The recovery of the Greek economy

Against the recession there is a simple recipe: growth. Everyone is talking about it. But only a few bother telling us how it can be achieved. Here we will try to describe in plain words the real condition of the Greek economy. Where we are and how we got here.

An honest assessment is always a good starting point. Only in this way will we be able to initiate the recovery of the Greek economy. We will start considering a number of factors that affect economic growth, so called “growth indicators”.

Work and productivity

According to Eurostat, Greeks work on average more hours a week than any other European. This made a huge impression to the citizens of Europe and explains why Greek citizens do not feel like they are responsible for creating the economic crisis. However, if we observe the corresponding indices for labor productivity, we see that Greeks are in the 18th place in a European Union of 27. Greeks work a lot, though unproductive.

To better understand this point, let us try to give a definition of the term ‘productivity’: we define productivity as the amount of work (in hours) required for the production of a specific output (product or service). An increase in productivity depends, among others, on improving the skills of the workforce, on advances in technology, on new forms of organization and on an effective public administration. So, to improve productivity, it is essential to use the resources and production processes efficiently. Harder work is less important.

Competitiveness and growth

In November 2011 Time magazine published an article from Stephen Gandel with the tricky title “The deregulation myth”. The writer analyzes official data from OECD, IMF and the World Bank and comes to a striking as well as surprising result: The states with the highest growth rates do not necessarily display the highest indexes for competitiveness! To calculate the competitiveness index, one has to consider various indicators, such as the number of regulatory acts for entrepreneurship, the level of taxation, the time for setting up a business, etc.

For example, the most business friendly countries/zones were found to be Singapore, Hong Kong, New Zealand, US and Denmark. And yet, the highest growth rates were displayed by countries such as China, Indonesia, Brazil, Argentina and Russia. Consequently, the flow of capital and foreign investment is not discouraged by political instability or complexity of the business environment (up to a reasonable margin). So, apparently, the factors that determine the attractiveness of a modern economy need to be sought elsewhere.

The growth indicators

In the respective indexes the US may maintain top positions, but in reality US economy lacks significantly in competitiveness compared to countries such as China, Taiwan and South Korea. This is also true in technological sectors, where the US has been for decades the world leader. The reason is not obvious at all, because, especially in technological products, wages are just a small fraction of the total product cost, which additionally includes the cost for research and development, promotion, distribution, etc.

Beyond low wages, Far East countries offer a broad range of accompanying infrastructure and services to facilitate industrial production. We name them here “growth indicators”.  So, in just a few years these countries succeeded in gathering the biggest part of the world’s electronics production.

These growth indicators are:

a) Stable tax environment,

b) Organized industrial areas,

c) Dense networks of suppliers,

d) Intermodal transport,

e) High degree of specialization,

f) Sufficient number of technical staff,

g) Flexible working schemes etc.

What happened in Greece?

The Greek entrepreneurship has found itself at a turning point. One could say it undergoes a deep transformation. Already in the 90s a lot of enterprises diagnosed the approaching dangers of globalization. To survive, they moved their production facilities to countries with low labor and tax costs, mainly in the Balkans. At the same time, they took advantage of the fact that Balkan countries were virgin markets.

Greece is not only unattractive to foreign investors, but it also suffers from disinvestment. High wages cannot be the only reason. Moreover, Greece has not managed to implement sufficiently even one of the above mentioned growth indicators. Perhaps the painful wage cuts enforced by the Troika will show some results in labor intensive sectors such as manufacturing and tourism. But in a modern and technologically advanced state it is most uncertain whether austerity measures will be able to create sustainable growth.

The gradual entering of Balkan countries into the European Union and the consequent increase in the living standards of their citizens will eliminate the most important factor that made them attractive to foreign investments. Greece should prepare the ground for the return of many Greek companies by starting to implement as many growth indicators as possible. By doing this it will encourage even more domestic and foreign direct investments.


Greeks work hard and have a strong will to succeed in restructuring their economy, but they are lacking proper organization and modern production methods. That is why Greeks abroad stand out and thrive in competitive multinational societies. At the same time, the absence of a long term strategic plan for the development of the Greek economy is evident.

Greece needs a new vision. Where do we want to be in 10 years from now? A shadow of the glorious past or an example for everyone to follow? There is no need to reinvent the wheel. It has been done before. Take Argentina for instance. After its bankruptcy in 2001 it figured at the top of global growth rates in 2011. With a plan, perseverance and patience, Greeks can do it.


This is the English version of an article that was posted on 19 February 2012 in the “Neos Agon” newspaper in Karditsa, Greece.

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