is 

(31%)  of  all  EU  coal/lignite 

The  recently  announced  plan  to  decommission 
Greece’s  lignite-based  generation  plants  by 
2028 will have a positive environmental impact, 
but  pose  significant  economic  and  social 
challenges  in  the  two  above-mentioned  areas. 
Lignite-based  electricity  production  is  by  far  the 
most  important  economic  sector  of  the  region, 
accounting  for  33-40%  of  regional  GDP  and 
indirectly  providing  some  22,000  jobs.  Western 
Macedonia  is  also  one  of  the  Greek  regions  that 
suffered  the  strongest  economic  downturn  during 
the  crisis  and  still  has  the  highest  unemployment 
rate 
regions. 
Furthermore,  over  100,000  inhabitants  in  Kozani 
and  Florina  are  currently  connected  to  district 
heating  systems  that  receive  their  heat  from  the 
lignite-fuelled power plants. The impact of closing 
in 
down 
Megalopolis will also be pronounced, but it will be 
cushioned by the diverse economic activities in the 
immediate  surroundings.  Therefore,  a  concrete 
plan on social and regional development measures 
to  benefit  affected  areas  and  communities  is 
required.  The  work  conducted  under  the  EU 
initiative  for  coal  regions  in  transition  will  be 
essential  in  developing  a  strategy  and  action  plan 
in  that  respect.  The  Commission’s  proposal  for  a 
Just  Transition  Mechanism  will  also  help  ensure 
that the transition towards climate neutrality is fair 
by helping most affected regions address the social 
and economic consequences (see Annex D). 

lignite-based 

generation 

plants 

The transition from lignite will significantly test 
active labour market and inclusion policies. The 
current  workforce  in  the  lignite  sector  is  ill 
prepared for switching to other economic activities 
and  the  contractual  status  of  many  employees  as 
public  employees  might  limit  potential  flexible 

68 

4.5. Environmental sustainability 

context, social dialogue is crucial. A special focus 
on  the  gender  dimension  of  a  just  transition  is 
essential  to  ensure  that  women  benefit  equally 
from  arising  opportunities.  As  highlighted  in 
chapter  4.3,  the  gender  employment  gap  is  very 
large in Greece. Since new green jobs are expected 
in  sectors  with 
female 
traditionally 
representation, education and skills in the relevant 
fields  need  to  be  strengthened  to  mitigate  pre-
existing gender inequalities.  

limited 

With  respect  to  energy  efficiency,  in  2005-2015 
Greece’s primary and final energy consumption 
levels  were  lower  than  the  indicative  national 
2020  targets  (59).  However,  as  the  reduction  was 
influenced  by  the  severe  economic  crisis,  efforts 
the  primary  energy 
are  needed 
consumption stable or minimise its increase as the 
economy grows. 

to  keep 

The  building  sector  will  be  a  key  area  for 
energy  savings.  Greece  is  transposing  the  new 
revised  provisions  of  the  Energy  Performance 
of  Buildings  Directive  and  strengthening  the 
the  existing  provisions. 
implementation  of 
Despite previous years’ efforts, the specific energy 
consumption  of  the  building  stock  remains  high. 
The  buildings  sector  in  Greece  accounts  for  41% 
of  total  final  energy  consumption,  mostly  in  the 
residential  sector.  The  age  of  building  stock,  with 
many  residential  and  commercial  buildings  built 
before  1980  with  no  or  low  levels  of  thermal 
protection,  is  a  substantial  source  of  inefficiency. 
This  means  that  there  are  considerable  potential 
benefits  to  improving  efficiency  standards  in  the 
buildings  sector  and  in  residential  appliances,  but 
also that significant investments are needed. 

Renovations  of  existing  buildings  will  be 
fundamental  to  achieving  energy  efficiency 
targets.  The  energy  efficiency  programme  co-
funded  by  the  EU  (‘Energy  Saving  at  Home’) 
shows  considerable  success,  but  employs  a  very 
high  share  of  grants  and  only  a  limited  private 
participation  through  loans/guarantees.  Over  the 
period  2014-2020  42,626  households  will  have 
improve  energy 
benefitted  from  measures 
efficiency 
this  mechanism, 
whereas  primary  energy  consumption  in  public 

to 
through 

financed 

(59)  The  2020  national  targets  are  for  consumption  levels  to 
below  24.7 million  tonnes  of  oil  equivalent  in  primary 
energy and 18.4 megatons of oil equivalent in final energy 

Investment  in  electricity  networks  will  be  vital 
to  fully  realise  the  potential  for  renewable 
energy  generation,  particularly  from  islands.  It 
could  also  relieve  providers,  as  currently  only  the 
incumbent Public Power Company takes the entire 
burden  of  the  Public  Service  Obligation  that 
requires non-interconnected islands to get power at 
the price of the connected mainland.  

improve 

the  functioning  of 

Thanks to its geographical location, Greece has 
a  potential to  become  an  energy  hub  for  South 
East  Europe.  This  would  require  developing 
major  infrastructure  projects  in  Greece  and  with 
the  neighbouring  countries  to  strengthen  Greece's 
security  of  supply,  further  diversify  its  energy 
its 
sources  and 
the 
electricity  and  gas  markets.  Notably, 
Interconnector  with  Bulgaria  will  boost 
the 
regional  gas  market  and  provide  access  to  the 
soon-to-be operational Trans-Adriatic Pipeline. As 
for  electricity,  Crete’s  connection  to  the  mainland 
will  improve  the  island's  security  of  supply  and 
integrate  more  renewables.  Key  schemes  to  be 
developed  as  Projects  of  Common  Interest  will 
address issues such as low interconnectivity levels 
and Cyprus’ energy isolation. 

Other more technically advanced solutions, like 
increasing storage, could also provide solutions 
in  the  future.  Such  technologies  will  also  bring 
new  job  opportunities  for  skilled  workers,  which 
could  go  some  way  to  addressing  the  social 
challenge  of  job  losses  connected  to  the  lignite 
sector,  if  accompanied  by  appropriate  re-skilling 
schemes. 

The  transition  to  a  green  economy  will  also 
create new employment opportunities. Most new 
jobs  are  expected  to  be  in  the  green  areas  of 
manufacturing, construction and services sectors as 
well as waste management and sustainable finance. 
Climate  action  is  expected  to  favour  job  creation 
for all skill groups, introducing in particular  more 
low-skilled  jobs  in  the  Greek  market  (Eurofound 
2019,  European  Commission,  2019a).  Preparation 
of  the  labour  force  is  essential  for  the  successful 
green  transition.  Greece  needs  to  invest  in  up-
skilling and re-skilling of its  labour force towards 
the greening of the economy and the wider use of 
energy efficient technologies.  

