Economic Policies
#41Key Findings
Still hampered by the lingering effects of financial crisis, Greece remains the lowest-ranked country (rank 41) in the SGI 2019 with regard to economic policies. Its score on this measure has improved by 1.1 point relative to its 2014 level.
The effects of the pandemic arrested the country’s progress toward recovery. Following a trend of modest growth, GDP plummeted by 9% in 2020. Government crisis spending boosted the deficit to 10.1% of GDP in 2020, falling to 7.6% in 2021. Debt surged to 206.3% of GDP in 2020.
The main unemployment rate continued to fall through the pandemic from 19.3% in 2018 to a low of 13.3% in late 2021. Though still high, this is a vast improvement over the last decade. Long-term unemployment makes up the largest single share of this amount, and undeclared work is common. A new labor law increases the flexibility of work time.
Tax evasion remains widespread, and the tax base is narrow. The new government has reduced social security contributions and property taxes. R&D spending is low in cross-EU comparison. The country turns out highly skilled researchers, but is also experiencing a serious brain drain.
The effects of the pandemic arrested the country’s progress toward recovery. Following a trend of modest growth, GDP plummeted by 9% in 2020. Government crisis spending boosted the deficit to 10.1% of GDP in 2020, falling to 7.6% in 2021. Debt surged to 206.3% of GDP in 2020.
The main unemployment rate continued to fall through the pandemic from 19.3% in 2018 to a low of 13.3% in late 2021. Though still high, this is a vast improvement over the last decade. Long-term unemployment makes up the largest single share of this amount, and undeclared work is common. A new labor law increases the flexibility of work time.
Tax evasion remains widespread, and the tax base is narrow. The new government has reduced social security contributions and property taxes. R&D spending is low in cross-EU comparison. The country turns out highly skilled researchers, but is also experiencing a serious brain drain.
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How successful has economic policy been in providing a reliable economic framework and in fostering international competitiveness?
10
9
9
Economic policy fully succeeds in providing a coherent set-up of different institutional spheres and regimes, thus stabilizing the economic environment. It largely contributes to the objectives of fostering a country’s competitive capabilities and attractiveness as an economic location.
8
7
6
7
6
Economic policy largely provides a reliable economic environment and supports the objectives of fostering a country’s competitive capabilities and attractiveness as an economic location.
5
4
3
4
3
Economic policy somewhat contributes to providing a reliable economic environment and helps to a certain degree in fostering a country’s competitive capabilities and attractiveness as an economic location.
2
1
1
Economic policy mainly acts in discretionary ways essentially destabilizing the economic environment. There is little coordination in the set-up of economic policy institutions. Economic policy generally fails in fostering a country’s competitive capabilities and attractiveness as an economic location.
Compared to previous periods, Greek economic policy during the period under review was not restrained by externally imposed conditionalities. However, it was highly constrained by the impact of the COVID-19 pandemic, which reversed the moderate recovery that the Greek economy had achieved in 2019 (real GDP growth 1.9%).
The optimism due to the election of a pro-investment government was short-lived with the first lockdown in the spring of 2020 and with the second one in the winter of 2020–2021. Economic activity was curtailed, while small and medium businesses, as well as affected households relied on cash transfers from the Greek government. As a result, real GDP growth in 2020 fell to -9.0% (EU-27 -5.9%).
The government ran a primary deficit in 2020 and 2021 to counter the negative economic impact of the pandemic. Thus, the country’s public debt, already the highest in the European Union, climbed from 191% of GDP in the second quarter of 2020 to 207% in the corresponding second quarter of 2021 (EU average: 90%). Greece’s debt is primarily owed by official European creditors.
Despite the government’s efforts, the most important macroeconomic indicators paint a bleak picture for Greece, reflecting long-term structural imbalances. For example, the current account deficit increased to 6.7% of GDP in 2020, its worst level since the peak of Greece’s economic crisis (-8.8% in 2011). Gross capital formation remained among the lowest in the OECD.
Promising trends were visible in tourism. Despite a decline in 2020, the number of tourists visiting Greece in July and August 2021 reached 86% of the corresponding (high) level in 2019, which provided much hope for an economic recovery.
Besides tourism, the business climate has substantially improved. For instance, some multinationals (e.g., Microsoft) have announced large investments in the country.
More importantly, in June 2021, the European Commission endorsed Greece’s recovery and resilience plan. This was an important step toward the disbursement of €17.8 billion in grants and €12.7 billion in loans under the European Union’s new Recovery and Resilience Facility (RRF) over the period 2021–2026.
Substantial challenges remain, however. Due to the pandemic-induced negative economic growth rate, public debt remains high. It is currently serviced, but is unsustainable in the long run. Greece’s creditors need to devise a plan for large-scale debt restructuring that may entail substantial losses for them. Although EU authorities still refuse to discuss such a prospect, it is an issue that will probably surface again if Greece’s creditors want to see the country attain much higher growth rates. Finally. the rise of energy prices in late 2021 pose another challenge for the Greek economy, which relies very heavily on imports of natural gas and oil.
