Capital Athens
Time Zone EET (GMT+2)
Country Code 30
Mobile Codes 690,693,694,695,697,698,699
ccTLD .gr
Currency Euro
Land Area 131,990 sq km
Population 11.3 million
Language Greek
Major Religion Orthodox Christianity

State of the Greek Economy: Key Sectors for a Recovery

By Ioannis Michaletos

Entering the crucial stages of the new Greek government’s discussions with the EU over financial matters, it may be worth assessing what are the strong points for possible growth, amidst the current destructively expanding crisis affecting the country. Concentrating on modernizing attitudes, state bureaucracy and addressing other issues might pay dividends in several sectors.

A Negative Picture

The projection of the Greek economy, based on available figures, paints a grim picture. A public debt of 175% of GDP, coupled with a minus 30% overall GDP decrease since 2009, together with a crippling official unemployment rate of 27%, do not inspire confidence.

Concurrently it is roughly estimated that up to 150,000 Greeks have emigrated over the past five years, most of them specialized personnel, doctors and scientists who have found new opportunities in developed countries such as the UK, Australia and Germany but also Dubai, Norway and China. This deficit of skilled expertise in vital fields is already having an adverse reaction for Greek society, affecting health care and the future of innovation.

Added to all the above is the crash of the stock market – which has lost more than 80% of its value over the same period – and the virtual exclusion of the Greek state from the private bond market. From this it is clear that the prospects are seriously negative and signal a default of some kind, bearing in mind that negotiations with the EU have been gridlocked for months now.

Nevertheless, despite these negative factors, the following sections present the actual strong points of Greece’s Balkan-Mediterranean economy, which may signal mid- to long-term progress and economic development. There are a number of strong areas which, if exploited beneficially, could seriously boost the country’s GDP for years to come.

The Tourism Sector

Tourism constitutes a large segment of Greece’s GDP and is an integral part of the local economy. Despite high figures (23 million visitors expected for 2015), the Association of Greek Tourism Enterprises (SETE) estimates that the tourist industry could be tripled, since the country currently uses only 35% of its capacity. Especially for the Athens region, which received 6 million tourists per year, a number of some 20 million could be accommodated, local pundits speculate.

The main issue regarding the under-exploitation of the local tourism project is that it is concentrated heavily on the summer period, as it still is based on the principles of sea, sun and entertainment. Failing to adequately diversify its offerings, Greece has thus neglected to significantly develop other expanding segments of international tourism that could be very easily adopted to the local environment.

Thus there are several sub-sectors were entrepreneurship is needed, such as: medical tourism, religious tourism, marine tourism, agro-tourism, mountain tourism, educational tourism, sports tourism, conference tourism, spa tourism, camping & trekking tourism, culinary tourism, scuba diving tourism, city break tourism, wellness tourism and further boosting of the cruise travel within the Greek seas. Some of these were already spelled out in a European Commission report from 2011.

In that same year, it should be remembered, Greece enjoyed a short-term influx of ‘new’ European tourists (particularly French) who cancelled their traditional visits to North African countries due to the ‘Arab Spring’ disruptions and the Libya NATO bombings. Due to the continued unrest there, Greece could again have a short-term influx this summer, but this must also be weighed against the rise in immigration that is feeding negative opinions of Southern Europe in the north of the continent at the moment.

In the future, the economics of a long-term project of tripling the visitors of a tourism product (and quadrupling potential revenues) for the country are enormous. From a roughly 20 billion euro annual revenue to 80 billion euros would constitute an extra 600 billion euros in a decade- almost three time the current GDP of the country.

Present day high taxation, irrational and numerous bureaucratic regulations and lack of sustainable business models and leaders prohibit such growth, critics have argued. But an increase is achievable, bearing in mind that the original “tourism wave” in the country which started in the late 1950’s took place in a much worse environment, at a time when Greece was characterized by a lack of infrastructure, specialized personnel and capital. Things are certainly much better now in these respects.

New Technologies Sector

Over the past 25 years, considerable infrastructure needed for new technologies has been developed in Greece and a significant rise of specialized professionals has been noted. Already some of them have developed applications and software comparable to any other product from similar professionals internationally. Nevertheless the lack of capital and the deficiencies of the local market (bureaucracy, over-taxation, lack of managerial skills) have burdened the expansion of the sector.

Moreover, due to the high unemployment in the country and the aforementioned burden for opening start ups on a large scale, one can find Phd-level computer engineers or highly trained, master’s graduates from Greek and foreign universities prepared to work for less than 600 euros per month. That alone opens up considerable opportunities for making Greece a launching pad for new technologies companies. Greece of course has a large geo-economic periphery, encompassing Southeastern Europe-Black Sea and the MENA region, totaling more than 600 million emerging costumers.

The advantages here are thus human resources, low cost, favorable location and established infrastructure. The disadvantages (as for most other sectors) include bureaucracy, over-taxation, lack of management skills and a lack of marketing know-how. As noted previously, a large number of specialized personnel have already left the country. Many have situated themselves in cities where a previous generation of Greek scientists resided. Although that may seem at first glance to be a disadvantage, it could become a starting point for introducing high-level expertise from those Greeks that would have the incentive of returning back to establish businesses or collaborations with those that stayed.