Careful  management  is  needed  to  ensure  that 
nobody  is  left  behind  in  the  transition.  In  this 

69 

                                                           
4.5. Environmental sustainability 

buildings  is  estimated  to  have  decreased  by  97 
million  kWh  per  year.  Using  this  instrument, 
Greece plans to renovate 60,000 building units per 
year.  There  is  therefore  scope  to  increase  the 
renovation  rate  and  depth  significantly,  and  to 
unlock  investments  and  attract  private  financing 
for  energy  efficiency  projects.  Putting  in  place 
appropriate  mechanisms  in  line  with  the  EU’s 
Smart Finance for Smart Building Initiative would 
help in this respect, as would facilitating access to 
mechanisms that are already in place at European, 
national or regional level. 

Investing 
in  energy  efficiency  of  buildings 
would  also  help  alleviate  energy  poverty  in 
Greece.  Improving 
the  energy  efficiency  of 
buildings could significantly unlock economic and 
social  benefits  on  top  of  environmental  ones.  In 
2018,  22.7%  of  the  population  (far  above  the  EU 
average  of  7.4%)  were  unable  to  keep  their  home 
adequately warm and 35.6% had arrears on utility 
bills. 

Towards a more sustainable transport system 

The  transport  sector  is  responsible  for  the 
largest  share  of  total  final  energy  consumption 
in  Greece.  Road  transport  is  the  dominant  mode, 
accounting  for  88%  of  total  energy  consumption 
for transport in 2014. Oil accounts for 97% of the 
energy  use  of  the  transport  sector.  The  market 
uptake  of  vehicles  and  vessels 
fuelled  by 
alternative  fuels  is  at  very  early  stage,  except  for 
vehicles  using  liquefied  petroleum  gas  whose 
number  is  expected  to  rise  to  more  than  a quarter 
million in Greece by 2020. 

A  recent  study  published  by  the  European 
Commission estimates the total external costs of 
transport  for  road,  rail  and  inland  waterways 
in  Greece  at  €13  billion  annually,  which 
corresponds  to  6%  of  Greece’s  GDP.  This 
includes  external  costs  related 
to  accidents, 
environment  (air  pollution,  climate  change,  the 
costs related to energy production, i.e. the well-to-
tank  emissions,  noise,  habitat  damage)  and  road 
congestion.  Environmental  costs  make  up  40%  of 
the total, while 36% of the costs are related to road 
congestion.  The  figures  on  external  costs  do  not 
land 
infrastructure  costs,  which 
include 
transport  modes  amount  to  almost  €4  billion 
annually (including fixed infrastructure costs). 

for 

Internalising external and infrastructure costs – 
for  example  through  taxes  and  charges  –  is 
important for social fairness and contributes to 
reducing external costs. Looking at the taxes and 
charges paid by transport users, road users pay for 
a  slightly  higher  share  of  their  external  and 
infrastructure costs than rail users. Excluding fixed 
infrastructure  costs,  road  users  pay  around  96% 
(passenger)  and  77%  (freight)  of 
total 
external and variable infrastructure costs while rail 
users pay 46% for passenger  and 28% for freight. 
In  order  to  ensure  that  the  transition  to  a  climate 
leaves  no  one  behind, 
neutral 
distributional effects of environmental taxation and 
respective  compensator  measures  for  the  most 
vulnerable  households  should  be 
into 
account (60). 

economy 

taken 

their 

Prevention of natural disasters 

Greece  faces  multiple  and  severe  natural  and 
environmental  risks,  in  particular  floods  and 
wildfires.  Tackling  such  issues  is  often  hampered 
by a lack of structures, coordination, planning and 
prioritisation,  as  well  as  the  absence  of  early 
warning  systems.  Within  the  context  of  the  EU 
Civil  Protection  Mechanism,  Greece  has 
to 
upgrade  its  National  Risk  Assessments.  As  such 
phenomena  are  recurrent  also  in  border  areas, 
cooperation  with  neighbouring  countries  for  risk 
prevention and disaster resilience plans and nature 
based  solutions  will  need  to  be  further  explored. 
Severe weather events such as droughts, heatwaves 
or  water  shortages  also  call  for  a  rethinking  of 
social assistance, education and training and other 
climate  change  adaptation  policies,  along  with  re-
prioritisation of public expenditure. 

Management  and  prevention  of  floods  is  an 
area  where  solutions  could  improve  resource 
efficiency through reducing costs and delivering 
multiple  benefits.  Over  the  last  decade,  Greece 
has claimed damages to the EU Solidarity Fund for 
one major and three regional floods, which caused 
damages of over €3 billion. The full application of 
the  European 
the  Directive  2007/60/EC  of 
Parliament and of the Council of 23 October 2007 
on  the  assessment  and  management  of  flood  risks 
is  crucial  for  addressing  the  issue.  Flood  risk 

(60)  See European Commission, 2019, Employment and Social 
Developments  in  Europe:  Sustainable  growth  for  all 
choices for the future of social Europe. 

70 

                                                           
4.5. Environmental sustainability 

management plans have be drawn up for the areas 
at risk. The flood risk maps and the accompanying 
plans  will 
the 
its  potential 
probability  of 
consequences.  

include  measures 
flooding 

reduce 

and 

to 

The  years  2017  and  2018  saw 
increasing 
numbers of forest fires. In 2017, five major fires 
occurred  in  Kythira,  Zakynthos,  Messinia  (twice) 
and  Achaia.  By  far  the  largest  fire  was  in  Attica, 
where  more  than  2 000  hectares  were  burnt. 
During the 2017 fire season, more than 1 000 fires 
were  recorded,  with  an  affected  burnt  area  of 
almost  14 000  hectares,  mainly  forests.  The 
numbers of fires increased by almost 40% in 2017 
in comparison to the previous year (61). The source 
traditional 
is  often  associated  with 
of  fires 
agricultural burning practices or deliberate clearing 
of  areas  for  housing  construction;  but  for  the 
majority  of  fire  incidents  the  cause  remains 
unknown.  Extremely  warm  summer  weather 
conditions,  with  maximum  temperatures  above 
40° C 
the  country,  often 
combined  with  strong  winds,  increase  fire  risk. 
Illegal construction is a factor contributing both to 
the risk and impact of fires. 

in  many  parts  of 

(61)  Forest Fires in Europe, Middle East and North Africa 2017, 

JRC 

71 

                                                           
ANNEX A: OVERVIEW TABLE 

Commitments 

Summary assessment(62) 

CSR 1: Achieve a sustainable economic recovery and 
tackle  the  excessive  macroeconomic  imbalances  by 
continuing  and  completing  reforms  in  line  with  the 
the 
commitments 
post-programme 
Eurogroup of 22 June 2018. 

given 

at 

CSR 2: Focus investment-related economic policy on 
sustainable  transport  and  logistics,  environmental 
protection,  energy  efficiency,  renewable  energy  and 
interconnection 
technologies, 
skills, 
research 
employability, health, and the renewal of urban areas, 
taking  into  account  regional  disparities  and  the  need 
to ensure social inclusion. 

and  development, 

education, 

projects, 

digital 

Greece  has  made  some  progress  in  addressing 
CSR1. 

