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Foundation for Economic and Industrial Research
The Greek Economy
2/11
Quarterly Bulletin No 64, July 2011
2
Editorial Policy
This analysis of the Greek Economy is the product of a collective effort by the research staff of the
Foundation. The views presented here form the consensus reached, and no individual bears sole re-
sponsibility for all or part of it. Furthermore, the views expressed do not necessarily reflect those of
other organisations that may support, finance or cooperate with the Foundation. The analysis in the
current report is based on data available until 01/07/2011.
IOBE
The Foundation of Economic and Industrial Research (IOBE) is a private, non - profit, public benefit
research organisation. Its purpose is to promote research on current problems and prospects of the
Greek Economy and its sectors and to generate reliable information, analysis and proposals for action
that can be of value to policy makers.
Copyright 2011 Foundation for Economic & Industrial Research
ISSN 1106 – 4315
This study may not be reproduced in any form or for any purpose without the prior knowledge and consent of the publisher.
Foundation for Economic and Industrial Research (IOBE) 11, Tsami Karatassou Str, 117 42 Athens, Tel. (+30210 9211200-10), Fax:(+30210 9233977) http://www.iobe.gr
3
Index FOREWORD............................................................................................................................... 5
“EXIT SUGGESTIONS FROM THE DEBT CRISIS THROUGH POLICY AND SOCIAL CONSENT
MEASURES” .................................................................................................................................. 7
A. The Greek problem: Why did we get here?................................................................................ 7
B. The Eurozone problem: Currency without a State....................................................................... 8
C. Two suggestions for exiting the crisis........................................................................................ 9
1. BRIEF OVERVIEW- CONCLUSIONS....................................................................................... 13
Mounting uncertainty in the public finances of developed countries .................................................13
Recession of the Greek economy at high levels at the beginning of 2011 .........................................13
Medium Term Fiscal Strategy Programme sustains the fiscal adjustment effort .................................14
The Medium Term Fiscal Strategy for the course of the GDP in 2011 is a critical factor......................14
Continuation of recession inhibitory of positive developments at the unemployment field...................15
De-escalation of inflation due to descending demand ....................................................................16
Special Study on the penetration of RES in electric power production ..............................................16
2. ECONOMIC ENVIRONMENT .................................................................................................. 17
2.1 Trends and Prospects of the Global Economy................................................................. 17
The Global Economic Environment ..............................................................................................17
European Union economies and the Eurozone ..............................................................................24
2.2 The Economic Environment in Greece ............................................................................ 29
A) Economic Sentiment ..............................................................................................................29
B) Fiscal Developments ..............................................................................................................35
3. PERFORMANCE AND PROSPECTS ......................................................................................... 43
3.1 Macroeconomic developments ....................................................................................... 43
Developments in Q1 of 2011.......................................................................................................43
Medium-term outlook.................................................................................................................45
3.2 Developments and prospects in key sectors of the economy........................................ 54
3.3 Export Performance of the Greek Economy.................................................................... 64
3.4 Employment - Unemployment ........................................................................................ 68
3.5 Consumer Prices ............................................................................................................ 75
Recent Developments ................................................................................................................75
Medium-term Outlook ................................................................................................................77
3.6 Balance of Payments....................................................................................................... 79
Current Account ........................................................................................................................79
Capital Account .........................................................................................................................80
Financial Account ......................................................................................................................83
Assessment ..............................................................................................................................83
4. IMPACTS AND NECESSARY ADJUSTMENTS FOR THE LARGE SCALE PENETRATION OF
RENEWABLE ENERGY SOURCES (RES) IN THE PRODUCTION OF ELECTRIC POWER ................ 87
5. APPENDIX: STRUCTURAL INDICATORS ............................................................................... 97
5
FOREWORD
This is the second report that IOBE is publishing in 2011 as part of its periodic series on the Greek
economy. This publication takes place at the most critical perhaps turning point of the fiscal
consolidation efforts of Greece, right after the turbulent approval of the Medium Term Fiscal
Strategy Programme from the Parliament and at the beginning of its implementation attempts,
while the negotiations for the next financial package to Greece take place. As all IOBE quarterly
bulletins, the report contains four sections and an appendix of structural indicators that track
the progress toward the attainment of the Lisbon Strategy's objectives. However, the report starts
with a position paper on the exit possibilities of the Greek state from the Debt Crisis
that it faces. The remaining sections of the report are structured as follows:
The first section presents a brief overview of the report's main points. The second section
examines the general economic conditions, containing: a) analysis of the global economic
environment based on the latest reports of the European Commission and the IMF; b) presenta-
tion of the economic climate in Greece, as outlined in IOBE's business surveys; c) the presenta-
tion of the Medium Term Fiscal Strategy Programme for 2012-2015, focusing on the additional
measures package for 2011.
