Economical overview
Greece has been in a constant economic crisis
since the autumn of 2008 - the deepest so far in an EU
country. During the period 2009–2014, the country's
gross domestic product (GDP) shrank by a quarter, and a
roughly equal share of the workforce lost their jobs.
Wages have been reduced by an average of 20–25 percent,
while pension levels and benefits in social security
systems have been significantly reduced. In 2017,
however, an economic recovery could be discerned.
One of the reasons why Greece is in this situation
can be found in the military dictatorship of the 1960s
and 1970s, when the country developed an extensive and
expensive public sector, not least a great defense.
Combined with low tax revenues, extensive tax evasion, a
large informal (black) market and widespread corruption,
the country has since incurred large deficits in the
state budget, and a high government debt. In other
words, the nation has long survived its assets. Many
public servants were long paid without performing any
actual work. The proportion of government employees in
the workforce rose from 7.5 percent in the 1960s to over
22 percent in 2008.
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Major imports by Greece, covering a full list of top products imported by the country and trade value for each product category.
Basically, Greece has a broad economic base with
multiple sources of income. By far the largest industry
by far is the service sector, which, apart from the
public sector, also consists of trade (not least
shipping and shipping) and an important tourism
industry. The latter accounts for almost a fifth of GDP
and employs an approximately equal share of the labor
force. Compared to other EU countries, agriculture is
also of great economic importance, while the industrial
sector is relatively small.
Greece was one of the poorest countries in the EU in
the 21st century. However, economic growth was good from
the mid-1990s to 2007. Growth was mainly driven by large
foreign investment, especially from the EU's various
support programs. During this period of growth, the
country's fundamental economic weaknesses were hidden.
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Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including GRC which represents the country of Greece.
Strong state influence
The Greek economy was long characterized by a large
state influence. Yet in 1998, almost half of all
state-owned economic activities took place. During the
1990s, a privatization program was launched with the aim
of adapting the economy to a future membership of the
EU's currency union (EMU), also called the euro zone.
Since 2010, a number of state property sales have been
conducted as a condition for support loans from, among
others, the EU (see further below). State ownership has
more than halved since the late 1990s.
For EMU membership, sound finances were required,
such as a government debt of no more than 60 percent of
GDP and a government budget deficit of no more than 3
percent of GDP. Prior to EMU entry in 2001, when Greece
introduced the euro as currency, Greece increased both
VAT and corporate tax. The soaring costs of the public
sector, especially the military and state
administration, sought to reduce the government by
laying off staff and freezing or lowering the salaries
of government employees.
In the fall of 2004, however, the new bourgeois
government's internal audit revealed that the former
Pasok government had provided incorrect figures for the
budget deficit in 1998 and 1999 - the years that
underpinned the Greek EMU entry. The actual deficit was
so great that Greece would not have been allowed to join
the currency union if it had been known. Later that
year, EU statistics revealed that since 1997, Greece's
budget deficit had never been below 3 percent. Between
1992 and 2009, the deficit actually averaged 7.2 percent
of GDP.
As there was no legal basis for excluding Greece from
EMU, the European Commission decided to monitor the
Greek economy for the time being. The country was urged
to reduce the budget deficit to the EMU's maximum limit
of 3 percent. Since Greece reported figures below that
level in both 2006 and 2007, EU surveillance ceased, but
a few years later, it would appear that these data also
did not match reality.
The financial crisis in 2008 is hitting hard
on Greece
Combined with a sovereign debt that has been well
above 100 percent of GDP since the turn of the
millennium, this was an important reason for Greece
being hit so hard when the global financial crisis broke
out in the fall of 2008. The Greek economy began to
shrink immediately and the country was in a financial
depression. (recession) until 2013. In 2009, the
situation deteriorated rapidly, and in early 2010, the
government presented a austerity package, which aroused
strong popular protests but which was approved by the
European Commission. However, Greece was again under
surveillance because the EU feared that its crisis could
spread to other euro countries.
As GDP continued to shrink, the budget deficit to
rise (to a record 15.6 percent of GDP in 2009) and
government debt measured at over 130 percent of GDP, in
May 2010, the government was forced, in exchange for
severe budget cuts, to take a € 110 billion loan from
the EU, the European Central Bank (ECB) and the
International Monetary Fund (IMF). Also in 2011, the
government was forced to take a similar loan from the
same lenders, this time at € 159 billion. At that time,
the national debt was 175 percent of GDP. In autumn
2011, the EU pushed European privately owned banks to
write down Greece's debt to them by 50 percent.
