the economy of greece:challenges and prospects

8/14/2019 The economy of Greece:Challenges and Prospects

1/40

THE ECONOMY OF GREECE:THE ECONOMY OF GREECE:Challenges and ProspectsChallenges and Prospects

Anastasia Mitronatsiou, DimitrisTsafoulis, Eleftheria Garozi


2/40

BRIEF OVERVIEW OF THE GREEK ECONOMY

Mixed capitalist economy

Public sector accounting for about 40% of the GDP

Per capita GDP about two-thirds that of the leading euro-zone economies

Tourism: 15% of the GDP

Immigrants: Nearly one-fifth of the work force

Rate of growth in 2008: Dropped to 2.9% as of 4% in the

years between 2003 - 2007


3/40


Greece - Key economic projectionsGross domestic productQuarterly annualised growth ratesGross domestic product

Last updated: 19 November

2009

Source:OECD Economic Outlook: Flash file - quarterly projections

www.oecd.org/oecdeconomicoutlookEconomics: Key tables from OECD
http://dx.doi.org/10.1787/747217734661http://www.oecd.org/oecdeconomicoutlookhttp://www.oecdepublishing.org/Keygraphs/country/%20http:/dx.doi.org/10.1787/2074384xhttp://www.oecdepublishing.org/Keygraphs/country/%20http:/dx.doi.org/10.1787/2074384xhttp://www.oecd.org/oecdeconomicoutlookhttp://dx.doi.org/10.1787/747217734661


4/40


Greece - Key economic projectionsUnemployment

In percentage of labour force Last updated: 19 November

2009 Source:

OECD Economic Outlook: Flash file - quarterly projections

www.oecd.org/oecdeconomicoutlookEconomics: Key tables from OECD


5/40


Greece - Key economic projectionsFiscal balanceIn percentage of GDP

Last updated: 19 November2009

Source:OECD Economic Outlook: Flash file - quarterly projections

www.oecd.org/oecdeconomicoutlook

Economics: Key tables from OECD


6/40


Greece - Key economic projectionsInflationQuarterly annualised growth rate,

consumption deflator

Last updated: 19 November

2009 Source:

OECD Economic Outlook: Flash file - quarterly projections

www.oecd.org/oecdeconomicoutlook

Economics: Key tables from OECD


7/40

GENERAL CHARACTERISTICS OF THE GREEK ECONOMY: LONG-STANDING ISSUES AND THE NEED FOR A LONG-TERM

PROGRAM OF STRUCTURAL, FISCAL AND INSTITUTIONALADAPTATION

Chronic problems of the Greek economic system thattouch both the public and private sectors.

Need for a long-term program of structural, fiscal andinstitutional adaptation


8/40

CURRENT STATE OF THE GREEK ECONOMY

Growth remained positive until the end of 2008

The banking sector has benefited from marginalexposure to the toxic assets which were at the root ofthe international storm

Persistent structural imbalances

Greece's exposure to southeastern Europe

The longterm sovereign interest rate spread visvisGermany widened sharply in early 2009

Rating agencies downgraded the sovereign debt andcredit risks of the leading Greekbanks


9/40


Real GDP contracted in 2009 as the effects of the global crisisgradually spread to the Greek economy

The unemployment rate is set to reach a doubledigit level

The current account deficit is likely to remain high

Longterm fiscal viability: Further pension and health care reforms

Increasing labour and product market flexibility


10/40



11/40


20th Annual Greek Economy Conference (Athens 30-01Nov.2009)

Meeting of the ECOFIN on December 2nd 2009 inBrussels


12/40

REFORMS REQUIRED FOR THE ECONOMICRECOVERY OF GREECE

Fiscal sector

Tax revenue

Better control of primary expenditure

Pension reform


13/40

THE ROLE OF GREECE AS A REGIONAL TRADE PARTNER AND

INVESTING FACTOR IN THE SEE GEOGRAPHICAL CONTEXT

HELLENIC PLAN FOR THE ECONOMIC RECONSTRUCTION OFTHE BALKANS (HiPERB): [Source Greek MFA]

HiPERB-Actions by Country-Albania:

Public Investments: The estimated available sum amounts to39,413,100. An official proposal has been approved for upgrading theSagiada-Konispol-Sarande Highway (40.5 km in total length), of a totalcost of 29,869,983.19 and a HiPERB contribution of 23,895,986.55.

Private Productive Investments:The estimated available sum amounts to9,978,000. 15 proposals, of a total cost of 31,499,035, have beenapproved thus far with a total HiPERB participation of 9,516,843. Ten ofthose have already been completed. The rate of absorbance isestimated at 95,37% and 480 new jobs have been created.