The third section focuses on the performance of the Greek economy. It contains an analysis of
the current macroeconomic environment and its medium-term prospects, developments in
key sectors of the economy during the first semester of the current year, the export per-
formance of the Greek economy at the same period, developments in the labour market (em-
ployment and unemployment) since the beginning of the year, as well as the course of
inflation at the first four months of 2011. Finally, the section entails developments regarding the
balance of payments.
Lastly, the fourth section of the report presents an IOBE discussion paper on the effects of the
production-transportation systems of electric energy, and on economic elements from the adjust-
ments that are necessary for the achievement of the national penetration target of the Renewable
Energy Sources (RES) till 2020.
In general the report refers to and is supported by data, which were available up to 01/07/2011.
IOBE's next quarterly report on the Greek economy will be published in late September 2011.
IOBE “The Greek Economy” vol. 02/11
7
“EXIT SUGGESTIONS FROM THE DEBT CRISIS THROUGH POLICY AND SOCIAL
CONSENT MEASURES”
A. The Greek problem: Why did we get here?
The root of the problem of the Greek economy lies in that it spends more than it produces
for over three decades, while the state continuously spends more than it collects.
The main characteristics of this period is the constant expansion of the state (that resulted in
the doubling of general government employment from 1980 till today), the constantly defi-
cient public governance, the provision of benefits to social groups, the protection of the so-
called “acquired” benefits and rights, the trends of co-management with trade unions, the
essentially absent managerial right in public corporations, the lack of political consent almost
for anything (with political parties often conflicting in a dogmatic way) and the identification
of the social state with statism. These constitute the basic characteristics of the political
economy of the metapoliteysis, i.e. the era after the fall of the military junta in 1974 and the
reparation of democracy.
The expansion of the public sector was realised in parallel with phenomena of lack of plan-
ning, programming, transparency, motivation and performance measurement. Moreover, the
public sector imposed (and continues to impose) a large number of restrictions in the way
the private sector functions, resulting on the one hand to the extremely low ranking of
Greece in the international climaxes regarding competitiveness, business venturing and for-
eign investment attraction, and on the other hand to strangulate the healthy private sector
via the unfair competition of the state-fed private sector.
The fiscal loosening of the last decade started almost immediately after the decision of our
entering the Eurozone (slightly at the beginning, with the actual derailment coming later),
which was taken in 2000, based on the financial elements of 1999: In 1999, the primary sur-
plus of the general government was 4% of GDP, while the general government deficit was
3.1% of GDP. Ten years later, in 2009, the primary surplus of 1999 had become a large pri-
mary deficit of 10% of GDP, while the general government deficit was fivefold, reaching
15% of GDP. In that framework, the average salary of the general government in the 1999-
2009 period was doubled, when employment rose more than 10%. The fiscal balance dete-
riorated after 2007, especially regarding expenditure. The Lehman Brothers collapse and the
subsequent valuation of financial risks on a global basis found Greece in fiscal derailment;
therefore her transformation to “weak link” of the Eurozone should not bear any surprises.
The new government that arose from the 2009 elections delayed to realize how critical the
situation was and did not take in time the necessary measures.
IOBE “The Greek Economy” vol. 02/11
8
Today, after entering the rescue mechanism of May 2010, the situation remains grave. While
in 2010 the implementation of the Agreement was, more or less, successful, that resulted in
important reduction of the general government deficit by 5% of GDP and measures regard-
ing the viability of the insurance system, the developments in 2011 create intense scepti-
cism. In the fiscal area, the developments of the first five months make clear the important
deviation from the yearly target of the tax revenue, mostly as a result of low efficiency of the
revenue collection mechanisms and secondarily as a result of the slightly deeper recession,
in relation to the original predictions. Deviation is also obvious from the target of the primary
expenditure of the Regular Budget. The deviation, compared to the yearly target, in the state
deficit is minimized by the drastic reduction, for the second year in the row, of the Public In-
vestments Programme (PIP) by circa 40%, during the first five months of 2011. However,
given the size of the fiscal multiplier of Public Investments (it should be reminded that IOBE
has calculated this figure to 5), possible continuation of this policy is going to have grave
consequences in the economic activity. In this framework, the recent declarations of Euro-
pean Commission officials about the possibility front-loaded execution of National Strategic
Reference Framework (NSFR) with increased participation from the EU, create positive ex-
pectations in that public investments will not be further reduced, without increasing the PIP
deficit.
