COMMISSION STAFF WORKING DOCUMENT In-depth review for Greece in accordance with Article 5 of Regulation (EU) No. 2011/1176 on the prevention and correction of macroeconomic imbalances Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK 2022 European Semester – Spring Package
Date: 2022-05-23
Institutions: European Commission, Secretariat-General
Subjects: European Semester, Greece, economic policy, economic recovery, energy policy, export, indebtedness, macroeconomics, public debt, tourism, unemployment

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.5.2022  SWD(2022) 630 final  COMMISSION STAFF WORKING DOCUMENT In-depth review for Greece           in accordance with Article 5 of Regulation (EU) No. 2011/1176 on the prevention and correction of macroeconomic imbalances       Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK 2022 European Semester – Spring Package {COM(2022) 600 final} - {SWD(2022) 628 final} - {SWD(2022) 629 final} - {SWD(2022) 631 final} - {SWD(2022) 632 final} - {SWD(2022) 633 final} - {SWD(2022) 634 final} - {SWD(2022) 635 final} - {SWD(2022) 636 final} - {SWD(2022) 637 final} - {SWD(2022) 638 final} - {SWD(2022) 639 final}  
 
 
On the basis of this in-depth review for Greece undertaken under Regulation (EU) No 
1176/2011  on  the  prevention  and  correction  of  macroeconomic  imbalances,  the 
Commission has considered in its Communication “European Semester – 2022 Spring 
Package” (COM(2022)600 final) that: 

Greece  is  experiencing  excessive  imbalances.  Vulnerabilities  relate  to  high  government 
debt,  incomplete  external  rebalancing  and  high  non-performing  loans  in  a  context  of  low 
potential  growth  and  high  unemployment.  The  government  debt-to-GDP  ratio  resumed  its 
decline,  which  is  projected  to  continue  thanks  to  improving  budgetary  outcomes  and 
economic growth. The current account deficit still reflects the incomplete recovery from the 
sharp fall in foreign tourism in 2020 and is expected to remain clearly negative this year and 
next. The net international investment position remains also largely negative, to a substantial 
extent  reflecting  government  debt  mostly  held  by  official  sector  creditors.  It  may  however 
improve expressed as a share of GDP thanks to economic growth and inflows of significant 
RRF funds. Despite substantial progress, the share of non-performing loans remains high and 
hampers  banks'  ability  to  provide  credit  to  firms  and  households.  Relevant  measures  have 
been  taken  to  facilitate  economic  adjustment  and  the  unwinding  of  vulnerabilities.  The 
successful  implementation  of  the  RRP  represents  a  major  opportunity  to  address 
vulnerabilities and enhance potential growth. 

1 

 
 
 
 
 
 
CONTENTS 

1.  Introduction 

2.  Assessment of macroeconomic imbalances 

3.  Thematic chapter: External Imbalances 

LIST OF TABLES 

Table b.1.1:   Selected exposures 

Table 2.1: 

Selected economic and financial indicators (Part 1), Greece 

Table 2.2: 

Selected economic and financial indicators (Part 2), Greece 

Table 3.1: 

Selected external indicators, Greece 

LIST OF GRAPHS 

Graph 2.1:  General goverment gross debt and budget balance 

Graph 2.2: 

Selected external indicators on Greece 

Graph 2.3: 

Churn rate (3) decomposition and contributions to potential growth 

Graph 2.4: 

Stage 2 loans/1  and adjusted probability of default 

 Graph b.1.1:  Sectoral distribution of energy use and of energy imported from Russia 

Graph b.1.2:  Greek goods and service trade balance – fossil trade contribution 

Graph 3.1: 

Current account and NIIP decomposition 

Graph 3.2: 

Key Ttourism sector developmentsindicators on Greece 

Graph 3.3: 

Employment in tourism-related activities and nights spent at tourist accommodation 

establishments 

Graph 3.4: 

Key export performance indicators on Greece 

Graph 3.5: 

Competitiveness gains of most exported goods /1 and relative advantage of most 

exported goods/2 

3 

4 

15 

12 

13 

14 

21 

4 

6 

7 

8 

11 

11 

15 

16 

17 

18 

19 

2 

 
 
 
 
 
 
1.  INTRODUCTION 

In  2021,  over  the  previous  annual  cycle  of  surveillance  under  the  Macroeconomic  Imbalances 
Procedure (MIP), the Commission identified “excessive macroeconomic imbalances” in Greece. (1) 
These  imbalances  related  to  high  government  debt,  incomplete  external  rebalancing  and  high  level  of 
non-performing  loans,  in  a  context  of  high  unemployment  and  low  potential  growth.  The  2022  Alert 
Mechanism Report concluded that an in-depth review (IDR) should be undertaken for Greece with a view 
to assess the persistence or unwinding of excessive imbalances. (2) 

Greece  recovered  swiftly  from  the  pandemic,  but  the  economy  remains  exposed  to  a  legacy  of 
imbalances (3).  The  economy  reached  a  high  GDP  growth  rate  of  8.3%  in  2021,  driven  by  domestic 
demand and the better-than-expected tourist season, as tourist receipts recovered in 2021 to 57.8% of their 
respective 2019 level (see section 3). The pre-pandemic level of economic activity was already reached in 
the  third  quarter  of  2021.  The  spread  of  the  new  omicron  variant  of  the  coronavirus  did  not  have 
significant repercussions to growth in the last quarter of 2021 and its impact is estimated to have largely 
faded out during the first quarter of 2022. Growth is expected to reach 3.5% in 2022 and 3.1% in 2023. 
The  turmoil  on  global  energy  markets,  also  associated  with  the  Russian  military  aggression  against 
Ukraine, is expected to increase domestic inflationary pressures and weigh on the real disposable income 
of households. However, government support measures, increases in the minimum wage, and the savings 
accumulated  during  the  pandemic  are  expected  to  partially  cushion  the  negative  effects  on  private 
consumption, which, following the successive lifting of the pandemic-related restrictions has returned to 
its  pre-pandemic  level  already  in  the  fourth  quarter  of  2021.  Heightened  risk  aversion,  along  with 
increased supply bottlenecks may delay the kick-off of new investment projects, but the economy is also 
set to benefit from the deployment of RRP-financed projects. Tourism is expected to continue its recovery 
to  its  pre-pandemic  level,  given  the  limited  share  of  tourists  from  Russia,  Ukraine  and  Belarus  in  total 
arrivals.  Growth  of  goods  exports  is,  however,  expected  to  decrease  compared  to  previous  estimates  in 
view  of  the  projected  slowdown  in  the  EU  and  the  global  economy  as  a  whole.  The  recent  price 
developments of energy and, in particular, of electricity have led to a surge in consumer prices and are an 
additional source of uncertainty for the economy at large. The Commission’s 2022 spring forecast expects 
inflation  to  peak  at  6.3%  in  2022,  before  it  would  ease  to  1.9%  in  2023,  as  international  prices  are  to 
moderate slowly. Potential growth is forecast to recover from the sharp drop in 2020 and to increase in 
2022  and  in  2023.  Labour  market  developments  remain  favourable  and  the  unemployment  rate,  which 
stood at 14.7% in 2021, down from its peak of 27.8% in 2013, is set to decrease further in 2022 as the 
slack in the labour market gradually diminishes, although the rate remains among the highest  in the EU. 
The second increase in the minimum wage by 7.5% in May 2022, followed an absence of updates for 2 
years and a modest increase of 2% from January 2022. This is set to support nominal wage growth and 
protect low-income workers in the second half of the year, given that 28% of the total employees in the 
country receive a minimum wage.  

This in-depth review presents the main findings of the assessment of imbalances. The assessment is 
backed by a thematic chapter that looks at length the developments in tourism and goods’ exports (section 
2).  Spillovers  and  systemic  cross-border  implications  of  imbalances  are  also  taken  into  account.  In 
addition, assessments of structural issues made in previous IDRs and in the context of fiscal assessments 
are  considered  if  relevant.  The  MIP  assessment  matrix  is  published  in  the  2022  Country  Report  for 
Greece. (4) 

(1)  European Commission (2021), European Semester Spring Package 2021, COM(2021) 500 final. 
(2)  European Commission (2021), Alert Mechanism Report 2022, COM (2021) 741 final. 
(3)  Forecast data are from European Commission (2022), European Economic Forecast: Spring 2022, Institutional Paper 172. 
(4)  European Commission (2022), Country Report Greece 2022, SWD(2022)609 final. 

3 

 
 
                                                           
2.  ASSESSMENT OF MACROECONOMIC IMBALANCES 

Assessment of gravity, evolution and prospects of macroeconomic imbalances 

Greece’s public debt-to-GDP ratio remains very high, at 193.3% of GDP in 2021. Gross financing 
needs were elevated in 2021 due to the high primary deficit. Market debt issuance in 2021 was close to 
9% of GDP, which is somewhat above the initial funding plan. As Greece’s debt is held predominantly by 
official lenders, the favourable interest rates of these loans ensure that interest expenditure is contained in 
the  short  and  medium-term.  Greece  continues  to  hold  a  sizeable  cash  buffer  which  allows  for  efficient 
liquidity management and reduces rollover risks. In the long run, as the ratio of market debt within total 
debt is expected to increase substantially, reaching 50% in the late 2030s, Greece will be more exposed to 
the fluctuation of refinancing rates and therefore it will be more vulnerable to interest shocks.  

