Modeling Economic Growth in Contemporary Greece

Greece's slow recovery from the severe economic depression caused by the great global financial and economic crisis that erupted in late 2000s was interrupted by the effects of COVID-19 pandemic on economic activity. This chapter looks into the factors shaping Greece's competitive position and discusses the potential to achieve a V-shaped recovery at the end of the pandemic.

Greek economic adjustment and memoranda austerity lasted for 10 years followed by intense academic and political debate over their impact on Greek society. Macroeconomic stabilization succeeded in nominal terms but to the detriment of growth drivers and social welfare involving asymmetrical and high social cost.

The article presents the key growth challenges after March 2020, taking into account the COVID-19 disastrous impact. From an institutional point of view, transaction cost reduction, attainment of market credibility, trust and confidence, and improvement of economic and social cohesion, remain doubtful in the long term if macroeconomic stabilization not collides with export-oriented growth and structural reforms.

The term “economic growth” refers to the increase of real gross national product or gross domestic product or per capita income. National income or else national product is usually expressed as a measure of total added value of a domestic economy known as gross domestic product (GDP). Generally, GDP measures the value of economic activity within a country during a specific time period. The current study aims to find the most suitable model that adjusts on a time-series data set using Box-Jenkins methodology and to examine the forecasting ability of this model. The analysis used quarterly data for Greece from the first quarter of 1995 until the third quarter of 2019. Nonlinear maximum likelihood estimation (maximum likelihood-ML) was applied to estimate the model using the Broyden-Fletcher-Goldfarb-Shanno (BFGS) algorithm while covariance matrix was estimated using the negative of the matrix of log-likelihood second derivatives (Hessian-observed). Forecasting of the time series was achieved both with dynamic as well as static procedures using all forecasting criteria.

This paper discusses the nominal and real convergence regarding Greece being a country-member of the European Union (EU), and of the Economic and Monetary Union (EMU). We argued that nominal convergence is relative to Maastricht criteria when real convergence has been investigated through six different axes: (1) the five Maastricht Criteria, (2) the GDP per capita in PPP prices, (3) the real GDP growth rates, (4) the minimum wages, (5) the HDI index development, and (6) the unemployment rates. We concluded for the case of Greece that by utilizing alternative indicators, such as the Maastricht criteria, and the above criteria only nominal convergence exists while real convergence appears to be a long-term target with many obstacles. In particular, Greece has managed to achieve the criteria proposed by the EMU (Maastricht Criteria) for membership, decisively different levels of unemployment, wages, and GDP growth rate/GDP per capita in PPP prices, and different human development indexes appear for the case of Greece.

In this chapter, we investigate the interactions between governance quality and economic development. More specifically, we analyze how the institutions through which state authority is exercised influence the level of economic development. In that respect, governance could be considered as a quasi-factor of production which affects the country's economic growth and development, an issue that lies in the heart of institutional economics. The effect of governance on economic development is mainly played out via two channels. Namely, the quality of democracy, distinguished in political rights and civil liberties, and the level of corruption, associated with the exercise of state authority. Good governance is in principle associated with a high quality of democracy and a low level of corruption. Both generate positive effects on the level of economic growth and development, mainly due to their impact on state effectiveness and private and public investment. At the same time, there also exists an inverse causality: the level of economic development affects positively the quality of democracy and negatively the level of corruption which in turn tend to improve the quality of democracy. These coexistent mechanisms are associated with crucial policy issues which are largely neglected by the traditional theory of economic growth.

This paper explores the fragmented social policy choices imposed in Greece during the turbulent period 2010–2020. The institutional, political, and economic crisis brought in the enforcement of huge austerity reforms provoking deep socioeconomic devaluation: in GDP, in available income, in job opportunities, in living standards, in social protection. The decade is marked by a couple of mismatches diminishing welfare provision and mounting social need, inexpedient national administration, and unbalanced international intervention. A major cause of the national bankruptcy has been the stark imbalances of a residual social policy system which never aimed at tackling inequalities, challenging market outcomes, or fighting poverty. A fractured system distributing welfare according to individualistic/corporatist criteria, preserving a clientelistic/corrupting pattern, focusing upon an unfair/irrational pension provision. At a first sight, the urgent changes during the crisis have reinforced residualism, deregulated social/labor rights, reproduced inadequacies, exacerbated the discontinuities with the European Social Model. At a second reading, they have also recalibrated the system embracing elements of universality, unity, rationality, sustainability, and equity. In sum, the 2021 social policy starting point provides modest protection and keeps complexities, contradictions and controversies. The crisis imposed a welfare strategy of cuts that has produced less provision, stricter conditions, more harmony, dubious viability, dribs, and drabs of justice. The pandemic health crisis gives now prominence to the neglected but crucial role of the NHS and, in a broader sense, to the vital importance of institutionalised welfare provision.