In both cases, the loan terms meant, among other
things, that the number of public employees would be
reduced, that state property would be sold out, that tax
collection would increase, that government employees
would receive frozen salaries, and that pension levels
and benefits in the social insurance systems would be
lowered. All these measures led to rapidly declining
living standards for many Greeks and rising poverty in
the country.
Vicious circle
It became increasingly clear that Greece was in a
vicious circle that was difficult to get out of. The
severe tightening increased unemployment dramatically
and lowered the purchasing power of the population. Lots
of stores and small businesses had to strike again and
fewer and fewer euro banknotes poured into the system.
The formerly large informal economy increased in scale
as the Greeks tried to feed on services and gene
services or on street trade. The state's already weak
ability to collect taxes hardly got any better from
this. At the same time, the state's income from
corporate taxes decreased as many companies went
bankrupt.
The country's banks soon had a shortage of capital
when large numbers of private individuals and companies
could no longer pay off their loans. Many Greeks also
emptied their bank accounts, fearing that the bank would
collapse and the savings would disappear - or because
they had nothing but saved money to live on. The mass
withdrawals increased the risk of a bank collapse and
made the banks increasingly cautious about lending money
to companies, which therefore probably renounced new
investments that could have created more jobs.
In an assessment in June 2013, the IMF stated that
the negative effects of austerity policy had been
underestimated by the lenders and that the budget cuts
had exacerbated the Greek crisis. The limited debt
write-offs that Greece should have come a long time ago,
according to the IMF. The evaluation included criticism
of the European Commission and showed contradictions
between the three lenders.
Some hope for better times
Economic experts now pointed out that Greece's crisis
was not just due to carelessness, neglect and low
productivity. The very construction of the euro
co-operation was considered to have paved the way for
problems when countries with very different economies
and conditions joined forces in a currency union without
a common fiscal policy. The countries could end up in
different economic situations without the possibility of
steering themselves out of a recession by lowering
interest rates to accelerate the economy. There were
also no mechanisms for redistributing resources between
countries.
When 2013 was over, it turned out that the budget
deficit fell to just over 2 percent of GDP during the
year. 2014 saw for the first time since 2008 a marginal
growth in the economy, while the figure the following
year was down to zero. Despite the ambition to negotiate
less stringent terms than in previous loan settlements,
the new Syriza government was forced in August 2015 to
take a third support loan, of EUR 86 billion, with the
toughest reform demands to date (see Calendar).
During the first half of 2016, the economy shrank
again. The problem with a so-so high debt, as was the
lack of money for the state and the banking system. In
May 2016, unemployment was 23.5 percent.
The economy is starting to grow
In the fall of 2017, Prime Minister Tsipras announced
that the government has spent a total of € 1.4 billion
on facilitating the most vulnerable households. The
Greek state had strengthened its economy over the past
year. EUR 720 million would be paid in the form of cash
grants to households with a total annual income of less
than EUR 18 000, which affected around 3.4 million
Greeks. EUR 315 million would be spent on compensating
pensioners for increased health care costs and EUR 360
million went to the indebted state electricity company
Dei so that it could offer cheaper electricity to poor
consumers.
In March 2018, the government further released the
capital controls introduced in June 2015. Now the Greeks
can withdraw a maximum of EUR 2,300 in cash per month
compared to EUR 1,800 previously. When traveling abroad,
EUR 2,300 in banknotes can be withdrawn from the bank.
The limit for bank withdrawals from abroad has also been
increased, to EUR 2,000 every two months.
Capital controls were introduced to prevent bank
customers from plucking out too much money too quickly
during the culmination of the debt crisis. The Greek
economy has slowly strengthened since then, showing GDP
growth of 1.4 percent in 2017.
In March 2018, the lenders made a final payment of
EUR 5.7 billion. A final payment is expected to be made
later this spring. The rescue program from the lenders
expires in August 2018. Then Greece is expected to stand
on its own.
In June 2018, the eurozone's 19 finance ministers
agreed to pay out EUR 15 billion to the Greek government
to facilitate the country when it leaves the rescue
program on August 20.
FACTS - FINANCE
GDP per person
US $ 20,324 (2018)
Total GDP
US $ 218,032 million (2018)
GDP growth
1.9 percent (2018)
Agriculture's share of GDP
3.7 percent (2018)
Manufacturing industry's share of GDP
9.6 percent (2018)
The service sector's share of GDP
68.1 percent (2018)
Inflation
0.6 percent (2019)
Government debt's share of GDP
184.9 percent (2018)
Currency
Euro
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