Graph 2.1:  General goverment gross debt and budget balance 

Source: European Commission 

The public debt-to-GDP ratio is expected to decline from 193.3% of GDP in 2021 to 185.7% of GDP 
in  2022  and  is  expected  to  remain  on  a  downward  trend  and  reach  130.5%  of  GDP  in  2032.  The 
fiscal  response  to  the  pandemic  led  to  a  budget  deficit  of  7.4%  in  2021,  which  is  expected  to  narrow 
substantially  in  2022  and  2023,  reaching  4.3%  of  GDP  and  1.0%  of  GDP,  as  support  measures  are 
gradually  phased  out  and  the  economic  recovery  continues.  The  Commission’s  fiscal  sustainability 
assessment  shows  that  Greece  faces  high  fiscal  sustainability  risks  over  the  medium  term  and  medium 
ones  in  the  long  run (9).The  debt  sustainability  analysis  in  the  latest  enhanced  surveillance  report (10) 
projects that under the baseline scenario debt-to-GDP would remain on a downward trajectory.  

The banking sector continues to be burdened by a high, albeit significantly reduced, stock of non-
performing loans. The ratio of non-performing loans (11) came down from 26.4% at end-2020 to 12% in 
September  2021  and  is  forecast  to  reach  single-digit  levels  during  2022,  mainly  on  the  back  of 
securitisation  transactions  under  the  Hercules  scheme.  However,  it  remains  the  highest  in  the  EU  and 
continues to weigh on banks’ profitability and their ability to provide credit to companies and consumers. 
Over the past  year, there  has  been net creation of new  non-performing loans at a limited rate  so far, as 
risks  persist  given  the  phase-out  of  state-support  measures  and  potential  second-round  effects  on 
economic growth from Russia’s unprovoked invasion of Ukraine. Going forward, banks’ ability to offer 
viable  long-term  loan  restructuring  solutions  will  be  key  to  sustain  the  pace  of  non-performing  loan 
reduction,  together  with  further  enhancements  in  debt  enforcement  and  efforts  to  improve  payment 

(9)  See European Commission Country Report on Greece 2022 for the latest results and Fiscal Sustainability Report 2021 (April 

2022) for methodological details. 

(10)  14th Enhanced surveillance report, European Commission, May 2022. 
(11)  Non-performing  loans  as  a  share  of  total  gross  loans  and  advances  on  a  consolidated  basis  (i.e.  including  cash  balances  at 
central banks and other demand deposits in the denominator) as reported by the European Central Bank. This figure is different 
than the one reported under enhanced surveillance, which follows non-performing loans as a share of total gross customer loans 
on a solo basis, as reported by the Bank of Greece. 

4 

160165170175180185190195200205210-12-10-8-6-4-20241415161718192021% of GDPGross debt (rhs)Budget balance (lhs)% of GDP 
   
                                                           
2. Assessment of macroeconomic imbalances 

culture.  A  large  amount  of  non-performing  private  debt  that  has  exited  the  banks’  balance  sheets  still 
remains in the economy, in the hands of specialised non-bank financial institutions (12). At the same time, 
the debt repayment capacity of both households and nonfinancial corporations remains limited (13), while 
capital markets are not well developed and offer limited alternative sources of finance.  

The continued efforts to clean up banks’ balance  sheets open the way for profitable new lending, 
while in the short term, they negatively impact banks’ profitability and capital positions. The impact 
of the securitisations on banks’ capital positions was partly offset by successful capital enhancing actions 
in 2021, but their capital adequacy ratio remains one of the lowest in the euro area (15% as of September 
2021). In addition, capital quality remains weak due to the increasing share of deferred tax credits in the 
banks’  supervisory  capital.  The  banks’  exposure  to  domestic  sovereign  bonds,  which  at  end-2021  had 
risen  to  8.5%  of  banks’  total  assets,  also  further  reinforces  the  overall  link  to  the  Greek  sovereign (14), 
despite measures taken by banks to mitigate the impact of potential increases in sovereign yields on their 
balance  sheets.  Banks  posted  losses  in  2021,  as  the  non-performing  loan  securitisations  resulted  in 
temporarily increased provisioning needs, however, recurrent profitability was positive. Non-performing 
loan  securitisations  should  allow  banks  to  reduce  their  cost-of-risk  and  free  up  space  in  their  balance 
sheets for new lending, supporting their long-term profitability. On the other hand, their profitability may 
be  affected  by  a  potential  increase  in  their  cost  of  funding,  that  may  come  from  further  debt  issuances 
needed to meet the minimum requirement for own funds and eligible liabilities (MREL) and the expected 
phasing out of ECB’s extraordinary monetary policy measures.  

Greece  has  a  high  stock  of  net  external  liabilities,  but  it  is  mainly  composed  of  public  debt 
instruments held by official creditors, which mitigates the country’s exposure to external shocks or 
shifts in market sentiment. Greece’s net international investment position in 2021 stood at -175.2%, and 
remained  broadly  stable  compared  to  2020.  The  pandemic  hit  the  country  at  a  time  when  Greece  was 
undergoing  a  process  of  external  rebalancing  and  reducing  the  external  liabilities  would  require 
maintaining  high  current  account  surpluses  for  a  sustained  period  of  time.  According  to  Commission 
calculations,  the  current  account  surplus  to  stabilise  the  net  international  investment  position  at  the 
threshold  of  -35%  of  GDP  over  two  decades  is  estimated  at  around  1.4%  of  GDP  in  2023.  Overall, 
continued  adjustment  is  conditional  on  further  efforts  to  improve  competitiveness  and  productivity 
growth, e.g. through up-skilling and reskilling and attracting productive foreign direct investment over the 
medium term.  

(12)  14th Enhanced surveillance report, European Commission, May 2022.  
(13)  The savings rate of households as a share of disposable  income has been negative on average over the period 2013-2019 and 
has only recently recovered, while the private sector was burdened by a private debt, which represented  125.3% of GDP as of 
end-2020.  

(14)  The  increasing  share  of  deferred  tax  credits  in  the  banks’  supervisory  capital,  in  conjunction  with  the  banks’  domestic 
government bond holdings, the State’s ownership stakes in the sector and the state guarantees under the Hercules scheme, imply 
an increased reliance on state-related assets.   

5 

                                                           
Graph 2.2: 

Selected external indicators on Greece 

2. Assessment of macroeconomic imbalances 

Source: Eurostat 

The current account balance improved in 2021, but its deficit remained significantly larger than its 
pre-pandemic  average.  Following  a  sharp  deterioration  during  2020,  the  current  account  deficit (15) 
improved  by  0.7  percentage  points  reaching  5.9%  in  2021.  A  stronger  improvement  was  recorded  in 
cyclically adjusted terms, with the cyclically adjusted current account balance improving from -12.1 % of 
GDP in 2020 to -9.3% in 2021. Notwithstanding the recovery in 2021, Greece’s current account deficit in 
cyclically  adjusted  terms  remains  below  what  would  be  required  to  stabilize  the  NIIP  at  more  prudent 
levels.  This  was  primarily  the  result  of  the  only  partial  recovery  of  the  travel  and  secondary  income 
balances. Greece seems more exposed to the energy price  shock in general than the EU average, which 
may  have  implications  for  the  external  position  (see  box  2.1).  Greece’s  current  account  is  expected  to 
remain  wide  in  2022  due  to  a  deterioration  in  the  trade  balance  of  goods,  in  view  of  the  projected 
slowdown in the EU and the global economy as a whole due to the military agression in Ukraine. This is 
expected  to  delay  the  correction  in  the  cyclically-adjusted  current  account  deficit,  which  is  nonetheless 
forecast to shrink by the end of the forecast horizon, yet remain below its pre-pandemic level (see Section 
3).  

Greece  continues  to  attract foreign  direct  investments  but  their  stock  remains  well  below  the  EU 
average.  Following  a  short  slowdown  in  2020  due  to  the  pandemic,  Greece  has  attracted  significant 
amounts of foreign direct investment inflows, which for 2021 point to a 13.0% increase compared to the 
respective  level  in  2019  in  nominal  terms.  The  stock  of  foreign  direct  investments  remains  one  of  the 
lowest  in  the  EU  (27.3%  of  GDP  compared  to  the  EU  average  of  77.0%  of  GDP  as  of  2020),  but  is 
expected  to  increase,  also  improving  the  country’s  presence  in  global  value  chains.  Nonetheless,  the 
composition of foreign direct investments is tilted to sectors  with limited productivity  growth potential, 
notably real estate. (16)  

Potential output growth remains weak, but investment, supported by the Recovery and Resilience 
Facility  as  well  as  other  European  Funds,  is  expected  to  record  significant  gains  in  the  following 
years  (Graph  2.3  (b)).  Over  the  period  before  the  pandemic,  weak  potential  growth  reflected  a  large 
investment  gap,  human  capital  erosion  and  subdued  productivity.  Weak  potential  growth  has  slowed 
down  the  rebalancing  and  correction  of  accumulated  stock  imbalances.  Potential  output  growth  is 
estimated  to  have  been  negative  since  2010,  but  with  some  signs  of  recovery  after  2016.  The  swift 
recovery of economic activity as the pandemic gradually fades, and the stimulus from the Recovery and 
Resilience  Plan  as  well  as  the  Cohesion  Policy  funds  are  expected  to  lead  to  a  marginally  positive 
potential  output  growth  in  2022  (0.3%),  for  the  first  time  in  more  than  a  decade.  Going  forward,  this 
stimulus is expected to further promote capital deepening and job creation, which is forecast to provide a 
notable boost in potential output growth over the entire forecast horizon.  