Small Projects Fund: The estimated available sum for the Small ProjectsFund amounts to498,900. 30 projects of a total cost of 498,900 havebeen approved thus far and the rate of absorbance is 100%.
http://www.mfa.gr/www.mfa.gr/en-US/Economic+Diplomacy/HiPERB/Actions+by+Country/http://www.mfa.gr/www.mfa.gr/en-US/Economic+Diplomacy/HiPERB/Actions+by+Country/


14/40

THE ROLE OF GREECE AS A REGIONAL TRADEPARTNER AND INVESTING FACTOR IN THE SEE

GEOGRAPHICAL CONTEXT

HiPERB-Actions by Country-Bosnia and Herzegovina:

Public Investments: The estimated available sum amounts to15,428,700. The construction of the Greek-Bosnian FriendshipBuilding in Sarajevo cost a total of 16,789,989, and the HiPERB

participation amounts to 13,497,073 (80,4%). The building wasinaugurated on 23 July 2007 by the former Prime Minister Karamanlisand his counterpart, the President of the Bosnia-Herzegovina Council ofMinisters, Mr. N. Spiric. A proposal on the reconstruction of the Kasindohospitals Serbia Pavillion, worth 1,920,000, is currently underexamination

Private Productive Investments: The estimated available sum amounts to3,906,000. No proposal for private investment funding has beenapproved thus far.


15/40

THE ROLE OF GREECE AS A REGIONAL TRADE PARTNER ANDINVESTING FACTOR IN THE SEE GEOGRAPHICAL CONTEXT

HiPERB-Actions by Country-FYROM:

Public Investments:The estimated available sum amounts to59,123,600. Approcal has been granted for the SeeLight project(South-East European Lambda Network Facility for Research andEducation/Interbalkan optic-fibre network infrastructure for research andeducation), an optic-fibre broadband network for the interconnection ofacademic communities, of a total cost of 2,007,787and HiPERBparticipation estimated at 1,606,230. The project for the construction ofthe Demir Kapija-Gevgelija part of the Pan European Corridor X(of atotal length of 27.75 km), with a total budget of 151.98 million, withHiPERB participation estimated at 50 million.


16/40

THE ROLE OF GREECE AS A REGIONAL TRADEPARTNER AND INVESTING FACTOR IN THE SEE

GEOGRAPHICAL CONTEXT

Private Productive Investments: The estimated available sum amounts to14,968,000. 6 proposals have been approved to this day, (total cost:9,605,995, total HiPERB funding: 2,861,564). Four of those havealready been completed. The rate of absorbance is estimated at 19.11%

and 660 new jobs have been created. Small Projects Fund: The estimated available sum amounts to 748,400. 8proposals have been approved to this day for projects of a total cost of302,700. These are mostly projects of a social nature: purchase of first-aid mobile units for Skopje, Bitola and Tetovo, provision with medicalequipment, etc. The rate of absorbance is 40.44%.


17/40


HiPERB- Actions by Country-Montenegro:

Public Investments: The estimated available sum amounts to13,825,000. The proposal relating to the funding for the regeneration ofthe oncology clinic of the Montenegro-Podgorica Hospital (renovation,additional work and purchase of equipment for the oncology clinicsshort-term treatment ward, total cost: 1,342,600, HiPERB contribution:1,042,600).

Private Productive Investments: The estimated available sum amounts to3,500,000. No application for private investment subsidies has beensubmitted as yet.

Small Projects Fund: The estimated available sum for the Small Projects

Fund amounts to175,000. Three small projects with a total cost of35,560 have been funded to this day. The rate of absorbance is

20.32%.


18/40


HiPERB- Actions by Country-Serbia:

Public Investments: The estimated available sum amounts to183,675,000. 2 proposals have been approved to this day: i) Theconstruction of the part of the Pan European Corridor X between Nis(Serbia) and FYROMs borders, of a total length of 74.6 km (total budget

of 475,060,095 million; HiPERBparticipation estimated at 100million), and ii) the SeeLight project (South-East European LambdaNetwork Facility for Research and Education/Interbalkan optic-fibrenetwork infrastructure for research and education), an optic-fibrebroadband network for the interconnection of academic communities, ofa total cost of 6,125,842 and HiPERB participation estimated at

4,900,674.


19/40


Private Productive Investments: The estimated available sum amounts to46,500,000. To this day, 8 private investment subsidies have beenapproved, of a total cost of 20,426,300. The total funding is worth6,144,487, accounting for 13.21% of the budget and creating 375 newjobs.

Small Projects Fund: The estimated available sum amounts to 2,325,000.Thirteen projects of a total cost of 422,410.77 have been approved, tenof which have already been implemented to this day.These projectsconcern building and school repairs, support for elderly homes andhospitals, repair of a small dam, etc.The rate of absorbance is 18.16%.


20/40

TRADE RELATIONS AND FIGURES OF THE GREEKECONOMY

Total value of Greek trade at 72,670 million in 2007. Development of Greek foreign trade by geographical region and

country.. Exports:

Value of Greek exports at 17,1483 million in 2007, up by 4%

Greek exports to Bosnia-Herzegovina, Croatia,Romaniaand Bulgaria. Imports:

Growth rate for Greeces imports almost double than that of exports

Imports from Albania and Bulgaria


21/40

GREEK ECONOMIC DIPLOMACY-ENERGY SECTOR

In the oil sector: Promotion ofthe Burgas - Alexandroupolioil pipeline project (BAPproject)


22/40

GREEK ECONOMIC DIPLOMACY-ENERGY SECTOR

In the natural gas sector:Ageopolitical project of majorimportance, the SouthEnergy Corridor will beimplemented.