The implementation of this CSR is monitored under 
enhanced  surveillance.  Greece  has 
the 
necessary  actions  to  achieve  all  specific  reform 
commitments  for  mid-2019  and  efforts  towards 
meeting the end-2019 commitments are ongoing.  

taken 

This  overall 
country-specific 
assessment  of 
recommendation  1  does  not  include  an  assessment 
of  compliance  with  the  Stability  and  Growth  Pact. 
The  compliance  assessment  with  the  Stability  and 
Growth  Pact  will  be  included  in  Spring  when  final 
data for 2019 will be available.  

Greece  has  made  some  progress  in  addressing 
CSR2. 

In  terms  of  horizontal 
investment-conducive 
economic  policies,  Greece  has  taken  important 
steps.  Since 
the 
the  adoption  of 
government has adopted several pieces of legislation 
to  foster  the  transition  to  a  ‘digital  state’  and  to 
promote  private  investment,  notably  through  the 
Development Law of last October. The latter paved 

the  CSR, 

(62)  The  following  categories  are  used  to  assess  progress  in  implementing  the  country-specific  recommendations  (CSRs):  
No  progress:  The  Member  State  has  not  credibly  announced  nor  adopted  any  measures  to  address  the  CSR.  This  category 
covers a number of typical situations to be interpreted on a case-by-case basis taking into account country-specific conditions. 
They include the following:  
 
 
 

no legal, administrative, or budgetary measures have been announced  
in the national reform programme, 
in  any  other  official  communication  to  the  national  Parliament/relevant  parliamentary  committees  or  the  European 
Commission, 
publicly (e.g. in a press statement or on the government's website); 
no non-legislative acts have been presented by the governing or legislative body; 
the  Member  State  has taken  initial  steps  in  addressing  the  CSR,  such  as commissioning  a  study  or  setting  up  a  study 
group to analyse possible measures to be taken (unless the CSR explicitly asks for orientations or exploratory actions). 
However, it has not proposed any clearly-specified measure(s) to address the CSR. 

 
 
 

Limited progress: The Member State has:  

 
 

 

announced certain measures but these address the CSR only to a limited extent; and/or 
presented legislative acts in the governing or legislative body but these have not been adopted yet and substantial further, 
non-legislative work is needed before the CSR is implemented; 
presented non-legislative acts, but has not followed these up with the implementation needed to address the CSR. 

 
 

Some progress: The Member State has adopted measures  
that partly address the CSR; and/or  
that address the CSR, but a fair amount of work is still needed to address the CSR fully as only a few of the measures 
have  been  implemented.  For  instance,  a  measure  or  measures  have  been  adopted  by  the  national  Parliament  or  by 
ministerial decision but no implementing decisions are in place.  

Substantial progress: The Member State has adopted measures that go a long way towards addressing the CSR and most of them 

have been implemented.  

Full implementation: The Member State has implemented all measures needed to address the CSR appropriately.  

72 

 
 
                                                           
 
A. Overview table 

the  way  for  a  streamlining  of  the  investment 
licencing  procedures  and  introduced  changes  in 
spatial  planning  to  accelerate  major  investment 
projects. The law also aims  to  increase  clarity and 
transparency  on  land  use  rules  to  investors  through 
the 
introduction  of  a  ‘Single  Digital  Map’,.. 
Meanwhile,  in  the  area  of  land  use,  reforms  are 
advancing  with  the  completion  of  forest  maps  for 
nearly  95%  of  the  country  and  continued  work  in 
cadastral  mapping,  while  in  the  area  of  justice, 
reforms  have  been  slow  overall.  Efforts  to  fight 
corruption  are  onging.  The  authorities  have  also 
taken  steps  towards  a  coordinated  approach  to 
promoting  the  outward  orientation  of  the  Greek 
economy  and  attracting  foreign  investment,  and 
have  greatly  strengthened  momentum 
the 
privatisation  process  that  could  have  a  positive 
impact on investment. 

in 

recovering 

In  quantitative  terms,  investment  appears  to  be 
following  a  protracted 
slowly 
contraction  period.  During  the  first  half  of  2019, 
investment increased by a  mere  0.7%,  as compared 
to  an  average  4.7%  in  the  euro  area.  In  the  second 
quarter  of  2019,  it  remained  broadly  flat  (-0.1%) 
compared  to  the  same  period  last  year.  Looking 
backwards,  investment  (as  a  share  of  GDP)  fell 
sharply  during  the  crisis  years  2007-2014  and 
bottomed out only in 2015 to reach 11.1 % of GDP 
in 2018. In what follows, the analysis reviews public 
investment trends for the priority areas identified in 
the second CSR.  

to 

transport 

Limited  progress.  According 
the  Global 
Competitiveness  Report  2019,  Greece  ranks  39th  in 
terms  of 
infrastructures,  out  of  141 
countries  assessed  and  18th  among  EU  countries. 
Meanwhile,  the  share  of  energy  from  renewable 
resources  used  for  transport  accounted  for  only 
1.7%  in  2016,  against  a  10%  target  set  for  2020. 
Greece also ranks 42nd in logistics, according to the 
Logistics Performance Indicator of the World Bank.  

Investment  in  transport  averaged  1.7%  of  GDP  in 
the  first  three  quarters  of  2019,  having  increased 
since  2018  (1.4%  of  GDP),  but  remain  below  the 
euro area average (2% of GDP).. Moreover, despite 
sizeable  EU  financing,  the  country’s  main  railway 
axis 
remains 
incomplete,  hindering  the  multimodality  of  the 
transport  system  and  negatively  affecting 
the 
price 
transport 

Patras-Athens-Thessaloniki 

goods 

thus 

cost 

and 

of 

 Focus investment-related economic policy on 

  Sustainable transport and logistics 

73 

A. Overview table 

investments 

competitiveness. The authorities have prepared, with 
the  support  of  the  European  Commission  and  the 
European  Investment  Bank,  a  National  Transport 
Master Plan that, among others, sets the framework 
for 
infrastructure. 
Meanwhile,  a  number  of  large  investment  projects 
are  delayed,  including  the  construction  of  the 
Thessaloniki  metro  system,  the  expansion  of  the 
Athens metro system, and the completion of railway 
sections.  

transport 

in 

  Environmental  protection,  energy  efficiency, 
renewable energy and interconnection projects 

Some  progress.  In  the  field  of  environmental 
protection,  Greece  suffers  from  serious  and  long-
standing  inefficiencies,  notably  in  the  management 
of  solid  waste  and  water  waste.  The  situation  in 
Attica,  which  produces  half  of  total  solid  waste  in 
the country, is of particular concern.  