(15)  Balance of Payment concept. 
(16)  In-Depth Review for Greece, European Commission, June 2021. 

6 

-14-12-10-8-6-4-20-200-180-160-140-120-100-80-60-40-20009101112131415161718192021% of GDP% of GDP(a) Net investment position and current account developmentsNIIPCurrent account (right axis)source: EurostatDEIEELESFRHRITCYNLPTRO020406080100120140160180200220-200-150-100-50050100150200General Government Debt (% of GDP)Net international investment position (% of GDP) (b) Net invesment position and public debt for selected countries (2020)source:Eurostat   
                                                           
Graph 2.3:  Churn rate (3) decomposition and contributions to potential growth 

2. Assessment of macroeconomic imbalances 

(1) on the basis of average hours worked 
(2) production function approach 
(3) expressed as the sum of openings and closures of enterprises 
Source: IAPR, ELSTAT and European Commission and calculations 

Economic  activity  is  concentrated  in  micro  and  small  businesses  which  struggle  with  access  to 
finance.  Small  and  medium-sized  enterprises  provide  jobs  to  83%  of  the  total  employed  persons  in 
Greece,  almost  18  percentage  points  higher  compared  to  the  respective  average  in  the  EU (17).  Small 
firms, which are concentrated in low-innovation and productivity sectors, while providing for many jobs, 
continue  to  play  an  outsized  role  in  the  economy,  with  some  signs  of  improvement  as  the  economic 
activity gradually shifts to tradable sectors. During the pandemic, the government support measures have 
safeguarded businesses, while the positive sentiment continues after the broad phase out of the support, 
with evidence suggesting that the dynamism of the corporate sector (18) recovers. Business demographics 
data, shows the balance of new business ‘births’, i.e. establishments of new businesses minus closures of 
existing ones, remaining positive during 2020 and exceeding the respective pre-pandemic levels in 2021 
(Graph 2.3 (a)). The data should nevertheless be interpreted with caution as the impact of the pandemic 
on  the  corporate  sector  could  be  underestimated.  As  regards  the  quality  of  corporate  balance  sheets, 
financial  sector  data  can  provide  additional  evidence.  The  trajectory  of  Stage  2  loans  indicates  that  the 
phase out of the moratoria has not led to a considerable increase to the aggregate corporate default risk so 
far (Graph 2.4 (a)). However, risks emerged from the SME portfolios, albeit decreasing as of the second 
quarter of 2021 (Graph 2.4 (b)). 

(17)  Source: SME Performance Review, European Commission, July 2021. 
(18)  Business dynamism as measured by the rate at which firms enter and leave the market. Source: Bartelsman, E. and Doms, M. 
(2000). Understanding Productivity: Lessons from Longitudinal Microdata, Journal of Economic Literature, 83(3):569—594.  

7 

0%5%10%15%20%25%30%05010015020025030020172018201920202021Thousands(a) Churn rate/3 decompositionOpeningsClosuresChurn rate (right ax.)source:ELSTAT, IAPR and Commission's calculations-5.0-4.0-3.0-2.0-1.00.01.02.0091113151719212325'Rate of change y-o-y (%)(b) Contribution to potential growthCapital accumulation contributionTotal factor productivity contributionTotal labour contribution/1Potential growth/2source: European Commission   
                                                           
Graph 2.4: 

Stage 2 loans/1  and adjusted probability of default 

2. Assessment of macroeconomic imbalances 

(1) financial instruments that have deteriorated significantly in credit quality since initial recognition but offer no objective 
evidence of a credit loss event 
Source: European Banking AuthorityEuropean Commission 

The labour market continues to display high unemployment, but the declining trend from 2013 has 
resumed. Since 2013 and until the outbreak of the  pandemic, unemployment  had been  steadily  falling, 
reflecting  improvements  in  the  functioning  of  the  labour  market  and  the  gradual  economic  upturn. 
Greece’s unemployment rate continued to decline, reaching 14.7% in 2021, down from its peak of 27.8% 
in  2013,  reflecting  the  swift  recovery  of  economic  activity  and  the  positive  tourist  season.  The 
unemployment  rate,  however,  remains  one  of  the  highest  in  the  EU.  It  is  forecast  to  decline  further  to 
13.7% and 13.1% in 2022 and 2023 respectively. The activity rate is relatively low, also compared to the 
respective  pre-pandemic  level  (67.3%  in  2021  vs.  68.4%  in  2019).  Similarly,  at  62.6%  in  2021,  the 
employment  rate  stood  about  10.5  percentage  points  below  the  respective  EU  average.  Young  people 
were hit particularly hard by the pandemic, as the share of young people who are neither in employment 
nor in education or training has just returned to its pre-pandemic level, same as youth unemployment. At 
least  12.5%  of  the  total  ESF+  resources  for  Greece  (around  EUR  700  million)  will  support  youth 
employment. 

Cost  competitiveness  has  been  improving  over  time,  but  non-cost  competitiveness  remains  a 
challenge. Wages have increased only moderately over the last decade, broadly in line with inflation and 
productivity  growth.  This  has  facilitated  a  steady  decline  in  nominal  unit  labour  costs,  which  has 
improved cost competitiveness for Greek exports as compared to the euro area. The decline in unit labour 
costs has partially restored the country’s competitiveness, but non-cost competitiveness issues, related to 
the  fact  that  the  country’s  comparative  advantage  focuses  on  products  with  low  technological 
sophistication,  remain  a  limiting  factor  that  also  keeps  the  exports-to-GDP  ratio  below  potential  (see 
Section 3).  

Assessment of MIP relevant policies 

Greece  is expected to return to a fiscal primary surplus in 2023. Most of the support measures that 
Greece has taken in response to the pandemic are set to expire by the end  of 2022, while the cut in the 
solidarity  tax  and  the  social  security  contribution  rates  are  expected  to  be  kept  permanently.  In  the 
meantime, economic growth will increase the tax base and lead to higher revenues. The authorities have 
adopted  measures  to  counter  the  social  and  economic  impact  of  the  increase  in  energy  prices  in  2022. 
These measures are expected to be temporary and to be phased out by 2023. The RRP includes measures 
to  increase  tax  compliance  and  contribute  to  a  more  efficient  tax  collection.  Once  fully  implemented, 
these measures could further improve the budgetary position of the general government.  

The  authorities  continued  to  take  measures  to  address  deficiencies  in  the  financial  sector.  The 
Hercules  asset  protection  scheme  to  securitise  banks’  non-performing  loans  has  been  extended  until 
October 2022 to further facilitate the clean up of banks’ balance sheets. Furthermore, the platforms under 
the  new  insolvency  framework  are  fully  operational  and  are  gradually  bearing  results,  particularly  with 
respect  to  out-of-court  settlements.  Greece’s  RRP  includes  measures  to  address  challenges  associated 

8 

12.6%12.7%12.8%12.9%13.0%13.1%13.2%13.3%13.4%13.5%13.6%13.7%(a) Stage 2 loans/1 (3 quarter average)source: EBA risk dashboard-1%1%3%5%7%9%11%13%15%17%19%21%Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4201920202021(b) Adjusted probability of defaultCorporate sectorRetail sectorCorporate sector, of which SMEssource:EBA risk dashboard  
2. Assessment of macroeconomic imbalances 

with  private  indebtedness  and  the  information  asymmetries  between  borrowers  and  lenders,  as  well  as 
measures  to  strengthen  capital  markets  by  enhancing  supervision.  They  are  complemented  by  a  Loan 
Facility  to  promote  private  investment,  including  an  equity  platform  to  provide  equity  and  mezzanine 
funding, mainly to small-and-medium sized enterprises and small mid-caps.  

A  number  of  measures  to  strengthen  the  export  performance  have  been  adopted.  A  series  of 
measures towards the simplification of processes and the acceleration of investment licensing procedures 
were adopted over the recent years, while a new strategy to facilitate trade and foreign direct investment 
has  been  adopted.  Similarly,  the  authorities  have  implemented  a  new  master  plan  on  the  investment 
priorities  for  transport  infrastructure  and  logistics  that  aims  to  direct  public  investment  towards 
infrastructure  projects  that  promote  exports.  Greece’s  RRP  includes  measures  to  increase  extroversion 
and  to  improve  the  regulatory  environment  for  businesses  and  exporters,  by  reducing  entry  barriers, 
improving the capacity of market surveillance structures and rationalising export processes.  