According to the Athens-based government agency, “Invest in Greece”, citing a report in The Economist, Greek engineers and new technology professionals are among the world’s top-20 in terms of human resources expertise. Additionally, a large part of them are multilingual and have either studied or worked abroad.

Presently the Information Technology & Communications (ICT) of the country produces an annual GDP of 20 billion euros. But that could be doubled in the coming decade, if prohibiting factors such as the ones mentioned previously are eradicated.

Agricultural & Food Processing Industries

Greece produces a set of agricultural products, well-known worldwide for their nutritious value, and in considerable quantities. It is third in the world in olive oil production and table olives, and also a major European producer on orange, wine, grapes, cheese, alcoholic beverages, grapefruit, raisins, peaches, lemons, kiwis, pistachios, fish, tobacco and other foodstuffs.

The main problem in developing this sector is the lack of management and marketing regarding the establishment of well-known brands. Such brands could be delivered in the world’s retail markets instead of being sold in bulk quantities, as is too often the cause today. This is coupled with extensive state interference and numerous regulations that prohibit newcomers. The heavy taxation on industry further obstructs investments.

For example, one liter of high-quality olive oil is sold for around 3 euros as a bulk product. But if packaged and marketed as a brand retail item, it could be sold for 30 euros in some retail global markets. However, this largely depends on brand awareness and fluctuations of demand; there is also a price ceiling that producers know all too well. In the United States, for example, Italian olive oil still dominates the retail market and even in high-end specialty grocery shops, it is difficult to get a really high price, discouraging aspiring Greek entrepreneurs who are sometimes over-optimistic about what they can charge abroad.

Moreover the lack of well-established light industry system (and logistics), obstructs the expansion of exports and costs perhaps a few billion euros per year from the local economy.

The Greek food processing industry thus lacks sufficient established name-brands, and light industry management. As in other regional countries, therefore exports are mainly wholesale, in large quantities and at substantial discounts, whereas foreign brands (notably, Italian in oil) are reaping benefits of having established their presence in the retail markets of the large consumer states. Moreover, the agricultural sector and food industry lack a coherent bond with the tourism industry- developing one could create obvious synergies in the long-term.

The Merchant Shipping Sector

It is well known that this particular sector has been the beacon of the Greek economy for centuries. According to the latest figures from the Lloyd’s Register, the Greek-owned fleet increased capacity by 8% in 2014, and has reached by early 2015 some 4,060 ships of 315 million tons- by far the largest fleet worldwide.

Presently, 375 ships are being constructed in Chinese, Korean and Japanese shipyards. Annually, the Greek shipping sector capital inflows into the country reach around 20 billion euros, while 20% of the global shipping sector is owned by Greek citizens.

Nevertheless, there is no real “maritime cluster” environment in the country. The shipbuilding sector has been underperforming for over 20 years now, with secondary financial, brokering, chartering and professional infrastructure remaining clearly underdeveloped. This is the main reason Greek shipowners still seek those services in London, Singapore or Oslo.

Moreover maritime education in all fields is far less than expected for such a large fleet. Also, other technical facilities that would act as a support base are either lacking or remain under-exploited. Further, the maritime sports, sailing and yachting sector in the country uses little of its capacities. Notorious for its “red tape” and taxation in the above, Greece has 33 yacht marinas with a capacity of 9,000 vessels, while Croatia boasts 110 facilities and Turkey only 45. There is thus clear room for growth here.

Provisional Conclusions

Overall, industry experts assess that GDP revenues from the shipping sector in general could at least double in the country on a yearly basis, reaping another 20 billion euros for the economy, if that segment was organized more efficiently and was able to establish a cluster of secondary and tertiary activities.

All of the above are substantial areas for growth, even without examining other promising sectors such as mining (which was discussed in a 2013 Balkanalysis article). Other sectors, like logistics and real estate, are being hotly pursued by Chinese investors (as has also been discussed by recently). So all things considered, the Greek economy has indeed plenty of space to grow and facilitate a robust economic paradigm.

Achieving that would involve of course a re-engineering of the country’s traditional0 mentality, model and state apparatus, along with an opening up of its highly rigid and regulated market. Moreover it will require a change in spirit and industry of the whole of its political-business class.

Recently, the German politician Gregor Gysi, head of the “Die Linke” party (ideologically close to the ruling Greek SYRIZA party) claimed on a politics TV show that “2,000 Greek families control 80% of the Greek wealth”. Should this be correct then those few thousand people have a historic opportunity to assist the country in achieving economic goals as described above, or to risk losing most of their wealth in a course of events that will involve a default and an economic catastrophe of equally historic proportions for Greece.

It is estimated that the “make or break” period for all topics discussed is nearing and certainly will not extent further than the beginning of 2016. If Greece cannot make vigorous efforts by that time, the expected economic turnaround will not happen and the more mercenary ‘vultures’ of the international financial system will start to circle, on behalf of outside lenders. As of now, Greece can still take proactive measures, but the clock is ticking.