Investment in environmental  protection is relatively 
low and Greece runs the risk of not meeting the EU-
wide  recycling  target  (50%)  by  2020.  A  number  of 
investment  projects,  co-financed  by  the  EU,  are 
underway  to  improve  wastewater  treatment 
in 
Western  Attica  and 
the  municipality  of 
in 
Marathonas  and  to  improve  waste  management  in 
Peloponnese. Meanwhile, law 4643/2019 introduced 
amendments 
of 
installations  for  electric  vehicles,  and  an  inter-. 
ministerial  committee  has  been  set  up  to  design  by 
June  2020  a  strategic  plan  for  the  development  of 
electro-mobility  in  Greece.  The  authorities  are  also 
currently 
the  EU 
revising,  as  envisaged  by 
their  national  and  regional  Waste 
legislation, 
Management Plans; their finalization is expected by 
July 2020. 

development 

regarding 

the 

On  energy-related  investments  (energy  efficiency, 
renewable  energy  and  interconnection  projects), 
some  progress  has  been  made.  In  December  2019, 
the  authorities  submitted  the  revised  2021-2030 
National Energy and Climate Plan that sets out long-
term goals and strategies in these areas and provides 
the basis for further investment.  

On energy efficiency, Greece is on track to meet its 
2020  goals  and,  by  2019,  investments  co-financed 
by  the  EU  had  improved  energy  efficiency  for 
19,100  households.  Programmes  such  as 
the 
‘Energy  saving  at  home’  and  ‘Electra’  will  further 
improve energy efficiency for household and public 
buildings  (law  4643/2019  introduced  amendments 
on the program ELEKTRA allowing energy service 

74 

 
A. Overview table 

companies  to  participate  in  the  development  and 
financing of energy upgrading projects).  

law 

4643/2019 

renewables, 

introduced 
On 
amendments  to  facilitate  large  investment  projects, 
including  the  construction  of  hybrid  plants  in  non-
interconnected  islands,  while  the  government  has 
the 
announced  further  measures 
investment-licensing  framework  in  the  area  of 
renewable energy sources.  

to  streamline 

  Digital technologies 

  Research and development 

On  interconnection  projects,  the  National  Energy 
and  Climate  Plan  provides  a  timeline  for  non-
interconnected  islands;  the  first  phase  of  a  major 
project connecting  Crete  to the  mainland electricity 
transmission  grid  is  underway,  the  construction  of 
the  Crete-Peloponnese  interconnection  is  expected 
to be completed in 2020, and the interconnection of 
West Cyclades islands is scheduled for 2023. 

Some  progress.  Greece  has  one  of  the  least 
advanced  digital  economies  in  the  EU.  Integration 
of  information  and  communication  technologies  in 
Greek businesses is low, the percentage of small and 
medium-sized  enterprises  selling  online  remain  at 
11%  and  their  e-commerce  turnover  stays  low  at 
4%.  

in 

communication 
information 
Investments 
technology (as a share of total investment) increased 
with  some  fluctuations  in  the  first  two  quarters  of 
2019  compared  to  the  same  quarters  of  2017,  but 
rose slightly as a share of GDP. In terms of policies, 
the  authorities  are  working  on  a  new  national 
strategy  (‘Digital  Bible’)  that,  among  others,  will 
include a pipeline of IT investment projects for the 
the 
entire  public  administration.  Meanwhile, 
authorities  are  taking  steps  as  regards  important 
projects (creation of a unified platform for electronic 
services,  introducing  digital  identity  cards  for  all 
citizens,  developing 
infrastructure  on  5G 
the 
increasing  ultrafast  broadband 
networks  and 
coverage). 

Some  progress.  Despite  steady  increases  in  total 
spending  on  research  and  development  since  2010, 
Greece is still lagging behind the euro area average 
(1.18%  for  Greece  in  2018  compared  to  2.11%  for 
EU).  Nonetheless,  there  are  persisting  weaknesses, 
with  the  loss  of  skilled  human  capital  remaining  a 
major challenge. Despite a relative high engagement 
of businesses in innovative activities, the production 

75 

  Education 

  Skills 

  Employability 

A. Overview table 

of academic research is not appropriately oriented to 
support  the  productive  sector,  as  reflected  by  the 
low  number  of  patents.  Further,  large  disparities  in 
innovation  capacities  remain,  due  to  lack  of  robust 
governance,  including  low  administrative  capacity 
and  weak  coordination  mechanisms.  In  December 
2019,  the  authorities  completed  the  evaluation  of 
2,912  proposals  submitted  in  the  context  of  the 
flagship  call  “Research-Create-Innovate”.  Overall, 
the budget of all announced calls regarding research 
and development has reached €877 million.  

Limited  Progress.  Public  expenditure  in  education 
is among the lowest in the EU and has contracted in 
recent  years.  Nevertheless,  with  the  help  of  the 
European  Social    Fund,  investments  have  taken 
place, among others, to reduce early school leaving, 
expand  early  childhood  education,  upgrade  the 
vocational  education  and  training  system,  expand 
dual learning, and reform higher education. In term 
of policy developments, law 4653/2020 allowed for 
increased independence of the Hellenic Authority of 
standardise 
Higher  Education  and 
university  evaluations,  which  could, 
turn, 
facilitate  performance-based  funding,  and  increase 
efficiency.   

it  helped 

in 

the 

Limited  Progress.  The  number  of  companies  that 
provide  training  and  vocational  programmes  to 
develop  and/or  upgrade 
information  and 
communication  technology  skills  of  their  personnel 
increased  slightly  in  2019  (from  14%  to  15%),  but 
remains  well  below  the  euro  area  average  (25%).  s 
Participation of adults (aged 25-64) in education and 
training stood at 4.5% in 2018, one of the lowest in 
the euro area, where the average was 11.5%.  

Limited  progress.  Public  expenditure  on  active 
labour market policies accounted for 0.18% of GDP 
in 2017, less than in most other EU member states. 
Moreover,  the  impact  of  policies  on  employability 
has been hampered by a flawed delivery model, the 
reform of which has started only recently, by a lack 
of  monitoring  and  evaluation  that  would  allow  for 
design  improvements,  as  well  as  by  low  quality  of 
some  training  programmes  that  has  not  yet  been 
sufficiently  addressed.  On 
the  positive  side, 
investment in the programme of childcare vouchers 
has  increased  with  a  view  to  facilitating  labour 
market  participation  of  women.  Meanwhile,  the 
‘Post-Lyceum  Year  -  Apprenticeship  Class 
in 
Greece’  programme,  providing  participants  with 

76 

  Health 

A. Overview table 

better  employment  prospects,  has  expanded  with 
steady increases in the number of apprentices, areas 
of specialisation and number of schools. 