23/40

OVERVIEW OF THE GREEK BANKING IN LIGHT OF THE GLOBALECONOMIC CRISIS

Greek banks had very little exposure toinstruments associated with the USsub-prime mortgage market

Impact from the international turbulencewas limited and indirect

Competition in the domestic Greek bankingmarket is becoming more intense andthe cost of financing is increasing

Although the crisis initially had little effect onbanks beyond reduced liquidity, Greekbanks remain vulnerable to internationalturbulence through their exposure in theBalkans, especially in Bulgaria,Romania and Turkey, if the economicsituation in these economies were toworsen substantially

As the chart illustrates, Greek and Austriancommercial banks are most heavily

exposed to countries in central, easternand southeastern Europe. They bothhad the highest share of lending as apercentage of annual GDP of all EUcountries in 2008, namely a staggering76.7 percent 49.3 percent respectively

Source: Dr Jens Bastian, Reaching out in atime of economic crises. External anchorsand internal dynamics in South EastEurope, Guest LecturePresentation in

Masters Degree in Southeast EuropeanStudies, Athens, N0vember 23rd 2009.

2 69

1 81 2

9 .

1 7

4 92 1

B e l g i u m

S w e d e n

I t a l y

A u s t r i a

G r e e c e

F o r e i g n B a n k L e n d i n g i n


24/40

OVERVIEW OF THE GREEK BANKING IN LIGHT OF THEGLOBAL ECONOMIC CRISIS

This chart further underlines the depth ofGreek banks exposure (i.e.investments and loans) in the region ofsoutheastern Europe.

At the end of 2008, the combined exposurein seven countries of the region(including Turkey) had reached 52.8billion euro.

Broken down into individual countries, suchexposure levels reached 28,7 percentmarket share in Bulgaria, 27,1 percentin Albania and 24,6 percent in FYRMacedonia.

Put otherwise, Greek banks are not onlyheavily invested in the region, but havealso become strongly dependent onthese countries economies returning toshort-term stability and long-term

viability.Source: Dr Jens Bastian, Reaching out

in a time of economic crises. Externalanchors and internal dynamics inSouth East Europe, Guest LecturePresentation in Masters Degree inSoutheast European Studies, Athens,N0vember 23rd 2009.

E x p o s u r e o f G r e e k B a

1 0

0 .

1 .

1 5

4 .

B u lg a r i a

C r o a t i a

M a c e d o n i a

R o m a n i a

S e r b i a

T u r k e y


25/40

PROSPECTS OF THE GREEK ECONOMY

Gross Domestic Product (GDP) at market prices (2008): 239.141 million . Gross National Income (GNI) at market prices (2008): 231.285 million . Net National Income (NNI) at market prices (2008): 202.075 million . Net National Disposable Income at market prices (2008): 201.406 million . Net Saving (2008): -12.183 million . Net Lending (+) /Net Borrowing (-) (2008): -29.621 million .

Imports-EU Countries (Oct.2009): 2.361.5 million . Imports-Third Countries (Oct.2009): 967.3 million . Exports- EU Countries (Oct.2009): 765.8 million . Exports- Third Countries (Oct.2009): 466.7 million . Budget Deficit (as forecasted in 31/03/2009): 3.7% of the GDP. Government Dept (as forecasted in 31/03/2009): 99.6% of the GDP.

Source: National Statistics Service of Greece


26/40


Although it wasnt a surprise,the downgrade of sovereign debt byFitch to triple B-plus still came as a shock.

The EUs authorities, rightly or wrongly, are more afraid of the moralhazard of a bail-out than the possible spillover effect of ahypothetical Greek default.

Greece needs to complete the structural changes, such as pension

and labour market reforms, pledged when it joined the euro buthardly begun.

The Greek economy has admitted that swift action is needed tobring the budget deficit under control and rebuild confidence in itsbond and stock markets.

Greeces prime minister, George Papandreou, acknowledged to his

fellow European Union leaders that the Greek public sector wasriddled with corruption. He said: Our basic problem is systemiccorruption.


27/40


Economists and bankers have warned that Greece mustannounce bold initiatives in the next few days torescue its collapsing bond market and avert default onits public debt.

The Greek government has announced a crackdown oncorruption and tax evasion in response to pressurefrom the European Commission and European CentralBank to accelerate economic reforms.

The Greek Prime Minister (PM) has announced 90 per

cent tax on bonuses for senior bankers in the privatesector and a ban on bonuses for executives at publicsector corporations.


28/40



29/40



30/40



31/40



32/40



33/40



34/40



35/40



36/40



37/40



38/40



39/40



40/40


the economy of greece:challenges and prospects

Documents