Citations:
Data on Gross Fixed Capital Formation and potential output are drawn on IMF’s world economic outlook for 2020 and is available on this SGI platform. GDP growth, unemployment and public debt are available from Eurostat.
On GDP: https://ec.europa.eu/eurostat/web/products-datasets/-/tec00115&lang=en
On public debt: https://ec.europa.eu/eurostat/web/products-datasets/-/teina230
On current account deficit: https://tradingeconomics.com/greece/current-account-to-gdp
On inflation: https://tradingeconomics.com/greece/inflation-cpi
Data on tourism is drawn on the World Travel and Tourism Council (WTTC), available at https://news.gtp.gr/2021/10/11/wttc-commends-greece-for-safe-positive-tourism-opening/
Data on FDI is drawn on Bank of Greece, as officially reported in https://www.enterprisegreece.gov.gr/en/greece-today/why-greece/foreign-direct-investment
On increasing business confidence: https://tradingeconomics.com/greece/business-confidence
The optimism due to the election of a pro-investment government was short-lived with the first lockdown in the spring of 2020 and with the second one in the winter of 2020–2021. Economic activity was curtailed, while small and medium businesses, as well as affected households relied on cash transfers from the Greek government. As a result, real GDP growth in 2020 fell to -9.0% (EU-27 -5.9%).
The government ran a primary deficit in 2020 and 2021 to counter the negative economic impact of the pandemic. Thus, the country’s public debt, already the highest in the European Union, climbed from 191% of GDP in the second quarter of 2020 to 207% in the corresponding second quarter of 2021 (EU average: 90%). Greece’s debt is primarily owed by official European creditors.
Despite the government’s efforts, the most important macroeconomic indicators paint a bleak picture for Greece, reflecting long-term structural imbalances. For example, the current account deficit increased to 6.7% of GDP in 2020, its worst level since the peak of Greece’s economic crisis (-8.8% in 2011). Gross capital formation remained among the lowest in the OECD.
Promising trends were visible in tourism. Despite a decline in 2020, the number of tourists visiting Greece in July and August 2021 reached 86% of the corresponding (high) level in 2019, which provided much hope for an economic recovery.
Besides tourism, the business climate has substantially improved. For instance, some multinationals (e.g., Microsoft) have announced large investments in the country.
More importantly, in June 2021, the European Commission endorsed Greece’s recovery and resilience plan. This was an important step toward the disbursement of €17.8 billion in grants and €12.7 billion in loans under the European Union’s new Recovery and Resilience Facility (RRF) over the period 2021–2026.
Substantial challenges remain, however. Due to the pandemic-induced negative economic growth rate, public debt remains high. It is currently serviced, but is unsustainable in the long run. Greece’s creditors need to devise a plan for large-scale debt restructuring that may entail substantial losses for them. Although EU authorities still refuse to discuss such a prospect, it is an issue that will probably surface again if Greece’s creditors want to see the country attain much higher growth rates. Finally. the rise of energy prices in late 2021 pose another challenge for the Greek economy, which relies very heavily on imports of natural gas and oil.
Citations:
Data on Gross Fixed Capital Formation and potential output are drawn on IMF’s world economic outlook for 2020 and is available on this SGI platform. GDP growth, unemployment and public debt are available from Eurostat.
On GDP: https://ec.europa.eu/eurostat/web/products-datasets/-/tec00115&lang=en
On public debt: https://ec.europa.eu/eurostat/web/products-datasets/-/teina230
On current account deficit: https://tradingeconomics.com/greece/current-account-to-gdp
On inflation: https://tradingeconomics.com/greece/inflation-cpi
Data on tourism is drawn on the World Travel and Tourism Council (WTTC), available at https://news.gtp.gr/2021/10/11/wttc-commends-greece-for-safe-positive-tourism-opening/
Data on FDI is drawn on Bank of Greece, as officially reported in https://www.enterprisegreece.gov.gr/en/greece-today/why-greece/foreign-direct-investment
On increasing business confidence: https://tradingeconomics.com/greece/business-confidence
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How effectively does labor market policy address unemployment?
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9
9
Successful strategies ensure unemployment is not a serious threat.
8
7
6
7
6
Labor market policies have been more or less successful.
5
4
3
4
3
Strategies against unemployment have shown little or no significant success.
2
1
1
Labor market policies have been unsuccessful and rather effected a rise in unemployment.
Greece’s unemployment rate, a major source of concern during the economic crisis of the previous decade, is slowly falling. It reached 16.3% in 2020 (down from 19.3% in 2018) and had fallen at 13.3% by September 2021 (EU average: 6.7%). Though the total unemployment rate remains the highest in the European Union, Greece has made substantial progress, given that it stood at 28% in 2013 and at 25% in 2015.