Limited Progress. Largely as a legacy of the crisis, 
few  investments  took  place  in  the  health  sector 
between  2010  and  2017.  In  particular,  investments 
in health accounted for 0.1% of GDP in 2017, while 
expenditure  on  health  decreased  with 
some 
fluctuations, until it reached just over 5.2% in 2017. 
Meanwhile,  EU  financing  though  the  European 
Social  Fund  has  contributed  to  the  reform  of 
primary health care and the rolling out of a network 
of  local  healthcare  units  (TOMYs)  to  strengthen 
access to primary healthcare. Around 130 units were 
in operation by the end of 2019.  

  And  the  renewal  of  urban  areas,  taking  into 
account  regional  disparities  and  the  need  to 
ensure social inclusion. 

Limited  progress.  Some  investments  have  been 
made or are planned to promote equal opportunities 
and  facilitate  social 
inclusion  of  marginalized 
groups in disadvantages urban areas.  

As  regards  social  inclusion,  public  expenditure  for 
family  support  or  housing  was  considerably  below 
the  EU  average  in  2017.  Investment  in  minimum 
income support has decreased, as the parameters of 
the  scheme  have  not  been  updated  since 
its 
introduction in 2017. On the other hand, Greece has 
invested,  with  support  from  the  European  Social 
Fund,  in  expanding  the  network  of  community 
centres,  which  facilitate  citizens’  access  to  social 
services  at  local  level,  and  it  has  introduced  a 
means-tested housing benefit in 2019.  

The  employment  rate  for  workers  aged  20-64  was 
59.5%  in  2018,  up  from  57.8%  in  2017.  This  rise 
in  2019,  with  an  average  61.2% 
continued 
employment rate in the first three quarters. However, 
the  70%  target  remains  out  of  reach  at  this  stage,  in 
spite of continued job creation. The employment rate 
is  very  low  and  significantly  below  the  EU  average 
(73.2% in 2018). 

In 2018, Greece reached a research and development 
intensity of 1.18% of GDP, according to provisional 
data  by  Eurostat  (compared  to  1.13%  of  GDP  in 
2017).In  2018,  research  and  development  intensity 
was composed of 48% private  investment (0.57% of 

Europe 2020 (national targets and progress)  

Employment rate  target: 70% of population aged 
20-64 

R&D target: 1.30% of GDP 

77 

 
A. Overview table 

GDP) and 51% public investment (0.60% of GDP).  

Greenhouse  gas  (GHG)  emissions  target:  4% 
reduction by 2020 compared to 2005 (in non-ETS 
sectors) 

Greece  is  expected  to  over-achieve  its  2020  effort 
sharing decision greenhouse gas emissions target by a 
significant margin, with a reduction of 22% by 2020 
relative to the 2005 level. 

Renewable  energy  target:  18%  of  gross  final 
energy consumption from renewable sources. 

Energy  efficiency 
primary consumption of 24.7 Mtoe 

target:  absolute 

level  of 

The  renewable  energy  share  in  Greece  was  18%  in 
2018.  While  being  above  the  2017/2018  indicative 
trajectory  (14.1%),  further  efforts  are  necessary  to 
reach the 2020 target. 

At 23.01 Mtoe in 2017, Greece is on track to meet its 
primary  energy  consumption  targets  for  2020,  but  it 
should make more efforts to keep the primary energy 
consumption at this level or to minimise  its increase 
when the GDP grows again during the next five year 
period. 

Early  school  leaving  target:  10%  early  leavers 
from education and training aged 18-24. 

At 4.7% in 2018, the share of early school  was  well 
below  the  EU  average  of  10.6%  and  the  national 
target of 10%. 

Tertiary  education  target:  32%  tertiary  education 
attainment, age group 30-34. 

Risk  of  poverty  or  social  exclusion  target:  450 
thousands  less  people  at  risk  of  poverty  or 
exclusion compared to 2008. 

At  44.3%  in  2018,  Greece  is  well  above  the  EU 
average  (40.7%)  and  the  national  target.  However, 
the attainment  gap between  foreign- and  native-born 
students (33pps) is one of the largest  in the EU and 
skills mismatches are pronounced.  

Greece targeted to lift out 450 thousand people from 
poverty  or  social  exclusion  by  2020  with  2008  as  a 
baseline year. Greece is far from achieving its target 
as  in  2018  still  302  thousand  more  people  lived  at 
risk of poverty compared to 2008. 

78 

 
ANNEX B: COMMISSION DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

The  long-term  sustainability  of  public  finances  is  discussed  in  the  fifth  enhanced  surveillance  report 
published in parallel to this country report (European Commission, 2020).   

79 

 
 
 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 2019. Includes not only banks but all monetary financial institutions excluding central banks. 
(2) Latest data Q2 2019. 
(3) Quarterly values are annualized. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all other indicators) 

80 

201420152016201720182019Total assets of the banking sector (% of GDP)(1)222.7217.8199.4167.3158.4167.0Share of assets of the five largest banks (% of total assets)94.195.297.397.096.8-Foreign ownership of banking system (% of total assets)(2)2.91.72.02.12.01.7Financial soundness indicators:(2)              - non-performing loans (% of total loans)39.746.846.345.041.639.6              - capital adequacy ratio (%)14.116.517.017.116.016.5              - return on equity (%)(3)-10.6-24.2-7.5-1.3-0.42.6Bank loans to the private sector (year-on-year % change)(1)-3.1-3.9-1.5-1.5-2.1-2.4Lending for house purchase (year-on-year % change)(1)-3.0-3.5-3.5-3.1-2.9-5.4Loan-to-deposit ratio(2)79.172.375.983.574.774.3Central bank liquidity as % of liabilities(1)18.338.226.616.25.23.2Private debt (% of GDP)130.8128.0125.1118.1115.3-Gross external debt (% of GDP)(2) - public149.4149.8152.9154.1161.8161.5    - private15.914.615.015.323.422.4Long-term interest rate spread versus Bund (basis points)*576.6917.1827.0566.1378.8294.0Credit default swap spreads for sovereign securities (5-year)*------ 
 
 
  
 
C. Standard tables 

Table C.2: 

