Updates from the Greek economy
Subscribe to myFT Daily Digest to be the first to know about Greek economic news.
After more than a decade of economic and financial crises, Greece seeks to rebuild its economy with a plan to spend billions of euros from the EU’s post-pandemic recovery fund, and in the process of transforming its industrial model, to attract foreign investment and restore public finances.
Kyriakos Mitsotakis, Greek Prime Minister, hailed the program, known as “Greece 2.0”, as one which “fundamentally changes the model of the Greek economy, making it competitive and outward looking”.
It comes as Greece seeks to recover from the coronavirus pandemic that has hit its economy, which is heavily dependent on tourism and services, especially hard. In 2020, production fell by 10%, while the national debt as a proportion of gross domestic product exceeded 200%, the highest in the euro area.
However, some observers have worried about Greece’s poor policy record and its ability to make the most of the money it will receive from the stimulus fund.
Greece 2.0 will be sent for final approval to Brussels early next week. Officials will examine its 2,000 pages, which detail how the government will use € 31 billion from the EU and an additional € 27 billion expected from investors over the next six years.
The submission will be the culmination of six months of work, during which Greek officials held more than 100 meetings with their counterparts from the European Commission.
“The Greek plan is one of the best we have seen so far,” said an EU official. The plan, based on a growth strategy devised by Nobel Prize-winning economist Christopher Pissarides, was among the most coherent of the plans submitted by member states, the official added.
Greece emerged from eight years of international bailouts in 2018, but remains under a system of “heightened surveillance” by the commission designed to ensure Athens meets agreed deficit targets. Although the way the bailout was administered by the commission, the IMF and the European Central Bank – known collectively as the “troika” – was deeply unpopular in Greece, some in Brussels believe the arrangement worked. to the advantage of the country.
“The experience of the program helps a lot,” said the EU official, who stressed that the committee had been working closely with the Greek authorities for more than a decade.
The injection of European funds will give Greece the opportunity to carry out reforms previously hampered by the disastrous state of its public finances. For example, the implementation of Greece 2.0 will see the injection of substantial capital into e-governance and the digitization of the public sector.
Under this plan, 57% of the funding will be used for green transition and digital transformation projects. Among the measures envisaged are the creation of 5G infrastructure, the improvement of the connection of the Greek islands to the continental electricity grid, the digitization of the tax services and the retraining or “upgrading” of the workforce.
The plan also comes with an ambitious goal of increasing Greece’s GDP by 7% and creating 180,000 jobs by 2026.
“Greece 2.0 is a comprehensive, ambitious and modern plan when it comes to promises,” said Maria Demertzis, deputy director of the Bruegel think tank in Brussels. “But that remains a promise, because the implementation and absorption of European funds has always been a problem. I hope Greece will do better this time.
Mitsotakis and his advisers took responsibility for carrying out the project, with Deputy Finance Minister Theodoros Skylakakis in the lead. He said he was aware of the challenges posed by the traditional failures of the Greek public sector.
“This is both a historic opportunity and a unique challenge because we have to change the efficiency and culture of the state itself to be successful. It will not be an easy task, but we are confident in our plan and in the future of the country, ”said Skylakakis.