A  wide  array  of  reforms  has  been  implemented  in  various  sectors  that  could  raise  productivity 
growth through facilitating the economy’s capital deepening, upgrade human capital and improve  
public administration. In 2021, the Greek authorities adopted ambitious reforms in the areas of labour 
and energy markets, the business environment, and public administration, while they continued improving 
the governance of state-owned enterprises and its privatization agenda. The authorities also put in place a 
project  preparation  facility  and  a  strategic  projects  pipeline,  which,  also  with  the  revised  public 
procurement legislation, are expected to support the implementation of public investments and promote 
public private partnerships. Greece’s RRP includes actions to incentivise the increase of average company 
size  and reduce the administrative and regulatory burden, while continuing the efforts to modernise the 
public administration. Moreover, it includes important infrastructural projects in key economic sectors to 
advance with the digital and green transition and the implementation of actions to upgrade the economy’s 
human capital.  

The  pandemic  has  had  a  relatively  limited  impact  on  the  labour  market  thanks  to  the  effective 
policy  response.  The  authorities  implemented  temporary  and  targeted  measures  to  maintain  jobs  and 
protect  incomes.  Notably  through  the  short-time  work  scheme  ‘SYNERGASIA’  and  other  financial 
support  measures  which  were  supported  by  SURE,  a  total  of  2  million  employees  benefitted  between 
March  2020  and  February  2021,  while  a  limited  number  of  eligible  individuals  continued  receiving 
support through national resources until March 2022. In parallel, the authorities continued implementing 
labour  market  reforms.  More  specifically,  they  have  adopted  an  ambitious  labour  code  reform  to 
modernise  key  aspects  of  the  labour  market  and  have  advanced  on  completing  the  general  minimum 
income scheme with a labour market integration pillar. Greece’s RRP, also in conjunction with ESF, aim 
to  tackle  several  challenges,  through  implementing  both  active  and  passive  labour  market  policies 
including activation programmes that subsidize employment and promote the upskilling and reskilling of 
the  labour  force.  The  plan  also  envisages  investments  to  boost  the  capacity  of  the  public  employment 
service (OAED) through the upgrade of its counselling services.  

Conclusion 

Greece  is  still facing imbalances linked to high public  debt, a high stock of non-performing loans 
and incomplete external rebalancing, in a context of low potential growth and high unemployment. 
The pandemic has led to an increase in the government debt and a deterioration in the external position, 
while further progress has been made on reducing the stock of non-performing loans and a large impact of 
the crisis on the labour market has been successfully averted. Given the fact that some support measures 
are  currently  either  extended  or  were  lifted  only  recently,  further  evidence  is  necessary  in  order  to 
accurately assess the long-term impacts of the pandemic on the Greek economy.  

With  the  pandemic  gradually  fading  out,  the  economic  adjustment  process  has  restarted.  Public 
debt-to-GDP ratio has started decreasing as of 2021. Greece’s current account is expected to remain wide 
in 2022 due to a deterioration in the trade balance of goods, in view of the projected slowdown in the EU 
and the global economy as a whole due to the military aggression in Ukraine. This is expected to delay 
the correction in the cyclically-adjusted current account deficit, which is nonetheless forecast to shrink by 
the  end  of  the  forecast  horizon,  yet  remain  below  its  pre-pandemic  level.  While  the  current  account  is 
projected  to  further  narrow  in  the  following  years,  it  will  remain  well  below  what  would  be  needed  to 

9 

2. Assessment of macroeconomic imbalances 

ensure  a  lasting  improvement  in  the  net  international  investment  position.  Despite  substantial  progress 
with the reduction of non-performing loans on the banks’ balance sheets, the non-performing loan ratio 
remains high, and further efforts will be needed by banks to increase their capacity to internally generate 
capital through increased profits. Greece seems more exposed to the energy price shock in general, and to 
Russian energy imports in particular, than the EU average (see box 2.1). 

The authorities have taken relevant  measures to facilitate economic adjustment and contribute to 
the unwinding of imbalances. Measures contributed to reducing the legacy of non-performing exposures 
to the banks’ balance sheets, improving the insolvency regime, reforming the labour market, improving 
the  business  environment,  thereby  supporting  productivity.  Greece  has  also  embarked  on  the 
implementation  of  its  Recovery  and  Resilience  Plan,  which  represents  a  major  opportunity  to  boost 
growth and modernise the Greek economy. Through promoting the capital deepening of the economy by 
facilitating public and private investment and accelerating job creation, the implementation of the Plan is 
expected  to  contribute  to  correcting  legacy  imbalances,  enhance  productivity  and  foster  smart  and 
sustainable growth, while also strengthening social resilience.  

Based  on  the  findings  in  this  in-depth  review,  the  Communication  “European  Semester  –  2022 
Spring  Package” (19)  sets  out  the  Commission’s  assessment  as  to  the  existence  of  imbalances  or 
excessive imbalances in Greece, in line with Regulation 1176/2011. 

(19)  European Commission (2022), European Semester Spring Package 2022, COM(2022)600 final. 

10 

                                                           
2. Assessment of macroeconomic imbalances 

Box 2.1: 

Exposures to the commodity price surge, and to Russia 

This  box  summarizes  risks  and  exposures  regarding  the  commodity  price  surge,  and  the 
magnitude of exposures to the Russian economy. The surge of commodity prices since 2021 had 
been aggravated by the Russian military aggression against Ukraine. This box reviews the risks for the 
macroeconomic vulnerabilities  in Greece. Available data suggests that due to the important role of 
gas  and  oil  in  Greece’s  energy  mix  (Table  b.1.1),  Greece  is  exposed  to  the  energy  price  shock  in 
general, and to Russian energy imports in particular (Graph b.1.1).  

 Graph b.1.1: 

Sectoral distribution of energy use and of energy imported from Russia 

Notes: The left panel displays the distribution of primary energy usage in Greece according to Eurostat energy balances. The horizontal axis displays the 
relative importance of energy-consuming sectors. The vertical axis displays the importance of energy importance from Russia in satisfying that need. Note 
that this dependence on Russia differs according to sector’s use of natural gas vs oil and coal. For comparison, the right hand panels displays the same 
concept for the EU aggregate. Russian imports include oil and petroleum products,natural gas and solid fossil fuels. 
Sources: Eurostat and European Commission services calculations 
Greece’s dependence on natural gas and fossil energy imports from Russia is relatively high, 
though significantly declining in recent years. Specifically, oil represents almost 49% of the gross 
inland  consumption  while  gas  25%  in  2020.  Greece’s  gas  production  is  negligible  and  39%  of  the 
imported gas comes from Russia. Russia represents also an important trade partner for the oil supply. 
Since the Greek economy relies considerably more on natural gas and oil than the EU average, it is 
particularly exposed to the recent commodity price surge. This concerns all sectors of the economy 
and in particular the transport and the energy transformation sectors which both depend strongly on 
imported fuel. The Greek reliance on natural gas also implies a  non-negligible exposure to Russia’s 
supply disruptions. 

Beyond  GDP,  the  fuel  price  surge  is  likely  to  have  a  strong  direct  impact  on  the  trade 
balance.  The  commodity  price  effect  is  expected  to  depress  the  balance  of  goods,  leading  to  a 
deterioration in the trade balance, and consequently in the current account balance, by around 4 pp. 
of GDP in 2022 (see Graph b.1.2).  

Graph b.1.2: 

Greek goods and service trade balance – fossil trade contribution 

Notes: The graph displays the trade balance as % of GDP, and highlights net trade of petroleum products, natural gas and solid fossil fuels (mainly coal), in 
2015 import prices. The ‘fossil price impact’ component details the impact of price changes on the (also changing) real trade balance. 2022 and 2023 figures 
reflect central assumptions of the Commission spring forecast, notably combining the forecasted fossil price evolution with broadly forecasted import 
quantities of fossil energy sources. 

Greece’s financial links to Russian entities are limited.  Table 1 shows that portfolio and other 
investment assets held in and towards Russia are well below EU average. However, the number of 
Russian  tourist  nights  spent  in  Greece  is  higher  than  the  EU  average  suggesting  that  the  tourism 

11 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2. Assessment of macroeconomic imbalances 

sector could experience some negative impact, in the absence of substitution effects.   

Table b.1.1:  

Selected exposures 

Data source: Eurostat for commodity exposures, European Commission Figaro for value-added exposures, BIS for consolidated banking exposures, 
European Commission FinFlows for other financial exposures. Energy gross inland consumption excludes net imports of electricity and derived heat. 