The recorded progress in tackling total unemployment is owed to several factors, including a rise in part-time jobs, growth in the tourism sector (where jobs are available over the long Greek summer, which lasts from April to October) and an increase in emigration (among both skilled and unskilled workers).
The progress made in fighting unemployment is significant, but the authorities have been largely unable to combat undeclared work. Moreover, Greece is among the OECD countries with the highest long-term unemployment and youth unemployment rates. The youth unemployment rate is twice as high as total employment (33% in October 2021). The largest share of total unemployment is long-term (9.6% in July 2021, down from 12% in the corresponding month of 2019). Although long-term unemployment is improving, most long-term unemployed persons are unemployable. They have outdated skills, are middle aged and are likely to only find jobs in non-tradeable sectors of the economy (e.g., in the declining retail sector, covering domestic demand for food or clothing).
In general, the number of unemployed is probably inflated, since many employees in the tourism industry do not seek employment In the winter months. Unemployment allowances are capped at one year over an entire working lifetime and – what is worse – the take-up of unemployment allowance has consistently been very low (between 10% and 20%). For several years, the Greek government, with the agreement of the European Union, has used money from the European Social Fund (ESF) to offer short-term employment opportunities to unemployed people in municipal and other state-owned organizations. Many unemployed people, who receive no unemployment allowance, depend on support from kin or rely on the guaranteed minimum income (GMI) of €400 per month for a family of four and a rent subsidy of €175 per month for a four-member household.
Long-term diverging trends between the education system and labor market are root causes of the aforementioned labor market problems. The country clearly needs, among others, more technicians, sales assistants, skilled and semi-skilled tourism workers, and computer scientists. Yet, the university system annually produces a very large number of graduates in the humanities, including hundreds of theologians and philologists, as well as unemployable professionals every year.
To give a topical example, related to the ongoing pandemic, in Greece there are large numbers of physicians who cannot find employment in Greek hospitals nor can they find the financial resources to start their own medical practices. The total number of doctors in Greece (specialized and general practitioners) is approximately 69,000. Among OECD member countries, Greece has the highest ratio of doctors to population (Greece has 6.3 doctors per 1,000 inhabitants, while the OECD average is 3.3 doctors per 1,000 inhabitants). As a result, hundreds of Greek physicians, who have been trained for free in respectable Greek state medical schools, emigrate to northern and western European countries, where they practice medicine.
Thus, the pre-crisis division of insiders and outsiders in the labor market has remained acute. Public sector employees, most of whom enjoy job security, have more or less successfully adapted to lower living standards. In contrast, private sector employees are faced with the recurring problem of unemployment. Moreover, as in the previous period under review, there has been a rise in part-time and short-term labor contracts, including a rise in precarious teleworking as a consequence of movement restrictions during the period of the pandemic.
In 2021, the government introduced a new labor law, which increases the flexibility of the eight-hour workday by allowing employees to work up to 10 hours on one day and fewer on another or take time off, and gives workers the right to disconnect outside of office hours (e.g., refuse any work on off-days or to check emails). Further, it introduced a “digital work card” to monitor employees working hours in real time as well as increase legal overtime to 150 hours a year.
In summary, the visible improvement in the overall unemployment rate in the period under review is a sign of progress. This progress, however, is endangered by a combination of rise in precarious work, continued brain drain and degradation among the long-term unemployed.
Still, broad-based recovery in the labor market may be achieved over the medium to long run. The so-called tradeable sector, which brings revenues to Greece from abroad, as well as tourism, industry, professional, and information and communication services may record substantial job gains after the pandemic is over.
Citations:
Information on unemployment is drawn on Eurostat: https://ec.europa.eu/eurostat/documents/2995521/11563355/3-03112021-AP-EN.pdf/8841353c-11f6-7fab-efef-0e768ab13bfd
On long-term unemployment: https://tradingeconomics.com/greece/long-term-unemployment-rate#:~:text=Long%20Term%20Unemployment%20Rate%20in%20Greece%20averaged%209.14%20percent%20from,the%20second%20quarter%20of%202008.
On youth unemployment: https://tradingeconomics.com/greece/youth-unemployment-rate
Information on brain drain is based on Bank of Greece estimations, reported in https://www.dw.com/en/greece-central-bank-reports-brain-drain-of-427000-young-educated-greeks-since-2008/a-19373527
On GMI and rent subsidies: https://ec.europa.eu/social/main.jsp?catId=1112&langId=en&intPageId=4569
The recorded progress in tackling total unemployment is owed to several factors, including a rise in part-time jobs, growth in the tourism sector (where jobs are available over the long Greek summer, which lasts from April to October) and an increase in emigration (among both skilled and unskilled workers).
