Press Conference remarks by Angel Gurría
19 March 2019 - Athens, Greece
(As prepared for delivery)
Deputy Prime Minister, Ministers, Ladies and Gentlemen,
It is my pleasure to share with you today some of the preliminary findings of the OECD Territorial Review of Greece.
I am grateful to Deputy Prime Minister Yannis Dragasakis for being here. Your presence demonstrates the priority Greece has given to regional development policy and to their partnership with the OECD.
The Territorial Review aims to provide a comprehensive diagnosis and tailored policy recommendations on how to make the most of cohesion policy post-2020. This work started only few months ago, at the request of the Ministry of Economy and Development and with the support of the Structural Reform Support Service of the European Commission (SRSS), and is expected to conclude in the second quarter of 2020. Today, I am happy to share with you a preview of what to expect.
At a time when Greece is recovering from a deep depression, the role of regional policies to promote inclusive and sustainable growth becomes crucial. The Greek economy is bouncing back with growth reaching 2% in 2018 and expected to reach 2.1% this year; unemployment – although still high – is edging down to around 18%, with new jobs being created every day; tourism is experiencing record numbers with 27 million arrivals in 2017 and 33 million in 2018; minimum wage has been raised for the first time since 2012.
Despite these improvements, Greece continues to face important challenges. Among them are persistent economic and social disparities across Greek regions. Greece ranks 9th in term of highest regional GDP per capita disparities among 30 OECD countries with comparable data. In 2016, the level of GDP per capita in the capital region (Attica) was twice as high as in East Macedonia, the region with the lowest GDP per capita in the country. The gap in GDP per capita between the richest and poorest Greek regions has increased over the last sixteen years.
In the years of the crisis, Greek regions lost, on average, a third of their GDP per capita. This loss in itself shows the potential for improvement. The greatest declines in productivity occurred in remote islands, but also in Western Greece and in Attica. Each region proved vulnerable to the crisis because of specific factors.
Take Attica for instance: the region is home to Athens, the largest metropolitan area in Greece with over a third of the national population. It used to concentrate most of the country’s productivity growth, relying mostly on non-tradable services and construction, both of which were severely affected by the shocks. The region also lost 6% of its manufacturing jobs between 2008 and 2015.
Not surprisingly, this has had devastating effects on the local and national economy. Attica’s economic decline was so sharp that “lagging” regions are now converging to Attica’s current productivity level - which remains below its potential. This is obviously the “wrong kind” of convergence!
Our Review also shows that a number of additional factors are affecting the growth and productivity potential of Greek regions.
Accessibility is one. Around a third (32%) of Greece’s population lives in rural areas and the vast majority of this rural population (89%) live in remote regions. Across the OECD, this is comparable to such countries as Norway, Iceland, or Finland. Moreover, Greece has around 6 000 islands and many mountainous areas. As a result, a quarter of the population cannot reach a town with at least 50 000 inhabitants within an hour travel time (by any mode). This matters because larger agglomerations have more dynamic and diversified economies and a greater range of services available, such as health care, post-secondary education institutions and various amenities.
Demography is another factor challenging growth. Greece’s population is shrinking and ageing. This trend is common to many OECD countries, but in Greece, even the large cities have lost population: almost 90% of the population losses over the past decade are actually located in Athens and Thessaloniki. The decline in the working-age population is even larger.
High unemployment is an additional challenge. Jobs outcomes for the well-being indicators of all Greek regions are in the bottom 20% of OECD regions. The youth unemployment rate in Epirus region of northern Greece reached 57.6% in 2017, almost twice the level in Southern Aegean and among the highest of all OECD regions. In comparison to pre-crisis levels, Greece’s regions have the highest rates of unemployment among all European regions. Thus, while there are structural challenges, the potential for resuming jobs and growth can and should be mobilised.
To address many of these challenges, a new place-based development policy is needed. This will enable regions to capitalise on their strengths and contribute to national performance. To achieve this, our Review’s preliminary findings indicate that it will be crucial to advance on a number of parallel tracks. Let me highlight two at this stage:
First, modernising low productivity industries and sectors. Greece has increased its participation in GVCs, with 50% of Greek exports consisting of intermediate goods, but it remains below the OECD average of around 62%. As such, new investments are needed to generate value chains at the local level and to support projects that will link regionally dynamic sectors such as tourism, the food industries, the transport sector, agriculture and cultural industries . In this context, EU structural funds have been key to supporting public investment and GDP growth and are crucial for the years ahead.
And second, ensuring subnational governments have the capacities to become key players of regional development and investments. The 2010 Kallikratis reform created thirteen self-governed regions with new powers, notably in the area of regional planning, employment and education. However, decentralisation reforms have outpaced improvements in local fiscal and administrative capacity.
Regions and municipalities face specific challenges in terms of quantity and quality of staff. Many are understaffed and their staff sometimes lack specific skills, such as, the use of new technologies. Targeted training, peer learning between regions and municipalities, and a clearer division of responsibilities across levels of governments would help subnational governments to develop their human resources and management systems.
Ladies and Gentlemen,
The potential of Greece’s regions, cities and rural areas to help consolidate the economic and social recovery is immense. As you forge ahead, the OECD remains committed to working with you and for you in designing, developing and delivering better policies for better lives. Thank you.