12 

Trade & financial exposuresunitELEUEnergy mixunitELEUDomestic value added embodied in exports to Russia% of GDP0.3%0.4%Solids fossil fuels (incl. peat)% of Gross inland consumption 20209.3%10.8%Non-energy Russian import content in final demand% of GDP0.6%0.4%Oil and petroleum products% of Gross inland consumption 202048.6%32.7%Russian tourist nights spent% of total 20195.5%2.7%Natural gas% of Gross inland consumption 202025.0%24.4%FDI assets held in Russia% of 2020 GDP0.0%2.5%Renewables and waste% of Gross inland consumption 202017.1%19.0%Portfolio & other inv. assets held in Russia% of 2020 GDP0.0%0.9%Nuclear% of Gross inland consumption 20200.0%13.1%FDI liabilities towards Russia% of 2020 GDP0.1%1.2%Commodity exposuresunitELEUPortfolio & other inv. liabilities towards Russia% of 2020 GDP0.0%1.1%Net petroleum imports from all countries% of GDP 20211.8%1.2%Consolidated banking exposures towards Russia% of 2021 GDP0.5%Crude oil imports from Russia '20% of oil imports17.7%25.7%Net gas imports from all countries% of GDP 20211.3%0.6%Gas imports from Russia '20% of gas imports39.0%43.6% 
 
 
 
 
 
 
 
 
 
Table 2.1: 

Selected economic and financial indicators (Part 1), Greece 

2. Assessment of macroeconomic imbalances 

(e) estimate based on ECB quarterly data 
(1) Potential output is the highest level of production that an economy can reach without generating inflationary pressures. 
The methodology to compute the potential output is based on K. Havik, K. Mc Morrow, F. Orlandi, C. Planas, R. Raciborski, W. 
Roeger, A. Rossi, A. Thum-Thysen, V. Vandermeulen, The Production Function Methodology for Calculating Potential Growth 
Rates & Output Gaps, COM, European Economy, Economic Papers 535, November 2014. 
(2) Deviation of actual output from potential output as % of potential GDP. 
(3) Current accounts in line with fundamentals ("current account norms") are derived from reduced-form regressions 
capturing the main determinants of the saving-investment balance, including fundamental determinants, policy factors and 
global financial conditions. See L. Coutinho et al. (2018), "Methodologies for the assessment of current account benchmarks", 
European Economy, Discussion Paper 86/2018, for details.  
(4) This benchmark is defined as the average current account required to reach and stabilise the NIIP at -35% of GDP over the 
next 20 years. Calculations make use of Commission’s T+10 projections. 
(5) NENDI is a subset of the NIIP that abstracts from its pure equity-related components, i.e. foreign direct investment (FDI) 
equity and equity shares, and from intracompany cross-border FDI debt, and represents the NIIP excluding instruments that 
cannot be subject to default. 
(6) 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. Methodology 
to compute the fundamentals-based and the prudential benchmarks based on Bricongne, J. C., Coutinho, L., Turrini, A., 
Zeugner, S. (2019), “Is Private Debt Excessive?”, Open Economies Review, 1- 42. 
Source: Eurostat and ECB as of 2022-05-02, where available; European Commission for forecast figures (Spring forecast 2022) 

13 

all variables y-o-y % change unless otherwise stated2003-072008-122013-17201820192020202120222023Real GDP 4.1-5.5-0.31.71.8-9.08.33.53.1Potential growth  (1)3.3-1.1-2.0-1.3-0.6-0.8-0.10.30.9Contribution to GDP growth:Domestic demand 5.1-7.0-0.60.01.2-4.98.62.61.6Inventories 0.0-0.70.11.40.01.4-0.90.00.0Net exports -1.12.10.10.20.6-5.50.70.91.5Contribution to potential GDP growth (1):Total Labour (hours) 0.70.9-0.1-0.7-0.8-0.9-0.6-0.20.0Capital accumulation 1.00.1-0.5-0.4-0.4-0.4-0.20.00.1Total factor productivity 1.7-2.0-1.4-0.20.50.40.60.50.7Output gap (2)2.5-7.0-13.3-7.2-4.9-12.8-5.3-2.4-0.3Unemployment rate9.814.725.019.717.917.614.713.713.1Harmonised index of consumer prices (HICP)3.32.9-0.40.80.5-1.30.66.31.9GDP deflator 3.11.5-0.9-0.20.2-0.82.14.82.1External positionCurrent account balance (% of GDP), balance of payments-10.3-10.0-1.3-2.9-1.5-6.6-5.9-6.0-4.0Trade balance (% of GDP), balance of payments-9.0-7.2-1.2-1.8-0.9-6.8-6.9..Primary income balance (% of GDP)-1.5-2.3-0.1-1.0-0.9-0.20.4..Secondary income balance (% of GDP)0.2-0.50.0-0.20.30.30.7..Current account explained by fundamentals (CA norm, % of GDP) (3)-2.1-1.5-1.1-0.9-0.9-0.8-0.8-0.6-0.5Required current account to stabilise NIIP above -35% of GDP over 20Y (% of GDP) (4)0.73.21.10.40.50.6-0.40.71.4Capital account balance (% of GDP)1.21.21.10.20.41.72.2..Net international investment position (% of GDP)-75.7-94.2-136.5-148.6-154.2-175.0-175.2..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (5).-96.2-129.1-135.1-133.6-155.2-151.9..Net FDI flows (% of GDP)0.0-0.1-1.00.0-0.4-0.40.3-0.51.0CompetitivenessUnit labour costs (ULC, whole economy)3.12.8-2.3-1.0-0.37.8-5.91.20.3Nominal compensation per employee 5.6-0.9-3.2-3.80.6-0.71.43.52.2Labour productivity (real, hours worked)2.3-3.5-0.4-3.53.32.0-0.3-1.71.4Real effective exchange rate (ULC)1.50.3-2.8-0.9-3.7....Real effective exchange rate (HICP)0.2-0.2-0.82.0-2.00.3-1.1..Export performance vs. advanced countries (% change over 5 years)13.6-5.2-13.14.01.6-9.7...Private sector debtPrivate sector debt, consolidated (% of GDP)84.8125.6128.5119.2110.5125.3120.7e..Household debt, consolidated (% of GDP)35.559.362.658.856.059.754.2e..Household  debt, fundamental benchmark (% of GDP) (6)12.815.318.318.919.422.321.620.920.6Household  debt, prudential threshold (% of GDP) (6)35.530.134.434.736.433.433.834.134.4Non-financial corporate debt, consolidated (% of GDP)49.366.365.960.454.565.666.4e..Corporate debt, fundamental benchmark (% of GDP) (6)26.732.245.846.545.850.447.043.941.7Corporate debt, prudential threshold (% of GDP) (6)60.852.463.464.267.562.262.763.063.3Private credit flow, consolidated (% of GDP) 13.61.8-2.7-0.9-0.95.40.5e..Corporations, net lending (+) or net borrowing (-) (% of GDP)4.87.28.61.61.82.82.20.9-0.7Households, net lending (+) or net borrowing (-) (% of GDP)-7.4-4.7-4.0-4.8-4.01.3-1.5-3.4-2.7Net savings rate of households (% of net disposable income)-0.4-6.8-13.6-14.8-11.8-4.9...forecast 
   
 
 
 
 
 
Table 2.2: 

Selected economic and financial indicators (Part 2), Greece 

2. Assessment of macroeconomic imbalances 

(7) Unweighted average of price-to-income, price-to-rent and model valuation gaps. The model valuation gap is estimated 
in a cointegration framework using a system of five fundamental variables; total population, real housing stock, real 
disposable income per capita, real long-term interest rate and price deflator of final consumption expenditure, based on 
Philiponnet, N., Turrini, A. (2017), "Assessing House Price Developments in the EU," European Economy - Discussion Papers 2015 - 
048, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission. Price-to-income and price-to-
rent gaps are measured as the deviation to the long term average (from 1995 to the latest available year). 
(8) Price-to-income overvaluation gap measured as the deviation to the long term average (from 1995 to the latest available 
year). 
(9) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
Source: Eurostat and ECB as of 2022-05-02, where available; European Commission for forecast figures (Spring forecast 2022) 

14 

all variables y-o-y % change unless otherwise stated2003-072008-122013-17201820192020202120222023Housing marketHouse price index, nominal7.5-4.9-5.41.87.24.57.1..House price index, deflated4.2-6.5-4.31.77.25.66.0..Overvaluation gap (%) (7)9.210.7-7.2-8.2-3.42.06.3..Price-to-income overvaluation gap  (%) (8)8.610.0-4.0-8.9-6.10.80.8..Residential investment (% of GDP)9.75.61.10.70.91.11.3..Government debtGeneral government balance (% of GDP)-7.1-11.2-4.40.91.1-10.2-7.4-4.3-1.0General government gross debt (% of GDP)103.7144.2179.1186.4180.7206.3193.3185.7180.4Banking sectorReturn on equity (%).6.0-10.9-0.40.7-7.8...Common Equity Tier 1 ratio.9.615.415.316.214.9...Gross non-performing debt (% of total debt instruments and total loans and advances) (9).9.135.337.331.322.2...Gross non-performing loans (% of gross loans) (9)..44.541.635.526.412.0..Cost of borrowing for corporations (%)5.86.15.03.83.93.13.0..Cost of borrowing for households for house purchase (%)4.44.02.93.32.92.72.5..forecast 
   
 
3.  THEMATIC CHAPTER: EXTERNAL IMBALANCES 

Introduction 

Greece’s  net  international  investment  position  (NIIP)  has  been  worsening  continuously  since  the 
beginning of the pandemic,  with signs of easing later in 2021.  Greece’s NIIP was on a deteriorating 
course even before the pandemic hit, a trend opposite to that observed for most of the euro area Member 
States, as GDP growth and the current account balance were not yet supportive of adjustment. Between 
the fourth quarter of 2019 and the second quarter of 2021, the NIIP worsened by nearly 27.6 percentage 
points  of  GDP,  reaching  -182%  of  GDP  (Graph  3.1),  due  to  the  decline  in  GDP,  a  more  negative 
contribution of financial flows, and negative valuation effects. Since the third quarter of 2021, there has 
been some  adjustment,  mainly on account of  the  rebound  in  nominal GDP growth. The NIIP is largely 
composed  of  external  government  debt  from  official  creditors  at  concessional  terms  and  with  long 
maturities,  which  mitigates  Greece’s  exposure  to  external  shocks  or  shifts  in  market  sentiment.  The 
private  sector’s  (non-financial  corporations  and  households)  position  recorded  a  significant  worsening, 
also because their loans were transferred from domestic credit institutions to specialized foreign financial 
institutions (Graph 3.1 (b)). These transactions are counterbalanced by a significant improvement of the 
NIIP  of  the  financial  corporations.  On  the  basis  of  the  Commission’s  spring  2022  forecast,  the  Greek 
NIIP is projected to reach the level of 168% and 162% by 2022 and 2023 respectively. 

