Greece, which has been under an internationally coordinated adjustment programme since 2010, has made impressive headway in cutting its fiscal and external imbalances and implementing structural reforms to raise labour market flexibility and improve labour competitiveness.
The depression has however been much deeper than expected, which has undermined debt sustainability and induced a dramatic rise in unemployment, which affected more than 27% of the labour force at mid-2013. Economic growth is held back by weak domestic and global demand, difficult access to credit and limited macroeconomic policy room for manoeuvre. Slow product market reforms restrained price competitiveness and exports in the recent past, but there are signs that the fall in unit labour costs has started to pass through to export prices and competitiveness.
A recovery is in sight. Encouraging economic developments in mid-2013 related, inter alia, to a good tourism season are expected to continue through 2014. However, risks are still on the downside. The fiscal stance will remain restrictive, although less so in 2014 than in the past few years. Together with the additional adjustment needed on the fiscal side and for boosting price competitiveness, the need for further assistance to achieve fiscal sustainability cannot be excluded.
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Dealing with growth obstacles through further structural reforms
Major structural reforms have been introduced in several domains, but more needs to be done.
Major restructuring and recapitalisation of banks have provided the basis for credit provision to the economy. However large portfolios of bad assets continue to weigh on credit supply, especially to small and medium enterprises (SMEs).
Although administrative burdens have been already somewhat reduced, remaining product market impediments continue to hinder further improvements in price competitiveness, and further reallocation of resources towards exports is needed.
Reform of the public administration has been slow; however efforts to address the serious inefficiencies of the large public service have recently accelerated. Tax evasion remains a key concern. The judicial process is improving, but it is still slow and costly although important reforms in legislation and procedures have taken place. Continuous monitoring and evaluation of the reform process is of crucial importance.
Fairly sharing the costs and benefits of adjustment
Fairness needs to remain a fundamental part of the fiscal and economic adjustment.
Despite fiscal measures which cushioned the impact on inequality, the recession and fiscal consolidation have worsened income distribution and poverty as unemployment has risen and real incomes have declined. The social impact has been aggravated by the lack of a general safety net and low and poorly targeted non-pension social spending.
Recent and proposed measures, including a pilot programme of means-tested minimum income and a change in the scheme for long-term unemployment benefits, should improve the targeting of support to the neediest. The governance of social programme is a challenge. Health care has suffered in the crisis and, despite reform measures that rationalised spending, inefficiencies remain.
The sharp rise in the unemployment rate, especially for the young, has not been adequately matched by activation policies. At the same time, it is important to strengthen the effectiveness of the labour inspection to ensure that the labour market liberalisation, implemented to promote competitiveness, does not risk a deterioration of working conditions.
How to obtain this publication
The complete edition of the Economic Survey of Greece 2013 is available from:
For further information please contact the Greece Desk at the OECD Economics Department at email@example.com.
The OECD Secretariat's report was prepared by Claude Giorno and Vassiliki Koutsogeorgopoulou under the supervision of Piritta Sorsa. Research assistance was provided by Isabelle Duong.