During the crisis, the Greek labor market went through major changes in terms of employment, unemployment and wages. The economic activity registered a cumulative decline of around 25%, weighting heavily on the labor market. The unemployment rate showed a substantial increase, with signs of persistence and the employment rate fell substantially. Utilizing a unique dataset, the European Union Structure of Earnings Survey (SES) the paper examines the evolution of wages over the period 2010–2014. During that period, the economic adjustment programs to deal with the chronic deficiencies of the Greek economy and restore sustainable public finances, to gain competitiveness and set the foundation for long-term growth, were implemented. Data refer to 2010, when the first elements of the program were beginning to be executed, and to 2014 when the crisis had already unfolded. Results point to a reduction of average wages across industries, even after controlling for personal and workplace characteristics. Amid a wage decrease at the mean, there is evidence of a divergent wage evolution between sectors of economic activity during the crisis. Furthermore, we find that wage premia that have persisted in the Greek economy during the same period are not disproportionately captured by employees at the upper end of the conditional wage distribution.

The main purpose of this chapter is to explore whether and how the productivity of SMEs is affected by qualified human capital, digital capabilities, and innovation activities. In doing so, we use a rich data survey of 3,500 Greek SMEs in the year 2012 and we perform conditional quantile regression analysis. The main findings of this study suggest that although human capital knowledge, ICT infrastructure, and organizational innovation are significantly affecting productivity at the mean of the distribution, the effects are highly differentiated in the quantiles. Thus, qualified human capital facilitates substantially the productivity of SMEs only in the middle and the higher quantiles of the productivity distribution. In addition, SMEs in some high and low quantiles seem to increase their productivity when they participate in R&D collaborations. Furthermore, a higher degree of ICT infrastructure and organizational innovation favors the labor productivity of SMEs in the low and middle quantiles. On the contrary, the internet usage by the employees of SMEs at the lowest quantile is harmful for their productivity. SMEs should adopt the most appropriate policies to increase productivity and enhance performance.

Competition law is key to the promotion of consumer welfare and consumer choice, efficiency maximization, market integration, market liberalization, and competitiveness. The review of the evolution of competition law enforcement in Greece shows that it has run in parallel with the path of the Greek economy toward liberalisation modernisation, development and growth. Upon this basis, competition law has contributed to increased levels of investment in the Greek economy, the development of new services and new corporate structures and accountability in Greece. In a fast changing world, in which market and societal development is increasingly interdependent across national borders, the question now turns on to whether competition law enforcement in Greece ought also to take into account public policy objectives, such as environmental protection and sustainability or industrial policy objectives. The competition law enforcement authorities and national Courts have made great progress in the last 20 years in keeping abreast with developments in respect of competition law compliance and enforcement and this has provided a better guarantee for a level playing field and fairer conditions of competition in the various product and services markets in Greece.

The Greek sovereign debt crisis had a substantial impact on the real economy and the Greek banking sector. From a period of growth in the economy and high levels of profitability, Greek banks experience a major decrease in demand in the local market, and a large increase in non-performing loans. This had a negative effect on the financing of the Greek firms and households, especially after the PSI and the recapitalisations of the Greek Banks. The Greek banking system has been restructured into four large systemic banking groups and after a long time of depression, the efforts are now being directed into restarting the economy through the financing of firms and individuals. However, the recent and on-going experience with substantial volumes of non-performing loans and strategic defaults, poses many challenges. The same can be said for stricter regulation that was introduced in the aftermath of the financial crisis, business model transformation, developments in the fintech and IT arena, and most recently COVID-19 pandemic, all introducing challenges to bank managers. This chapter provides an overview of these issues.

Since Greece became a member of the EU and after the implementation of plethora of structural funds programs regarding the agricultural sector, the situation has remained more or less the same as far as the structural characteristics of the agricultural sector is concerned.