Graph 3.1:  Current account and NIIP decomposition 

Note: (1) forecast period uses NA-based figures. Total balance of goods and of services is shown for the forecast period 
Source: Eurostat, AMECO 

The deterioration in the NIIP during the pandemic crisis was reinforced by a large current account 
deficit, which is improving only gradually. The widening of the current account deficit from  -1.5% of 
GDP in 2019 to -6.6% in 2020 (32) has been almost entirely driven by the collapse in international travel 
(Graph  3.3  (b)).  With  its  partial  recovery,  the  trade  surplus  in  travel  (tourism)  services  increased  from 
2.1% in 2020 to 5.1 of GDP in 2021. At the same time, the deficit in trade of goods widened by 2.9 pps. 
in  the  fourth  quarter  of  2021  compared  to  -13.0%  of  GDP  in  the  first  quarter  of  2020.  This  is  mostly 
attributed to a considerable increase in the imports of goods, as the increase of exports of goods as a share 
of  GDP  did  not  accelerate  at  the  same  pace.  Overall,  the  current  account  deficit  narrowed  to  -5.9%  of 
GDP in 2021 (33). Going forward, the current account deficit is forecast to narrow to -4.0% of GDP by 
2023, on account of the forecast recovery of tourism. The remainder of the section discusses the potential 

(32)  Balance of Payment concept. 
(33)  From the sectoral perspective, the worsening of the economy’s net borrowing position in the crisis was brought about by the 
general  government’s  large  net  borrowing  driven  by  the  crisis  and  the  costs  of  fiscal  support,  both  in  2020  and  2021. 
Conversely, households moved to a small net lending position, as the saving rate increased considerably. 

15 

-15-10-505101514151617181920212122*23*% of GDP(a) Current account decompositionGoods, fcastServices, fcastGoods excl energyEnergy balanceServices excl travelTravel balancePrimary inc. bal.Second. inc. bal.Current accountNet lending/borrowingsource:Eurostat-250-200-150-100-5005010014Q315Q316Q317Q318Q319Q320Q321Q3% of GDP(b) Decomposition of NIIP by sectorGeneral governmentPrivate sectorMFI (excl central bank)Central bank (incl reserves)Net int'l investment position (NIIP)source: AMECO 
    
                                                           
3. Thematic chapter: External Imbalances 

contribution of the tourism sector and exports of goods to a more structural improvement in the current 
account and the NIIP. 

Tourism sector developments 

Tourism  is  an  important  economic  activity  and  a  key  source  of  export  revenues  for  Greece. 
According  to  Balance  of  Payments  data,  the  international  tourists’  receipts  in  Greece  amounted  to 
EUR 18.2 billion in 2019, roughly 10% of Greece’s GDP and around 25% of its overall export revenue. 
The  direct contribution of tourism to the aggregate  output is estimated at 7.7% of the total GVA (34) in 
2019 which is the highest among Member States  with a  large share of tourism (35). The tourism-related 
sectors  in  Greece  account  for  almost  9.8%  of  total  employment,  more  than  Cyprus  (9.1%)  and  Spain 
(8.7%)  that  follow  in  second  and  third  place  in  the  EU.  The  geopolitical  developments  and  favourable 
demand conditions in international tourism before the pandemic, as well as the efforts to promote Greek 
tourism  internationally,  have  contributed  to  an  increase  in  the  country’s  tourism  revenues  by  almost 
11.2% on average per year between 2017 to 2019. 

Graph 3.2: 

Key Ttourism sector developmentsindicators on Greece 

Source: Eurostat European Commission services 

Tourism  in  Greece  features  a  ‘sun-and-sea’  model  with  relatively  long  stays  in  coastal  areas  and 
high seasonality (Graph 3.2 (b)). The tourist season typically lasts between April and October, a period 
where almost 93.2% of the total international tourist arrivals in the country are observed. The length of 
the  tourist  season  in  Greece  remains  relatively  short  compared  to  most  peers (36),  mirroring  a  limited 
contribution  from  other  tourist  products,  notably  from  ‘city-breaks’.  The  strong  brand  name  of  Greek 
tourism allows the country to attract a diverse  profile of international tourists,  with the  bulk of arrivals 
coming  from  the  United  Kingdom,  Germany  and  France  (almost  40%  of  total  arrivals  in  2019).  The 
geographical structure of tourism in Greece contributes to the reduction of regional imbalances across the 
country, as most of the tourist activity is concentrated in coastal areas and notably islands.  

The sector is dominated by small firms. Around 85% of enterprises active in the sector have fewer than 
10 employees (Graph 3.2 (a)). These enterprises create only 10% of the sectoral value added. Investment 
in fixed assets in the sector remains subdued, but construction continued growing, reflecting the interest 
of large players to establish new hotel units across the country. As a share of GVA, investment in tourism 
in Greece stands below the respective level for most peers (6.5% on average between 2017 and 2019, as 

(34)  According to 2019 data for the NACE sector ‘Accommodation and food service activities’. 
(35)  According to 2019 data, Greece’s share of sector ‘Accommodation and food service activities’ in total GVA was considerably 
higher  compared  to  Member  States  with  a  similar  tourist  model.  The  respective  figure  for  Cyprus  was  7.1%,  while  Spain, 
Croatia and Portugal follow with 6.4%, 6.3% and 6.1% respectively. 

(36)  This  concerns  Member  States  with  a  large  tourism  sector  which  attracts  a  large  share  of  tourists  in  coastal  regions,  notably 
Croatia, Cyprus, Italy, Malta, Portugal and Spain. The length of the tourist season in Croatia is the only exception, as it records 
more than 96% of its total tourist arrivals during the same period.  

16 

0%10%20%30%40%50%60%70%80%90%100%enterprisespersons inemploymentvalue-added(a) Distribution of enterprises, value-added and employment by enterprise size in tourism-related activities (2019)0-910-1920-4950-249250-source: Eurostat0204060801001201213141516171819millions(b) Foreign tourists' nights by degree of urbanizationcitiestowns and suburbsrural areassource: Eurostat  
                                                           
opposed  to  14.6%  in  Portugal,  7.0%  in  Italy  and  6.4%  in  Spain),  partly  linked  to  the  strong  seasonal 
pattern, the high share of micro enterprises and remaining investment bottlenecks (37).  

Graph 3.3: 

Employment in tourism-related activities and nights spent at tourist accommodation establishments 

3. Thematic chapter: External Imbalances 

Source: Eurostat  

The  restrictions  that  were  brought  about  by  the  pandemic  have  disrupted  the  operation  of  the 
tourism sector, but 2021 saw a marked recovery. Foreign tourist arrivals in 2020 fell to 23.5% of 2019 
the level, with the collapse being strong compared to similar destinations due to the greater dependence of 
Greek tourism on the aviation industry (38). The sector recorded a strong recovery in 2021, with the tourist 
receipts  reaching  57.8%  of  2019  level.  The  significantly  improved  tourist  revenues  in  2021  were 
complemented by an improvement of the average  spending per person and night (39), linked to a higher 
share  of  arrivals  from  high  income  countries  and  a  longer  average  stay  per  tourist.  Employment  in 
tourism-related activities recovered completely in the third quarter of 2021 (Graph 3.3 (a)).  

The net credit flow to the tourism sector was not interrupted by the pandemic due to the liquidity 
support  measures,  but  credit  was  mainly  used  to  cover  working  capital  needs.  For  2020,  the  net 
credit flow, both in nominal terms and as a percentage of GDP, remained above the pre-pandemic level, 
but  given  the  lower  investment  in  fixed  assets  under  the  same  period,  a  notable  part  of  the  credit 
expansion  was  used  to  cover  working  capital  needs  in  view  of  the  foregone  revenues.  No  significant 
uptick in the sector’s non-performing liabilities (NPLs) has been observed by the third quarter of 2021, in 
line  with  the  evolution  at  aggregate  level.  The  large  majority  of  moratoria  on  loan  repayments  and 
enforcement has expired before the end of 2021, however a niche part of the businesses operating in the 
hospitality sector still benefit from payment moratoria, which are set to expire by the end of 2022 (40). 