The progress made in fighting unemployment is significant, but the authorities have been largely unable to combat undeclared work. Moreover, Greece is among the OECD countries with the highest long-term unemployment and youth unemployment rates. The youth unemployment rate is twice as high as total employment (33% in October 2021). The largest share of total unemployment is long-term (9.6% in July 2021, down from 12% in the corresponding month of 2019). Although long-term unemployment is improving, most long-term unemployed persons are unemployable. They have outdated skills, are middle aged and are likely to only find jobs in non-tradeable sectors of the economy (e.g., in the declining retail sector, covering domestic demand for food or clothing).
In general, the number of unemployed is probably inflated, since many employees in the tourism industry do not seek employment In the winter months. Unemployment allowances are capped at one year over an entire working lifetime and – what is worse – the take-up of unemployment allowance has consistently been very low (between 10% and 20%). For several years, the Greek government, with the agreement of the European Union, has used money from the European Social Fund (ESF) to offer short-term employment opportunities to unemployed people in municipal and other state-owned organizations. Many unemployed people, who receive no unemployment allowance, depend on support from kin or rely on the guaranteed minimum income (GMI) of €400 per month for a family of four and a rent subsidy of €175 per month for a four-member household.
Long-term diverging trends between the education system and labor market are root causes of the aforementioned labor market problems. The country clearly needs, among others, more technicians, sales assistants, skilled and semi-skilled tourism workers, and computer scientists. Yet, the university system annually produces a very large number of graduates in the humanities, including hundreds of theologians and philologists, as well as unemployable professionals every year.
To give a topical example, related to the ongoing pandemic, in Greece there are large numbers of physicians who cannot find employment in Greek hospitals nor can they find the financial resources to start their own medical practices. The total number of doctors in Greece (specialized and general practitioners) is approximately 69,000. Among OECD member countries, Greece has the highest ratio of doctors to population (Greece has 6.3 doctors per 1,000 inhabitants, while the OECD average is 3.3 doctors per 1,000 inhabitants). As a result, hundreds of Greek physicians, who have been trained for free in respectable Greek state medical schools, emigrate to northern and western European countries, where they practice medicine.
Thus, the pre-crisis division of insiders and outsiders in the labor market has remained acute. Public sector employees, most of whom enjoy job security, have more or less successfully adapted to lower living standards. In contrast, private sector employees are faced with the recurring problem of unemployment. Moreover, as in the previous period under review, there has been a rise in part-time and short-term labor contracts, including a rise in precarious teleworking as a consequence of movement restrictions during the period of the pandemic.
In 2021, the government introduced a new labor law, which increases the flexibility of the eight-hour workday by allowing employees to work up to 10 hours on one day and fewer on another or take time off, and gives workers the right to disconnect outside of office hours (e.g., refuse any work on off-days or to check emails). Further, it introduced a “digital work card” to monitor employees working hours in real time as well as increase legal overtime to 150 hours a year.
In summary, the visible improvement in the overall unemployment rate in the period under review is a sign of progress. This progress, however, is endangered by a combination of rise in precarious work, continued brain drain and degradation among the long-term unemployed.
Still, broad-based recovery in the labor market may be achieved over the medium to long run. The so-called tradeable sector, which brings revenues to Greece from abroad, as well as tourism, industry, professional, and information and communication services may record substantial job gains after the pandemic is over.
Citations:
Information on unemployment is drawn on Eurostat: https://ec.europa.eu/eurostat/documents/2995521/11563355/3-03112021-AP-EN.pdf/8841353c-11f6-7fab-efef-0e768ab13bfd
On long-term unemployment: https://tradingeconomics.com/greece/long-term-unemployment-rate#:~:text=Long%20Term%20Unemployment%20Rate%20in%20Greece%20averaged%209.14%20percent%20from,the%20second%20quarter%20of%202008.
On youth unemployment: https://tradingeconomics.com/greece/youth-unemployment-rate
Information on brain drain is based on Bank of Greece estimations, reported in https://www.dw.com/en/greece-central-bank-reports-brain-drain-of-427000-young-educated-greeks-since-2008/a-19373527
On GMI and rent subsidies: https://ec.europa.eu/social/main.jsp?catId=1112&langId=en&intPageId=4569
Graph View
How effective is a country’s tax policy in realizing goals of revenue generation, equity, growth promotion and ecological sustainability?
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9
9
Taxation policy fully achieves the objectives.
8
7
6
7
6
Taxation policy largely achieves the objectives.
5
4
3
4
3
Taxation policy partially achieves the objectives.
2
1
1
Taxation policy does not achieve the objectives at all.