Headline Social Scoreboard indicators 

(1) People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) and/or suffering from severe material 
deprivation (SMD) and/or living in households with zero or very low work intensity (LWI).    
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin working immediately or within 
two weeks.    
(3) Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2019.    
(4) Reduction in percentage of the risk of poverty rate, due to social transfers (calculated comparing at-risk-of poverty rates before social transfers with 
those after transfers; pensions are not considered as social transfers in the calculation).    
(5) Average of first three quarters of 2019 for the employment rate, unemployment rate and gender employment gap.    
Source: Eurostat 

81 

201420152016201720182019 5Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)9.07.96.26.04.7:Gender employment gap (pps)18.318.019.019.721.020.2Income inequality, measured as quintile share ratio (S80/S20)6.56.56.66.15.5:At-risk-of-poverty or social exclusion rate(1)36.035.735.634.831.8:Young people neither in employment nor in education and training (% of population aged 15-24)19.117.215.815.314.1:Dynamic labour markets and fair working conditionsEmployment rate (20-64 years)53.354.956.257.859.561.2Unemployment rate(2) (15-74 years)26.524.923.621.519.317.5Long-term unemployment rate (as % of active population)19.518.217.015.613.612.3Gross disposable income of households in real terms per capita(3) (Index 2008=100) 70.469.668.869.3::Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)181691844718577:::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)-3.1-1.10.0:::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction(4)15.016.115.915.820.3:Children aged less than 3 years in formal childcare12.811.48.920.540.9:Self-reported unmet need for medical care10.912.313.110.08.8:Individuals who have basic or above basic overall digital skills (% of population aged 16-74):44.046.046.0:: 
 
  
 
C. Standard tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator    
(1) Long-term unemployed are people who have been unemployed for at least 12 months.    
(2) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a percentage of average gross 
hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for the distribution of individual characteristics (and thus 
gives an overall picture of gender inequalities in terms of pay). All employees working in firms with 10 or more employees, without restrictions for age 
and hours worked, are included.    
(3) PISA (OECD) results for low achievement in mathematics for 15 year-olds.    
(4) Impact of socio-economic and cultural status on PISA (OECD) scores. Values for 2015 refer to mathematics and for 2018 to reading.   
(5) Average of first three quarters of 2019. Data for youth unemployment rate is seasonally adjusted.    
Source: Eurostat, OECD    

82 

Labour market indicators201420152016201720182019 5Activity rate (15-64)67.467.868.268.368.268.6Employment in current job by durationFrom 0 to 11 months9.910.19.59.99.9:From 12 to 23 months6.16.97.17.27.0:From 24 to 59 months11.911.212.512.813.3:60 months or over72.171.970.970.169.8:Employment growth* (% change from previous year)0.90.70.51.51.72.0Employment rate of women(% of female population aged 20-64)44.346.046.848.049.151.2Employment rate of men (% of male population aged 20-64)62.664.065.867.770.171.4Employment rate of older workers* (% of population aged 55-64)34.034.336.338.341.143.0Part-time employment* (% of total employment, aged 15-64)9.39.49.89.79.19.0Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)11.611.911.211.411.312.6Transition rate from temporary to permanent employment(3-year average)17.917.721.520.021.9:Youth unemployment rate (% active population aged 15-24)52.449.847.343.639.934.9Gender gap in part-time employment6.46.46.77.57.27.5Gender pay gap(2) (in undadjusted form)12.5:::::Education and training indicators201420152016201720182019Adult participation in learning(% of people aged 25-64 participating in education and  training)3.23.34.04.54.5:Underachievement in education(3):35.8::::Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)37.240.442.743.744.3:Variation in performance explained by students' socio-economic status(4):12.5:::: 
 
  
 
C. Standard tables 

Table C.4: 

Social inclusion and health indicators 

* Non-scoreboard indicator    
(1) At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national equivalised median 
income.     
(2) Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay their rent or utility bills, 
ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein equivalent every second day, v) enjoy a week of 
holiday away from home once a year, vi) have a car, vii) have a washing machine, viii) have a colour TV, or ix) have a telephone.    
(3) Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation.    
(4) People living in households with very low work intensity: proportion of people aged 0-59 living in households where the adults (excluding 
dependent children) worked less than 20 % of their total work-time potential in the previous 12 months.    
(5) Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of people aged 50-59.    
(6) Fixed broadband take up (33%), mobile broadband take up (22%), speed (33%) and affordability (11%), from the Digital Scoreboard.    
Source: Eurostat, OECD    

83 

201320142015201620172018Expenditure on social protection benefits* (% of GDP)Sickness/healthcare5.44.74.95.25.1:Disability1.61.61.61.51.5:Old age and survivors16.216.717.016.815.6:Family/children1.11.11.11.01.4:Unemployment1.31.11.01.00.9:Housing0.00.00.00.00.0:Social exclusion n.e.c.0.10.30.10.20.4:Total25.825.525.825.824.9:of which: means-tested benefits1.21.51.41.31.7:General government expenditure by function (% of GDP)Social protection19.620.220.320.419.4:Health5.24.74.75.05.2:Education4.54.34.24.03.9:Out-of-pocket expenditure on healthcare33.736.636.434.634.8:Children at risk of poverty or social exclusion (% of people aged 0-17)*38.136.737.837.536.233.3At-risk-of-poverty  rate(1) (% of total population)23.122.121.421.220.218.5In-work at-risk-of-poverty rate (% of persons employed)13.113.413.414.112.911.0Severe material deprivation rate(2)  (% of total population)20.321.522.222.421.116.7Severe housing deprivation rate(3), by tenure statusOwner, with mortgage or loan3.73.44.95.54.85.3Tenant, rent at market price9.98.08.88.28.08.0Proportion of people living in low work intensity households(4) (% of people aged 0-59)18.217.216.817.215.614.6Poverty thresholds, expressed in national currency at constant prices*423239163889392139734065Healthy life yearsFemales6.87.17.57.87.8:Males8.07.77.98.08.1:Aggregate replacement ratio for pensions(5)0.60.60.60.60.60.6Connectivity dimension of the Digital Economy and Society Index (DESI)(6):35.042.944.948.0:GINI coefficient before taxes and transfers*57.357.256.657.053.8:GINI coefficient after taxes and transfers*34.434.534.234.333.4: 
 
  
 
C. Standard tables 

Table C.5: 

Product market performance and policy indicators 

(1) Value added in constant prices divided by the number of persons employed.    
(2) Compensation of employees in current prices divided by value added in constant prices.    
(3) The methodologies, including the assumptions, for this indicator are shown in detail here: http://www.doingbusiness.org/methodology.     
(4) Average of the answer to question Q7B_a.- "[Bank loan]: If you applied and tried to negotiate for this type of financing over the past 6 months, 
what was the outcome?". Answers were codified as follows: zero if received everything, one if received 75% and above, two if received below 75%, 
three if refused or rejected and treated as missing values if the application is still pending or don't know.    
(5) Percentage of population aged 15-64 having completed tertiary education.    
(6) Percentage of population aged 20-24 having attained at least upper secondary education.    
(7) Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are shown in detail here: 
http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm    
Please be aware that the indicator values from 2003 to 2013 are comparable, however the methodology changed considerably in 2018 and therefore 
past vintages cannot be compared with the 2018 PMR indicators.    
(8) Simple average of the indicators of regulation for lawyers, accountants, architects and engineers.    
(9) Aggregate OECD indicators of regulation in energy, transport and communications.    
Source: European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for the product market 
regulation indicators); SAFE (for outcome of SMEs' applications for bank loans). 

