Bell from the Commission for the high external deficit and poor investments
Returning a few days ago from the Council of Finance Ministers of the European Union (ECOFIN) o Kostis Hatzidakis he presented – as always – a rosy picture for the Greek economy, claiming that the European body found that Greece is doing well in terms of absorbing the Recovery Fund money, as it has collected 50% of the funds allocated to it and added how, especially with regard to public debt, while as an EU average it is increasing, in Greece it is decreasing, as from 180.6% of GDP in 2019 it was 161.9% of GDP in 2023.
However, the text that the EU finance ministers approved for our country in the context of the European Semester 2024 (In Depth Reviews) outlines a different story, as it rings a warning bell about the persistently high external deficit of the Greek economy, linking it directly to the its investment poverty and low productivity.
He certainly acknowledges that there has been a reduction in the public debt – although due, as he explicitly mentions, to high inflation – since in absolute numbers the debt is still increasing, now approaching 356 billion euros. It also recognizes that the country has a primary surplus. However, he hurries to record as the biggest problem for the Greek economy today the high external deficit, which, despite the fact that in 2023 it closed at 6.4% of GDP, retreating from the inconceivable levels of 10.3% of GDP that had been found in 2022, it still remains much higher than before the pandemic and five percentage points above 2019 levels.
Productivity gap
The reason why the external deficit is at these levels, explains the Commission, has to do with the productivity gap that separates it from the rest of Europe. In previous years, he continues, Greece improved the competitiveness of the economy and succeeded in increasing the share of exports in GDP, but all the gains in competitiveness came from wage cuts while the increase in exports was mainly through services, i.e. tourism and international transport, and not from the increase in goods exports.
Greece has not managed to increase exports of goods because the competitiveness of the Greek economy remains low, as business investments are low. Specifically, the report states, while before the crisis e.g. with data from 2008 business investments in Greece were at 24% of GDP, at levels comparable to EU averages, from 2010 onwards, with the crisis, they collapsed and despite the increase they have recorded in recent years, they still remain and today (2023) below 15% of GDP, at particularly low levels compared to the EU (22.9%) and Eurozone (22.7%) averages.
At the bottom of the EU
Without investment, however, the productivity of the Greek economy is stuck at one of the lowest levels in the EU, with the result that Greece diverges instead of converging with the rest of Europe. “Greece’s GDP in purchasing power units per working hour in 2023 was just 57.4% of the EU average,” the report says, meaning that despite the government’s claims of strong economic growth, the country has a significant gap productivity with the rest of the EU – and in fact magnifies it, and the more it magnifies the more it sinks.
Furthermore, the competitiveness rankings suggest that the Greek business environment – despite what the ND government says – is still less attractive than in most EU countries.
Where does the Commission’s report end? In what they write and rewrite, especially from 2010 onwards, most Greek economists: the Greek economy does not produce; it imports, it depends on abroad even for the capital goods and equipment it needs, and as long as this does not change it remains vulnerable to all sorts of external shocks, from a global financial crisis to logistics problems
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