Greece’s taxation policy only partially achieves its objectives, though there has been some progress in recent years. Since January 2017, the Independent Public Revenue Authority has become organizationally and functionally independent vis-à-vis the Ministry of Finance. In addition, Greek authorities have repeatedly passed primary and secondary legislation to combat tax evasion. As a consequence, the tax-to-GDP ratio in Greece increased from 36.6% in 2015 to 38.8% in 2021 (OECD average: 33.5%).
The redistribution effect achieved through taxation is reasonably good and the share of total taxes in GDP is comparable to that of other EU member states: 39.5% of GDP in Greece as compared to EU average of 40.5% in 2019. However, the structure of Greece’s tax revenues is different from the OECD average and remains problematic. The country receives a lower-than-average revenue share from personal-income tax, capital gains and profits, and corporate gains and profits.
The top marginal tax rate on personal income is 44% (down from 45% in 2019) and the corresponding tax rate for business income is 24% (down from 28% under the previous government, which lost power in 2019), while that of sales tax is also 24%. The new government has reduced employees’ and employers’ social security contributions by 14 and 23%, respectively, and reduced the property tax (ENFIA) rate by 22%. It also pledged further reductions for the following years. During the pandemic, it has abolished the “solidarity tax” for the private sector for one year.
Although personal income and business taxes are relatively high, owing to widespread tax evasion and the narrow tax base in the country, direct taxes in 2019 amounted to only 9.9% of the total revenue (EU average in 2018 and 2019: 13.2–13.3%). Notably, the tax-free threshold for income tax is set at 60% of the average pay, nearly three times the EU average. VAT deficit is estimated at 34% due to tax evasion, tax avoidance and ineffectiveness in the tax collection mechanism.
Measures to increase taxes are easier to announce than implement. During the tourist season, income earned by small and very small businesses remains largely undeclared, while throughout the year, an unknown share of income in the liberal professions also evades tax authorities’ eyes. Thus, engineers, lawyers, medical doctors and dentists, as well as craftsmen, plumbers, electricians and computer technicians typically declare an amount of personal income below the threshold at which personal-income tax would be imposed. For income earned in 2019 (and taxed in 2020), personal and business annual income up to €10,000 was taxed at 9% (and most self-employed persons, and small and very small businesses made sure to declare less than that amount to the tax authorities).
Regulations on income and property taxes are altered almost every year. As long as tax regulations are constantly under revision, private investment will not be forthcoming, and the business environment will remain unstable; nor will progress will be achieved in improving horizontal and vertical equity.
Greece’s revenues from environment-related taxes are high in cross-EU comparison. Environmental taxes accounted for 3.97% of GDP in 2017 (EU-28 average 2.4%) and energy taxes for 3.18% of GDP (EU average 1.84%). However, there are implementation gaps. For example, although the landfill tax has been in place since January 2014, it has not been implemented as of the end of the review period.
To sum up, the Greek tax system continues to be characterized by relatively high tax rates, which do not result in the anticipated revenue. Greek taxation policy has improved over time and has become more business friendly, but is still subject to unpredictable shifts.
Citations:
Comments on tax system complexity and the redistribution effects of Greek taxes are based on the comparative data on OECD countries, available on this SGI platform.
Data on the ratio of taxes to GDP an the structure of tax revenue is drawn on OECD, https://www.oecd.org/tax/revenue-statistics-greece.pdf
On personal income tax: https://tradingeconomics.com/greece/personal-income-tax-rate#:~:text=Personal%20Income%20Tax%20Rate%20in%20Greece%20is%20expected%20to%20reach,according%20to%20our%20econometric%20models.
On tax main aggregates and direct taxes: https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en
The redistribution effect achieved through taxation is reasonably good and the share of total taxes in GDP is comparable to that of other EU member states: 39.5% of GDP in Greece as compared to EU average of 40.5% in 2019. However, the structure of Greece’s tax revenues is different from the OECD average and remains problematic. The country receives a lower-than-average revenue share from personal-income tax, capital gains and profits, and corporate gains and profits.
The top marginal tax rate on personal income is 44% (down from 45% in 2019) and the corresponding tax rate for business income is 24% (down from 28% under the previous government, which lost power in 2019), while that of sales tax is also 24%. The new government has reduced employees’ and employers’ social security contributions by 14 and 23%, respectively, and reduced the property tax (ENFIA) rate by 22%. It also pledged further reductions for the following years. During the pandemic, it has abolished the “solidarity tax” for the private sector for one year.
Although personal income and business taxes are relatively high, owing to widespread tax evasion and the narrow tax base in the country, direct taxes in 2019 amounted to only 9.9% of the total revenue (EU average in 2018 and 2019: 13.2–13.3%). Notably, the tax-free threshold for income tax is set at 60% of the average pay, nearly three times the EU average. VAT deficit is estimated at 34% due to tax evasion, tax avoidance and ineffectiveness in the tax collection mechanism.