84 

Performance indicators201320142015201620172018Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry5,12-1,60-3,764,480,781,35Labour productivity growth in construction-16,80-14,13-0,2522,81-1,106,82Labour productivity growth in market services1,13-0,60-2,53-3,760,160,22Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry-8,074,011,61-4,05-1,771,18ULC growth in construction5,83-5,59-12,46-17,12-7,55-7,23ULC growth in market services-10,21-2,89-2,493,143,291,96Business environment201320142015201620172018Time needed to enforce contracts3 (days)130015801580171117111711Time needed to start a business3 (days)14,013,013,013,012,512,5Outcome of applications by SMEs for bank loans41,541,811,211,541,141,05Research and innovation201320142015201620172018R&D intensity0,810,830,960,991,131,18General government expenditure on education as % of GDP4,504,304,204,003,90:Employed people with tertiary education and/or people employed in S&T as % of total employment343334363737Population having completed tertiary education5242525262728Young people with upper secondary education6878890919294Trade balance of high technology products as % of GDP-1,24-1,18-1,31-1,22-1,37-1,49Product and service markets and competition2003200820132018*OECD product market regulation (PMR)7, overall2,512,211,741,56OECD PMR7, retail4,503,852,552,54OECD PMR7, professional services83,303,263,012,19OECD PMR7, network industries94,293,132,551,19 
 
  
 
 
C. Standard tables 

Table C.6: 

Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices)  
     Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)  
     Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)  
     Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR)  
     Waste intensity: waste (in kg) divided by GDP (in EUR)  
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP.  
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP.  
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % change).  
Real unit energy cost: real energy costs as % of total value added for the economy.  
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2010 EUR).  
Real unit energy costs for manufacturing industry excluding refining: real costs as % of value added for manufacturing sectors.  
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP.  
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000 -100 000 GJ; figures excl. VAT.  
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste.  
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP.  
Proportion of GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions.  
(excl. land use, land use change and forestry) as reported by Member States to the European Environment Agency.  
Transport energy intensity: final energy consumption of transport activity including international aviation (kgoe) divided by gross value added in 
transportation and storage sector (in 2010 EUR).  
Transport carbon intensity: GHG emissions in transportation and storage sector divided by gross value added in transportation and storage sector (in 
2010 EUR).  
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of international bunker fuels.  
Aggregated supplier concentration index: Herfindahl index covering oil, gas and coal. Smaller values indicate larger diversification and hence lower 
risk.  
Diversification of the energy mix: Herfindahl index covering natural gas, total petrol products, nuclear heat, renewable energies and solid fuels. 
Smaller values indicate larger diversification.  
* European Commission and European Environment Agency - 2018 provisional data.  
Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European Commission 
(Environmental taxes over labour taxes and GDP); Eurostat (all other indicators). 

85 

Green growth performance201320142015201620172018MacroeconomicEnergy intensity kgoe / €0.130.130.130.130.13-Carbon intensity kg / €0.560.530.520.500.51-Resource intensity (reciprocal of resource productivity)kg / €0.730.750.710.670.650.64Waste intensity kg / €-0.38-0.39--Energy balance of trade % GDP-3.7-3.4-2.1-1.6-1.8-2.4Weighting of energy in HICP%9.5511.968.456.667.688.78Difference between energy price change and inflation p.p.16.20.1-10.5-5.36.91.4Real unit of energy cost% of value added13.113.213.714.2--Ratio of environmental taxes to labour taxesratio0.250.260.260.250.25-Environmental taxes% GDP3.73.73.83.84.03.7Sectoral Industry energy intensity kgoe / € 0.110.130.140.130.12-Real unit energy cost for manufacturing industry excl. refining% of value added9.29.79.89.9--Share of energy-intensive industries in the economy% GDP5.605.435.195.475.77-Electricity prices for medium-sized industrial users€ / kWh0.120.130.120.110.110.10Gas prices for medium-sized industrial users€ / kWh0.050.050.040.030.030.03Public R&D for energy % GDP0.010.010.010.010.030.02Public R&D for environmental protection% GDP0.010.010.020.010.030.02Municipal waste recycling rate%15.815.415.817.218.9-Share of GHG emissions covered by ETS*%57.055.552.350.852.251.2Transport energy intensitykgoe / €0.580.580.640.700.67-Transport carbon intensitykg / €0.500.520.660.720.83-Security of energy supplyEnergy import dependency%61.765.471.072.971.1-Aggregated supplier concentration indexHHI32.237.633.840.944.7-Diversification of energy mixHHI32.333.033.033.732.0- 
  
 
ANNEX D: INVESTMENT GUIDANCE ON JUST TRANSITION FUND 

2021-2027 FOR GREECE  

Building  on  the  Commission  proposal,  this  Annex  (63)  presents  the  preliminary  Commission  services’ 
views on priority investment areas and framework conditions for effective delivery for the 2021-2027 Just 
Transition  Fund  investments  in  Greece.  These  priority  investment  areas  are  derived  from  the  broader 
analysis  of  territories  facing  serious  socio-economic  challenges  deriving  from  the  transition  process 
towards a climate-neutral economy of the Union by 2050  in Greece, assessed in the report. This Annex 
provides  the  basis  for  a  dialogue  between  Greece  and  the  Commission  services  as  well  as  the  relevant 
guidance  for  the  Member  States  in  preparing  their  territorial  just  transition  plans,  which  will  form  the 
basis for programming the Just Transition Fund. The Just Transition Fund investments complement those 
under  Cohesion  Policy  funding  for  which  guidance  in  the  form  of  Annex  D  was  given  in  the  2019 
Country Report for Greece (64). 

 Greece  produces  high  greenhouse  gas  emissions-  9.2  tons  per  capita  every  year,  compared  to 
8.8 tons per  capita at EU level.  This is  mainly due to  fossil  fuel dependency,  with  more than 30% of 
electricity generated from lignite in the two lignite mining areas (the Western Macedonia region and the 
Megalopolis area in the Peloponnesus region), and close to 10% generated by heavy oil or diesel on the 
islands.  