With tourism recovering to its pre-pandemic levels without significant long-lasting adverse effects, 
the  challenge  to  move  beyond  the  existing  ‘sun-and-sea’  model  re-emerges.  The  Greek  authorities’ 
recent  reforms  in  the  areas  of  investment  licencing  and  cadastre  planning  are  expected  to  facilitate 
investments  in  the  sector,  while  also  ensuring  a  stable  environment  for  both  domestic  and  international 
businesses.  The  efforts  of  the  Greek  authorities  to  depart  from  the  traditional  tourist  model (41)  are 
expected to be complemented by investments supported by Greece’s recovery and resilience plan (RRP), 
including  actions  to  better  monitor  and  manage  existing  infrastructure  and  promote  alternative  tourist 
products such as agrotourism, diving and underwater tourism, health and  wellness tourism. Similarly, a 
series of large infrastructure projects funded by the recovery and resilience facility, aim to upgrade tourist 
ports  and  marinas,  while  also  upgrading  the  accessibility  and  improving  the  tourism  experience  to 

(37)  While  work  continues,  certain  factors  continue  to  weigh  on  investment  in  tourist  activity.  These  factors  concern  access  to 
finance, skills shortages, and regulatory inefficiencies, as well as the lack of a comprehensive spatial planning framework. 
(38)  According  to  2019  data,  about  85%  of  the  total  EU  tourist  arrivals  in  Greece  visited  the  country  by  air,  with  Greece  being 

among the Member States with the highest rate, behind Cyprus and Malta. 

(39)  Computed as the ratio of foreign tourism revenue to the number of non-domestic overnights. 
(40)  See 13th Enhanced Surveillance Report on Greece, February 2022.  
(41)  As indicated in the Tourism Growth Strategy 2021 by the Hellenic Tourism Organizatrion (EOT). This strategy aims to reflect 
the latest trends in the tourism market, as well as the conditions that are formed in the international and domestic market as a 
result  of  the  pandemic.  Furthermore,  the  new  strategy  sets  the  general  guidelines  and  a  communication  strategy,  laying  the 
foundation that will lead in a new promotion package for Greek tourism over the following years.  

17 

02040608010012020Q120Q220Q320Q421Q121Q221Q3% of the same quarter of 2019(a) Employment in tourism-related activitiesEL Accomm. and food serviceEU Accomm. and food servicesource:Eurostat0204060801001201402020M012020M022020M032020M042020M052020M062020M072020M082020M092020M102020M112020M122021M012021M022021M032021M042021M052021M062021M072021M082021M092021M10diff. from the respective month in 2019(b) Night spent at tourist accomodation establishmentsEL - ForeignEU - Foreignsource:LFS data  
                                                           
3. Thematic chapter: External Imbalances 

disabled  persons.  The  RRP  also  includes  large  infrastructure  projects  in  regions  with  significant  tourist 
presence (waste management projects, irrigation and energy upgrade of islands). These efforts are key for 
laying out the fundamentals for attracting a wider spectrum of tourists in the longer term, as they aim to 
address long-standing issues pertaining to the absence of infrastructure that facilitates the implementation 
of large investment projects in certain areas. 

Goods export performance 

In  the  years  before  the  pandemic,  Greek  merchandise  exports  recorded  significant  gains,  as  the 
economy  was  getting  further  integrated  in  the  international  markets.  According  to  Balance  of 
Payments  data,  goods  exports  in  Greece  amounted  to  EUR 32.4  billion  in  2019 (42),  about  45%  of  the 
country’s aggregate export receipts. The competitiveness gains in the recent years (43), and the efforts to 
integrate the economy in international markets (44), have helped increase the share of goods exports as a 
percentage of GDP to 17.7% in 2019, 3.6 percentage points higher compared to 2015. Export growth over 
the  years before the pandemic did not translate into an equally sized improvement in the trade balance, 
following the cyclical recovery of demand along with the high import content of the Greek GDP.  

Graph 3.4: 

Key export performance indicators on Greece 

Source: Eurostat, UN comtrade 

Greek  goods  exports  are  concentrated  in  a  narrow  range  of  sectors  and  commodities  but 
considerable  market  share  gains  were  recorded  over  the  last  years.  The  largest  share  (15.1%)  of 
export  revenues  is  accounted  for  by  mineral  products,  primarily  refined  petroleum,  however  this  has  a 
large  import-content  and  does  not  have  a  big  contribution  to  the  goods  balance.  Base  metals,  chemical 
products,  light  machinery  and  food  products  complete  the  list  of  Greece’s  most  exported  commodities. 
Along with the exports in minerals, these products account for almost 70.5% of Greece’s total exports in 
goods according to 2019 data. While overall Greece’s exports (excluding oil products) decreased by 2.6% 
in  2020,  this  decrease  was  contained  compared  to  the  global  fall  in  international  trade,  leading  to 
important  market  share  gains  and  continued  the  positive  sentiment  from  the  previous  years  (Graph  3.4 
(b)). Chemicals have shown a considerable growth over the past years, both in terms of expanding into 
new  markets (45) as  well as recording gains in existing ones (46). It is indicative that the  share of Greek 

(42)  Source: Bank of Greece. 
(43)  See 13th Enhanced Surveillance Report on Greece, February 2022.  
(44)  These  efforts  concern  the  consolidation  of  the  Ministry  of  Foreign  Affairs’  institutional  reforms  and  the  new  economic 
diplomacy strategy, important actions that aim to create a coordinated framework for the development of export promotion tools 
across the country. Further policy actions that help integrate the economy in international markets include the upgrade of the 
regional  infrastructure  (e.g.  regional  airports,  crossborder  railways,  marinas  and  ports),  measures  to  promote  the  use  of 
information and communication technologies by corporates, also in the form of tax incentives to businesses, efforts to promote 
the  uptake  of  ‘quality  label’  certifications,  as  well  as  actions  to  expand  the  tradable  sectors  through  common  cross-cutting 
policies.  

(45)  The decomposition is based on the shift-share methodology, which breaks down the market dynamism of a sector based on its 
penetration in geographical destinations (geographical exposure) or market gains in existing geographical markets (gains within 
product markets). 

(46)  Exports  of  chemical  goods  improved  their  geographical  presence  worldwide  in  2019  by  more  than  0.4  percentage  points 
(vertical  axis),  while  also  improved  their  competitiveness  across  existing markets by  around  1.0  percentage  point  (horizontal 
axis). 

18 

4050607080901001100305070911131517192123'% GDP(a) Trade opennessEA19Greecesource: Eurostat-4-20246810151617181920%(b) Export market share of goods, exluding mineral productsChemical productsBase metalsOther commoditiesTotal market share change (excl. mineral goods)source: UN comtrade  
                                                           
3. Thematic chapter: External Imbalances 

exports in chemical goods worldwide has been growing since 2016, posting a cumulative growth figure of 
7.0% between 2015 and 2020 (Graph 3.4 (b)). Base metals and agricultural exports have also increased 
their  share  over  the  same  period,  and  recorded  a  cumulative  growth  of  2.6%  and  1.1%  respectively. 
Greece’s  exports  of  mineral  goods  are  dependent  on  international  oil  price  movements,  hence  the 
respective market share shows a volatile outlook.   

Greece remains a relatively closed economy considering its size (Graph 3.4 (a)), but its participation 
in  the  global  value  chain  has  seen  improvements.  By  taking  stock  of  its  important  geographical 
position in the European region and its strong shipping industry, Greece is slowly emerging to become a 
partner in the global value chain, where different stages in the production and consumption of materials 
and products take place in different parts of the world. This is also reflected in Greece’s improving trade 
openness, defined as the sum of exports and imports over GDP, although coming from a relatively low 
level compared to its euro area counterparts (82.0% of GDP in 2019 compared to 92.8% of GDP in the 
euro area). On aggregate, the country has reported an increase in its participation in the global value chain 
over the last years (47) with gross exports embodying higher foreign value added in 2018 (30.7%) than in 
2015  (25%).  According  to  the  same  source,  Greece’s  exports  are  mostly  focused  towards  final  goods, 
rather  than  intermediate  inputs.  This  comes  at  a  cost,  since  it  implies  an  increasing  reliance  on  foreign 
intermediate  inputs  that  are  used  to  produce  exportable  goods  (i.e.  greater  backward  participation  in 
global value chains).  