The agricultural sector in Greece accounts for €6.67 billion and contributes 4.3% to the total GVA which is double compared with the average European one (1.6%). The Agricultural Factor income per annual work unit (AWU) has reached 94% of the EU average. During the economic crisis (2009–2013) the value of this index decreased 22% while in the next years an upward trend followed and in 2019 reached the same level as before the economic crisis. During the period 2005–2018, productivity in Greece showed moderate and negative TFP growth numbers while in the same period, the TFP growth was stronger in the EU presenting an increase of 10%. The trade balance of agri-food products in Greece is negative, although recently this trade deficit has been reduced following an improvement in the agri-food sector's export performance. The value of agri-food products exports amount to €6.04 billion, which are the third largest category of exported goods. Also, the value of exports of manufactured products rose 70% during the period 2009–2019 against the exports of commodities, which also rose with a lower rate (25%), something that it is positive for the Greek economy, given the higher added value of manufactured products. Under the current Common Agricultural Policy Action Plan (2014–2020), Greece has a guaranteed flow of around €20 billion for direct support of agricultural income through direct payments (Pillar I) and has earmarked €15 billion and the remaining €5 billion under the Rural Development Program, (Pillar II). However, the direct payments are not allocated fairly.

The COVID-19 pandemic crisis hit the entire Greek economy and the agri-food sector which has just recovered from the recent economic crisis. However, during this crisis, the Greek agro-food chain has demonstrated great resilience to guarantee the supply of food to consumers. In the era of COVID-19, the key factors that can be employed by agri-food industry as a strategy for penetrating in global markets, are (1) Focus on developed markets, (2) Marketing in branded form (not bulk), and ideally emphasis on the uniqueness of the raw material, and (3) Sufficient volume of products to gain a leading share in the premium segment of the market. In addition, knowledge and innovation have a key role to play in helping farmers and rural communities meet future challenges. Finally, the only way in order to achieve economies of scale in the agri-food sector is to increase the level of cooperation at all levels by any available means.

Energy policy and sector developments in Greece in the last decades reveal the government and investors' intentions to exploit the energy resources and production potential of the country. Developments regard renewable and hydrocarbon energy sources. Agreements with international companies come with economic terms attached and the prospect of related sectors' development, employment generation, research and innovation. Developments, particularly those related to hydrocarbons exploration, take place in times of climate change mitigation and adaptation and actions to ensure environmentally, socially, and economically sustainable development in line with the goals set out in the United Nations Agenda for 2030 and the European Green Deal. Given these challenges, the design and implementation of timely policies that can promote local supply capacity appear to be of primary importance. This chapter discusses the challenges and opportunities of designing and implementing local content policies with the intention to derive useful policy considerations. The discussion draws from the latest developments with hydrocarbons exploration and production activities in Greece and from the recent relevant to local content literature. The analysis concludes that in the face of climate action, rapid technological innovation, and the high capital intensity that characterize the sector, knowledge transfer, and education upgrade emerge as important factors of achieving sustainable growth through local content policies.

The tourism industry in Greece has come a long way since its beginning as a distinct economic activity to reach the recent impressive results. It is a sector that has grown remarkably and became a major source of growth for the Greek economy. As such this chapter aims to discuss the importance and the potential of the sector, the unique characteristics of the Greek tourism industry and the future challenges ahead. Tables and suitable graphics are provided to visually enhance and inform the discussion. A wide range of articles, journals, books, and electronic sources has been reviewed to present as accurately and up to date information as possible. This chapter can therefore prove useful for academics and non-academics to use it as a reference point for the tourism sector in Greece.

The aim of this chapter is to explore the economic impact of the ICT sector in the Greek economy. In the first stage of this study, the ICT sector is identified as a composite agglomerate of various manufacturing and service industrial sectors of the economy, following its international definition introduced by OECD. Under this concept, we explore the main structural indicators of its business activity and quantify its impact in the Greek economy (in terms of production value, GDP, investment, and employment), utilizing the basic principles of Input-Output analysis. We further investigate the ICT sector’s linkages with other industries as a ‘route’ for technology and innovation diffusion in the Greek production system by approximating the ICT sector as the enabling force for the digital transformation of production in the face of Industry 4.0. The empirical results of this analysis are accompanied by a review of some key qualitative characteristics of the sector and elaborate on major challenges and relevant policy implications that arise.

The contribution of the Greek transport industry to the country's GDP has been well over the EU average. The industry is of vital importance to the efficient operation of local, national, and international economic transactions and is responsible for almost half of the value added to the Greek economy by its tourism industry. Despite its significant contribution to Greek economy, the industry is facing challenges and has not achieved its full potential. This chapter provides an overview of the transportation and storage industry and examines its general institutional framework and its overall performance, before focusing on specific policy issues for each transport mode, namely air, rail, road, and maritime transport.