In  the  region  of  Western  Macedonia  (286,000  inhabitants),  notably  in  the  Kozani  prefecture 
(150,000  inhabitants)  where  the  largest  mines  and  most  power  plants  are  located,  lignite-based 
electricity  production  is  the  most  important  economic  sector,  accounting  for  over  one  third  of 
regional  GDP.  Therefore,  while  closing  down  the  lignite  sector  will  have  positive  environmental  and 
health  impacts,  it  poses  significant  economic  and  social  challenges.  T  An  estimated  5,500  jobs  in  the 
lignite mines and power plants are directly at risk. An additional 20,000 jobs are indirectly at risk. At 31% 
(2016), the region already has one of the highest unemployment rates of all EU coal/lignite regions, and 
its GDP/capita collapsed from 86% to 59% of the EU average between 2009 and 2017. Furthermore, over 
100,000 inhabitants are connected to district heating systems, which function with the residual heat of the 
lignite-fuelled  power  plants.  The  environmental  rehabilitation  and  repurposing  of  the  mining  areas  is 
another important challenge to address, taking into account the “polluter pays” principle. 

Megalopolis in the central-south part of the Peloponnesus region is a small area, with a population 
of less than 6,000 inhabitants. The lignite mines and related power plants are by far the most important 
activity in  the area.  An estimated 1,600 jobs are  at risk due  to the closing of the lignite sector, equally 
divided  between direct and indirect employment. Two of the four lignite-fired power plants were closed 
down recently, and one natural gas fired unit has been built. 

In its revised National Energy and Climate Plan, the Greek government has committed itself to the 
full closure of the lignite sector by 2028. To this aim, an Intergovernmental Committee was set up in 
2019 to promote the fair transition in the regions in reference. This presents a huge challenge in terms of 
transforming  the  Western  Macedonia  economy  from  its  near  to  complete  lignite  dependency  to  other, 
diversified economic activities. Key to the latter should be the sectors identified in the region’s regional 
innovation  strategy  (65),  namely:  (i) agro-food;  (ii) environment  and  energy;  (iii)  the  luxury  clothing 
industry;  and  (iv)  tourism,  in  particular  agro-tourism.  The  energy  component  of  such  a  new  regional 
model  would  concern  the  development  of  hydroelectricity,  other  local  renewables  and  energy  storage 
solutions  in  relation  to  renewables.  As  concerns  Megalopolis,  the  reduced  size  of  the  area  and  the 
presence of diversified economic activities in its immediate surroundings  will render the transition  to a 
new development model much less challenging than in Western Macedonia. 

(63)  This Annex is to be considered in conjunction with the EC proposal for a Regulation of the European Parliament and of the 
Council  on  the  Just  Transition  Fund  2021-2027  (COM(2020)22)  and  the  EC  proposal  for  a  Regulation  of  the  European 
Parliament and of the Council laying down common provisions on the European Regional Development Fund, the European 
Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those and for the 
Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument (COM(2020)23) 

(64) SWD(2020) 1007 final 
(65)  As defined in Article 2(3) of Regulation EU 1303/2013 (CPR). 

86 

 
                                                           
D. Just transition fund 

The Greek government is also committed to phasing out the inefficient and very polluting heavy oil 
and  diesel  fired  power  plants  on  the  islands.  In  line  with  the  Clean  Energy  for  EU  islands  initiative 
they are planned to be substituted by onshore and offshore renewables, for which Crete and the Aegean 
islands  have  very  high  potential.  Interconnectors  with  the  mainland  and  between  the  islands  will  be 
extended to optimise the use of renewable energy. 

To tackle these transition-related challenges in the mentioned areas, priority investment needs to be 
targeted at diversifying the regional economy and making it more modern and competitive. Notable 
actions to alleviate the socio-economic costs of the transition include: 

1.  Western Macedonia: 

  productive investments in SMEs, including start-ups, leading to economic diversification and 

reconversion; 

 

the deployment of technology and infrastructures for affordable clean energy, in greenhouse gas 
emission reduction, energy efficiency and renewable energy; 

 

regeneration and decontamination of sites, land restoration and repurposing projects; 

  upskilling and reskilling of workers; 

 

job-search assistance to jobseekers; 

  active inclusion of jobseekers. 

Western  Macedonia  is  expected  to  experience  job  losses,  which  realistically  might  not  be  entirely 
offset  by  creating  and  developing  SMEs.  Support  to  productive  investments  in  large  firms  could 
therefore be considered. 

2.  Megalopolis: 

  productive investments in SMEs, including start-ups, leading to economic diversification and 

reconversion; and 

 

regeneration and decontamination of sites, land restoration and repurposing projects; 

  upskilling and reskilling of workers. 

3.  Crete and the Aegean islands: 

 

the deployment of technology and infrastructures for affordable clean energy, in greenhouse gas 
emission reduction, energy efficiency and renewable energy; 

  upskilling and reskilling of workers. 

87 

 
 
ANNEX E: PROGRESS TOWARDS THE SUSTAINABLE 

DEVELOPMENT GOALS (SDGS) 

Assessment of Greece’s short-term progress towards the SDGs (66) 

Table E.1 shows the data for Greece and the EU-28 for the indicators included in the EU SDG indicator 
set used by Eurostat for  monitoring progress towards the SDGs in an EU context (67). As the short-term 
trend at EU-level is assessed over a 5-year period, both the value at the beginning of the period and the 
latest available value is presented. The indicators are regularly updated on the SDI dedicated section of 
the Eurostat website. 

(66)  Data  extracted  on  9  February  2020 
Table E.1: 

Indicators measuring Greece’s progress towards the SDGs 

the  Eurostat  database 

from 

(official  EU  SDG 

indicator 

set; 

see 

https://ec.europa.eu/eurostat/web/sdi/main-tables).  

(67)  The EU SDG indicator set is aligned as far as appropriate with the UN list of global indicators, noting that the UN indicators are 
selected for global level reporting and are therefore not always relevant in an EU context. The EU SDG indicators have strong 
links with EU policy initiatives. 

(Continued on the next page) 

88 

 
 
                                                           
 
  
 
E. Assessment of Greece's progress towards the sustainable development goals over the past 5 and 15-years periods 

Table (continued) 

(Continued on the next page) 

89 

 
 
 
   
 
E. Assessment of Greece's progress towards the sustainable development goals over the past 5 and 15-years periods 

Table (continued) 

(Continued on the next page) 

90 

 
 
 
   
 
E. Assessment of Greece's progress towards the sustainable development goals over the past 5 and 15-years periods 

Table (continued) 

(Continued on the next page) 

91 

 
 
 
   
 
E. Assessment of Greece's progress towards the sustainable development goals over the past 5 and 15-years periods 

Table (continued) 

Source: Eurostat 

92 

 
 
   
 
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