Measures to increase taxes are easier to announce than implement. During the tourist season, income earned by small and very small businesses remains largely undeclared, while throughout the year, an unknown share of income in the liberal professions also evades tax authorities’ eyes. Thus, engineers, lawyers, medical doctors and dentists, as well as craftsmen, plumbers, electricians and computer technicians typically declare an amount of personal income below the threshold at which personal-income tax would be imposed. For income earned in 2019 (and taxed in 2020), personal and business annual income up to €10,000 was taxed at 9% (and most self-employed persons, and small and very small businesses made sure to declare less than that amount to the tax authorities).
Regulations on income and property taxes are altered almost every year. As long as tax regulations are constantly under revision, private investment will not be forthcoming, and the business environment will remain unstable; nor will progress will be achieved in improving horizontal and vertical equity.
Greece’s revenues from environment-related taxes are high in cross-EU comparison. Environmental taxes accounted for 3.97% of GDP in 2017 (EU-28 average 2.4%) and energy taxes for 3.18% of GDP (EU average 1.84%). However, there are implementation gaps. For example, although the landfill tax has been in place since January 2014, it has not been implemented as of the end of the review period.
To sum up, the Greek tax system continues to be characterized by relatively high tax rates, which do not result in the anticipated revenue. Greek taxation policy has improved over time and has become more business friendly, but is still subject to unpredictable shifts.
Citations:
Comments on tax system complexity and the redistribution effects of Greek taxes are based on the comparative data on OECD countries, available on this SGI platform.
Data on the ratio of taxes to GDP an the structure of tax revenue is drawn on OECD, https://www.oecd.org/tax/revenue-statistics-greece.pdf
On personal income tax: https://tradingeconomics.com/greece/personal-income-tax-rate#:~:text=Personal%20Income%20Tax%20Rate%20in%20Greece%20is%20expected%20to%20reach,according%20to%20our%20econometric%20models.
On tax main aggregates and direct taxes: https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en
Graph View
To what extent does budgetary policy realize the goal of fiscal sustainability?
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Budgetary policy is fiscally sustainable.
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6
7
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Budgetary policy achieves most standards of fiscal sustainability.
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3
4
3
Budgetary policy achieves some standards of fiscal sustainability.
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1
1
Budgetary policy is fiscally unsustainable.
Greece made progress in the area of fiscal sustainability before the onset of the pandemic, reporting budget surpluses every year between 2016 and 2019. However, in 2020 and 2021, the government was obliged to effect budget deficits to counter the negative economic and social impact of the pandemic. All in all, the government’s support measures turned the surplus into a deficit. Eurostat data that shows that the budgetary impact of the measures was 6.4% of GDP in 2021. It is expected that this impact will be phased out in 2022, if the pandemic subsides.
In 2020, the budget deficit was -10.1% of GDP (EU average: -6.9%), while in 2021 the deficit was -7.6%. In the meantime, the public debt surged from 180.7% of GDP in 2019 to 206.3% in 2020 (the highest in the European Union).
Besides the fiscal cost of measures to counter the pandemic’s impact, the government also bore the burden of mitigating unforeseen risks on three different fronts.
First, facing periodic military threats from Turkey, Greece must dedicate a large proportion of the budget to defense expenditure. In 2019, this constituted 2.0% of Greece’s GDP (the highest in the European Union along with Estonia’s defense spending. EU average: 1.2%). In 2020 and 2021, rising tensions with Turkey made it necessary to increase defense spending. Greece agreed with France to purchase French fighter planes (Rafale fighter jets) and combat ships (the Belhara frigades).
Second, wildfires in the summer of 2021 devastated agricultural production and households across a very large area of Euboea, Greece’s second-largest island, as well as in other areas of the country. The government stepped in to provide financial support to victims of the wildfires.
And third, the government responded to a spike in energy prices toward the end of 2021 by subsidizing electricity costs for low-voltage consumers and increasing the heating benefit for low-income households.
Despite all, according to the European Commission, a primary surplus of 1.2% in 2022 appears to be attainable. However, if the pandemic continues, the government may need to implement additional measures to support businesses and households, as it did in 2020 and 2021.
Citations:
Eurostat information on the Greek state budget and public debt is available at https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Government_finance_statistics#General_government_surplus.2Fdeficit
and at the European Commission’s “Enhanced Surveillance Report on Greece,” 12th round, November 2021, available at https://ec.europa.eu/info/sites/default/files/economy-finance/ip164_en.pdf
Eurostat data on defense spending is available at https://ec.europa.eu/eurostat/web/products-eurostat-news/-/ddn-20210827-1
In 2020, the budget deficit was -10.1% of GDP (EU average: -6.9%), while in 2021 the deficit was -7.6%. In the meantime, the public debt surged from 180.7% of GDP in 2019 to 206.3% in 2020 (the highest in the European Union).