Graph 3.5:  Competitiveness gains of most exported goods /1 and relative advantage of most exported goods/2 

(1) The size of each bubble refers to the respective share of Greece’s total exports  
(2) The indicator is based on the symmetric revealed method. A positive sign indicates a comparative advantage 
Source: UN comtrade 

Greece’s comparative advantage is concentrated in products with low technological sophistication. 
Comparative advantage refers to the country’s ability to produce a particular good at a lower opportunity 
cost  than  its  trading  partners (48).  Based  on  Greece’s  actual  trade  performance,  its  largest  comparative 
advantages  are  concentrated  in  food  and  agricultural  products  (such  as  fruit  and  vegetables,  oils,  dairy 
goods, fish and aquaculture goods), commodities with limited value-added and low technological content 
(Graph  3.5  (b)).  In  addition,  Greece  specialises  in  traditional  manufacturing  industries  (such  as  light 
machinery  and  plastics),  which  face  strong  competition  from  countries  with  lower  labour  costs. 
According  to  recent  studies,  only  8.5%  of  total  Greek  exports  (excluding  refined  petroleum  products) 
have comparative advantage in sectors with high global productivity (49). This mirrors structural features 
of the Greek economy, notably the small size of its enterprises, the lack of efficient infrastructure and the 
investment  gap.  The  decline  in  unit  labour  costs  achieved  during  and  after  the  financial  assistance 
programme  has  partially  restored  the  country’s  cost  competitiveness,  but  the  abovementioned  non-cost 
competitiveness  factors  remain  a  limiting  factor  to  a  further  substantial  increase  in  the  exports-to-GDP 

(47)  Source: OECD trade in value added (TiVA) 2021 ed.  
(48)  The comparative advantage shows the degree of specialisation of a country’s exports of goods relative to the rest of the world. 
According to Graph 3.5 (b), the relative symmetric comparative advantage index, or ‘Balassa index’ is used for calculating the 
relative advantage or disadvantage of a certain country in a certain class of goods as evidenced by trade flows. Positive values 
imply specialisation in the corresponding good.  

(49)  Source: Piraeus bank, Greek export performance: tangible signs of improvement but much more is required, March  2019.  

19 

FoodChemicalsTextilesBasemetalsMachinery-1.0-0.8-0.6-0.4-0.20.00.20.40.60.81.0-5.0-3.0-1.01.03.05.0Gains due to exposure to the market (pp)Gains within product market (pp)(a) Competitiveness gains of most exported goods (gains for the period between 2015 to 2019)source:UN comtrade-1.0-0.50.00.51.0Animal productsFood productsMineral productsVegetable productsBase metalsChemicalsTaxtilesPlasticsMachinery, electrical equipment(b) Relative advantage of most exported goods201020152020Source: UN comtrade  
                                                           
3. Thematic chapter: External Imbalances 

ratio.  Nonetheless,  the  recent  increase  in  research  and  development  (R&D)  expenditure (50)  across  the 
economy  had  a  notable  positive  impact  on  the  share  of  high  and  medium-high  technology  goods 
exports (51) (23.8% of total exports in 2021, up by 3.4 percentage points compared to 2015; but still below 
to the respective EU average.  

Greece’s  recent  and  planned  policy  actions  aim  to  overcome  the  still  weak,  although  improving, 
export  performance  through  both  reforms  and  investments.  The  latest  reforms  in  the  area  of 
investment  licencing  and  trade  facilitation (52)  are  expected  to  provide  a  boost  to  export  performance 
through  the  simplification  of  processes,  the  acceleration  of  investment  licensing  procedures  and  the 
promotion  of  foreign  direct  investment.  More  specifically,  a  major  investment  licensing  reform  was 
initiated during the economic adjustment programmes that involved the simplification and digitalization 
of the administrative licensing procedures in a number of economic activities, including transport-related 
services, as well as the streamlining of the inspections framework, notably in the areas of food, product 
safety  and  environmental  protection.  The  investment  licencing  reform  allowed  the  transition  towards  a 
simplified  system  based  on  risk-based  ex-post  inspections.  An  Integrated  Licensing  Information 
Management System (ILIMS) is under development to facilitate licencing procedures. Further, a number 
of  digitalization  and  administrative  initiatives  were  successfully  implemented  to  facilitate  the 
simplification of transactions with the State, including business registration processes.  

Moreover,  Greece’s  recovery  and  resilience  plan  outlines  a  significant  effort  to  increase 
extroversion  and  facilitate  investments  in  sectors  where  Greece  can  improve  its  comparative 
advantage. For instance, the plan outlines actions to upgrade the country’s infrastructure, notably in the 
transport  sector.  Through  promoting  high-quality  and  multimodal  transport,  these  investments  are 
expected  to  reduce  the  respective  transport  costs  for  exporting  firms.  Together  with  the  reform  of  the 
regulatory  framework  of  public  contracts,  this  is  expected  to  improve  connectivity  in  all  parts  of  the 
country and promote exporting activity in businesses located in broader geographical areas. These actions 
are  intended  to  facilitate  the  greater  openness  of  the  economy  and  the  further  integration  on  the  global 
supply chains. Further interventions in the field of business environment target on increasing the relative 
weight  of  tradable  sectors  in  the  domestic  economy,  strengthening  the  export  orientation  of  Greek 
corporates  and  provide  greater  incentives  for  strategic  investments,  inter  alia,  to  attract  foreign  capital 
inflows towards sectors with significant extroversion.  

(50)  According to Eurostat data, Greece’s gross domestic expenditure on R&D as a share of GDP has increased from 1.0% in 2016 

to 1.5% in 2020 and slowly converges to the respective EU average of 2.3% in 2020.  

(51)  Source; OECD bilateral trade by industry and end-use.  
(52)  Placeholder with a description of the measures and a reference to our ESurs/CRs.  

20 

                                                           
Table 3.1: 

Selected external indicators, Greece 

3. Thematic chapter: External Imbalances 

Abbreviations: NA=National Accounts, BoP=Balance of Payments, CA=Current Account, NENDI= NIIP excluding non-
defaultable instruments, VA= Value Added, TB= Trade Balance.  
(1) Flow data refer to national account concept, unless indicated otherwise.  
(2) Cyclically adjusted CA is the CA adjusted for the domestic and foreign output gaps, taking into account trade openness.  
(3) The average CA needed in order to stabilise the NIIP is based on European Commission “T+10” medium-term projections.  
(4) The CA explained by fundamentals refers to the expected CA given the level of its fundamentals with respect to world 
average. (5) The CA or TB needed either to halve the distance to fund. NIIP benchmark, or to reach the prud. NIIP 
benchmark in 10Y, whichever is higher. Based on European Commission “T+10” medium-term projections. 
(6) In case private-sector FDI is not available, total economy FDI is displayed.  
(7) VA imports as % of aggregate demand describes the % of aggregate demand that  is sourced from foreign value added.  
(8) More information on benchmark indicators methodology can be found on B1 intranet. 

Source: (a) Eurostat, (b) Ameco, (c) European Commission calculations, (d) WIOD database. 

21 

2003-072008-122013-17202020212022f2023fFlows (1)Source:CA balance as % of GDP, NA(b)-11.5-10.4-1.8|-7.9-8.3-8.4-6.4CA balance as % of GDP, BoP(a)-10.8-10.0-1.3|-6.6-5.9-6.0-4.0Cyclically adj. CA balance as % of GDP (2)(c)-10.7-13.5-8.1|-13.4-11.7-9.9-6.5CA req. to stabilize NIIP above -35% (3)(c)1.03.21.1|0.6-0.40.71.4CA explained by fundamentals (CA norm) (4),(8)(c)-2.0-1.5-1.1|-0.8-0.8-0.6-0.5Required CA for specific NIIP target (5)(c)1.74.75.0|6.06.57.57.6Trade bal. G&S, % of GDP, NA(b)-9.9-8.1-1.6|-7.6-7.9-8.1-5.9Required TB for specific NIIP target (5)(c)3.15.55.0|6.26.98.08.2StocksNENDI as % of GDP(a)-63-96-129|-155-152of which: net portfolio debt(a)-43-2538|7682of which: net mutual fund shares(a)04|56of which: net other investment(a)-15-71-171|-236-243NIIP as % of GDP(a)-80-94-137|-175-175-168-162Prudential NIIP/NENDI benchmark (8)(c)-60-55-46|-44-46-46-46Fundamentally expl. NIIP benchmark (NIIP norm) (8)(c)-16-22-37|-46-41-41-40Gen. Government NIIP(a)-94-151|-174-155Private Sector NIIP(a)1317|-25-52of which: Net FDI (6)(a)-6-1-5|-12-14MFI (excl CB) NIIP(a)1213|1020Oth. financials NIIP(a)51|-1-2Central bank NIIP(a)-31-17|1414of which: Reserves(a)123|67of which: Target2(a)-36-37|-49-57Value-added trade and capital accountVA imports % of agg. demand (7)(d)252527|Capital account bal. as % of GDP, NA(b)1.81.71.9|2.02.12.22.3Indicators in % of potential GDP0.00.00.00.0CA balance as % of potential GDP, NA(b,c)-11.9-10.0-1.5|-6.9-7.8-8.2-6.3CA balance as % of potential GDP, BoP(a,c)-11.1-9.5-1.2|-5.8-5.6-5.9-4.0Cyclically adj. CA balance as % of potential GDP (c)-11.0-12.5-7.0|-11.6-11.1-9.6-6.5Trade bal. G&S, as % of potential GDP, NA(b,c)-10.2-7.7-1.4|-6.6-7.5-7.9-5.9NENDI as % of potential GDP(a,c)-65-88-112|-135-144NIIP as % of potential GDP(a,c)-82-87-118|-153-166-164-162Capital account bal. as % of potential GDP, NA(b,c)1.91.61.6|1.82.02.12.3