Besides the fiscal cost of measures to counter the pandemic’s impact, the government also bore the burden of mitigating unforeseen risks on three different fronts.
First, facing periodic military threats from Turkey, Greece must dedicate a large proportion of the budget to defense expenditure. In 2019, this constituted 2.0% of Greece’s GDP (the highest in the European Union along with Estonia’s defense spending. EU average: 1.2%). In 2020 and 2021, rising tensions with Turkey made it necessary to increase defense spending. Greece agreed with France to purchase French fighter planes (Rafale fighter jets) and combat ships (the Belhara frigades).
Second, wildfires in the summer of 2021 devastated agricultural production and households across a very large area of Euboea, Greece’s second-largest island, as well as in other areas of the country. The government stepped in to provide financial support to victims of the wildfires.
And third, the government responded to a spike in energy prices toward the end of 2021 by subsidizing electricity costs for low-voltage consumers and increasing the heating benefit for low-income households.
Despite all, according to the European Commission, a primary surplus of 1.2% in 2022 appears to be attainable. However, if the pandemic continues, the government may need to implement additional measures to support businesses and households, as it did in 2020 and 2021.
Citations:
Eurostat information on the Greek state budget and public debt is available at https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Government_finance_statistics#General_government_surplus.2Fdeficit
and at the European Commission’s “Enhanced Surveillance Report on Greece,” 12th round, November 2021, available at https://ec.europa.eu/info/sites/default/files/economy-finance/ip164_en.pdf
Eurostat data on defense spending is available at https://ec.europa.eu/eurostat/web/products-eurostat-news/-/ddn-20210827-1
Graph View
To what extent does research and innovation policy support technological innovations that foster the creation and introduction of new products?
10
9
9
Research and innovation policy effectively supports innovations that foster the creation of new products and enhance productivity.
8
7
6
7
6
Research and innovation policy largely supports innovations that foster the creation of new products and enhance productivity.
5
4
3
4
3
Research and innovation policy partly supports innovations that foster the creation of new products and enhance productivity.
2
1
1
Research and innovation policy has largely failed to support innovations that foster the creation of new products and enhance productivity.
Greece continues to rank below the EU average for public and private expenditure on research and innovation. In 2020, it devoted 1.49% of GDP to research and development, compared to an EU-27 average of 2.36% (Eurostat data). As usual, the main funding came from public money. However, Greece has made visible progress over time.
According to the latest European Innovation Scoreboard (EIS), published in 2021, Greece still belongs to the group of countries labeled “moderate innovators,” but also to the five EU member states that improved the most (more than 25%) compared to the previous year. Improvements in Greece concerned innovation by small and medium enterprises (SMEs), linkages and cooperation, and employment opportunities. Generally, over the 2011–2020 period, Greece exhibited an upward trend with regard to innovation.
A lingering problem is a serious brain drain, depleting Greece’s human resources for research and innovation. In 2008–2015, about 427,000 skilled employees or professionals holding at least one university degree left the country to seek employment abroad, mostly in northern and western Europe or the United States. The outflow of younger researchers (PhDs and post-doctoral researchers) continues today, as job opportunities and salaries offered abroad are attractive, compared to those offered in Greece.
Nonetheless and despite the outflow, the number of Greek researchers remains disproportionately high, compared to the levels of public and private expenditure on research. Greek research teams very often participate in international research consortia. For instance, the National Technical University of Athens actively participates in international projects, as does the Heraklion-based Institute for Technology and Research.
The Greek government has sought since 2016 to counter this outflow of skilled labor. For example, it has provided government funds for research through the newly established Hellenic Foundation for Research and Innovation (in Greek, ELIDEK).
Meanwhile, Greece continues to lack large corporate R&D investors. Links between academia and the private sector are weak, reflecting institutional weaknesses and cultural resistance to public-private collaboration. Most private sector companies are active in non-tradeable goods and services, are oriented toward the domestic market, and have little interest in R&D and innovation. The corresponding supply from universities and public research institutions is small.
Nevertheless, in 2021, the national association of Greek industrialists (SEV) started a campaign to attract digital innovation from foreign and domestic investors, based on the progress which Greece had accomplished in 2017–2020 with regard to digitalization. The SEV’s campaign matched a government policy shift. In 2020, the Ministry of Digital Governance devised a holistic digital strategy, and the Ministry of Development and Investments a corresponding strategy for the digitalization of Greek industry (the Greek Industry 4.0 strategy).
Moreover, despite economic adversity, there are clear “islands” of excellence at universities and SMEs in areas such as biology, IT and computer science, economics, engineering, archaeology, and history. Moreover, a number of private startup companies are using private capital to concentrate on the production of software and technological innovations.
Citations:
Data on expenditure on research is drawn on Eurostat, https://ec.europa.eu/eurostat/databrowser/view/tsc00001/default/table?lang=en
Information on Greece’s brain drain in English is found in https://www.dw.com/en/greece-central-bank-reports-brain-drain-of-427000-young-educated-greeks-since-2008/a-19373527
Information in English on the Greek research and innovation policy and particularly on brain drain is available from the EU, https://rio.jrc.ec.europa.eu/en/country-analysis/Greece/country-report
Information on Greece’s performance, as assessed by the European Innovation Scoreboard, is available at https://www.ekt.gr/en/news/26308
Information on the new innovation strategies of the SEV and the Greek government is available at https://www.sev.org.gr/wp-content/uploads/2021/11/Destination-Greece_Attracting-Digital-Innovation-Investment_LowRes.pdf
According to the latest European Innovation Scoreboard (EIS), published in 2021, Greece still belongs to the group of countries labeled “moderate innovators,” but also to the five EU member states that improved the most (more than 25%) compared to the previous year. Improvements in Greece concerned innovation by small and medium enterprises (SMEs), linkages and cooperation, and employment opportunities. Generally, over the 2011–2020 period, Greece exhibited an upward trend with regard to innovation.
A lingering problem is a serious brain drain, depleting Greece’s human resources for research and innovation. In 2008–2015, about 427,000 skilled employees or professionals holding at least one university degree left the country to seek employment abroad, mostly in northern and western Europe or the United States. The outflow of younger researchers (PhDs and post-doctoral researchers) continues today, as job opportunities and salaries offered abroad are attractive, compared to those offered in Greece.
Nonetheless and despite the outflow, the number of Greek researchers remains disproportionately high, compared to the levels of public and private expenditure on research. Greek research teams very often participate in international research consortia. For instance, the National Technical University of Athens actively participates in international projects, as does the Heraklion-based Institute for Technology and Research.
The Greek government has sought since 2016 to counter this outflow of skilled labor. For example, it has provided government funds for research through the newly established Hellenic Foundation for Research and Innovation (in Greek, ELIDEK).
Meanwhile, Greece continues to lack large corporate R&D investors. Links between academia and the private sector are weak, reflecting institutional weaknesses and cultural resistance to public-private collaboration. Most private sector companies are active in non-tradeable goods and services, are oriented toward the domestic market, and have little interest in R&D and innovation. The corresponding supply from universities and public research institutions is small.
Nevertheless, in 2021, the national association of Greek industrialists (SEV) started a campaign to attract digital innovation from foreign and domestic investors, based on the progress which Greece had accomplished in 2017–2020 with regard to digitalization. The SEV’s campaign matched a government policy shift. In 2020, the Ministry of Digital Governance devised a holistic digital strategy, and the Ministry of Development and Investments a corresponding strategy for the digitalization of Greek industry (the Greek Industry 4.0 strategy).
Moreover, despite economic adversity, there are clear “islands” of excellence at universities and SMEs in areas such as biology, IT and computer science, economics, engineering, archaeology, and history. Moreover, a number of private startup companies are using private capital to concentrate on the production of software and technological innovations.
Citations:
Data on expenditure on research is drawn on Eurostat, https://ec.europa.eu/eurostat/databrowser/view/tsc00001/default/table?lang=en
Information on Greece’s brain drain in English is found in https://www.dw.com/en/greece-central-bank-reports-brain-drain-of-427000-young-educated-greeks-since-2008/a-19373527
Information in English on the Greek research and innovation policy and particularly on brain drain is available from the EU, https://rio.jrc.ec.europa.eu/en/country-analysis/Greece/country-report
Information on Greece’s performance, as assessed by the European Innovation Scoreboard, is available at https://www.ekt.gr/en/news/26308
Information on the new innovation strategies of the SEV and the Greek government is available at https://www.sev.org.gr/wp-content/uploads/2021/11/Destination-Greece_Attracting-Digital-Innovation-Investment_LowRes.pdf
Graph View
To what extent does the government actively contribute to the effective regulation and supervision of the international financial architecture?
10
9
9
The government (pro-)actively promotes the regulation and supervision of financial markets. It demonstrates initiative and responsibility in such endeavors and often acts as an international agenda-setter.
8
7
6
7
6
The government contributes to improving the regulation and supervision of financial markets. In some cases, it demonstrates initiative and responsibility in such endeavors.
5
4
3
4
3
The government rarely contributes to improving the regulation and supervision of financial markets. It seldom demonstrates initiative or responsibility in such endeavors.
2
1
1
The government does not contribute to improving the regulation and supervision of financial markets.
During the period under review, Greece, an EU member state, participated in the appropriate EU forums where issues of regulation and supervision of financial markets were discussed. In such forums, Greece normally supports ideas in favor of a more regulated international system for financial markets. However, Greece is a rather small European economy and cannot realistically take initiatives to influence the global economic environment.