As far as the reforms are concerned, it is impressive that, a year and a half after the 2009
elections, no privatization has been realized.
The vote by the Greek Parliament of the Medium Term Fiscal Strategy Programme for 2012-
2015 -which predicts extra measures of almost €6.7 bn for the second semester for 2011 in
order to approximate the primary target of the 2011 deficit and the general government tar-
geted deficit of 1.7% of GDP for 2015- is expected to restart the adjustment process of
Greek economy that was stopped in the last few months. Still, voting in favour of the MTFSP
does not predicate its success, since its implementation depends on a series of domestic
policies and organizational issues. Those include the materialisation of an ambitious, but do-
able privatization programme and use of state land, of overall worth of €50 bn till 2015,
which consists the catalyst for the great decrease of public debt as a percentage of GDP be-
low 130% in 2015. It is also dependent from the stance of our Eurozone, IMF, ECB partners
and ultimately, of the international markets.
B. The Eurozone problem: Currency without a State
The root of the problem of Eurozone is that it is a complete monetary union, but an incom-
plete economic and fiscal union, so not just “a currency without a state”, but a currency
without even the mechanisms of crisis management, with inadequate monitoring of eco-
nomic and fiscal developments in the member-states. Moreover, the developments in the
balance of current accounts were not assessed after the creation of the Eurozone, the fiscal
developments in Greece and Portugal, the banking developments in Ireland, the speculation
IOBE “The Greek Economy” vol. 02/11
9
regarding land in Ireland and Spain. The banks were let loose to function with low own capi-
tal (high leveraged), while there were, till recently at least, constant frictions between Berlin
and the ECB about the way the Greek economic crisis should be handled (and, subsequently,
the Portuguese and the Irish).
The latest developments show a change in the way of thinking: Besides the fact that “rescue
mechanisms” have already been created (EFSF/ESM), Berlin now accepts the mild approxi-
mation of ECB about the way the private sector should participate in the refinancing of Greek
state bonds that mature (avoidance of credit event), while the Council of Economics and Fi-
nance Ministers (ECOFIN) recently rescinded its decision regarding the seniority of debt of
the ESM against the private sector debts. Moreover, it seems that an agreement is being
shaped on the provision of a new debt to Greece, under the prerequisite of additional meas-
ures implementation, under the Medium Term Fiscal Strategy Programme, privatizations-
state land use of up to €50bn till 2015 included.
However, an oxymoron seems to be developing. On the one side, the Eurozone starts to re-
alise that the problem of its architecture and moves on, with small steps, to the gradual
resolution of the debt issue. Without a doubt, the issue of Eurobond, the repurchasing of
debt in the secondary market form the rescue mechanisms EFSF/ESM, the issue of Brady-
bonds-type would be the suitable solutions of this problem and it is highly likely that the
situation is going to lead us there. On the other hand, though, in Greece, besides the well-
known organisational and managerial problems that hinder the implementation of decisions,
more problems are added up: Problems that have to do with the lack of political consent to-
wards the appropriate solution (that has been achieved in Portugal), as far as with the
emerging lack of understanding from the greater social strata of the harmful consequences
from a possible abandonment of the adjustment process.
C. Two suggestions for exiting the crisis
In effect, the Eurozone, ECB and IMF suggest to Greece the following alternative relation
(“social contract”): “We undertake to refinance your old public debt, as long as in 2015 you
have reduced the general government deficit below 2% of GDP and you realize privatizations
and recovery of state real estate of €50 bn”.
The repayment of the old public debt could start with the revenues from the privatizations,
the production of primary surpluses and the return in positive rates of economic development.
Important viability factors of this procedure are:
a) The interest rate with which Greece (and the other countries in need) will borrow from the
rescue mechanism (EFSF/ESM).
IOBE “The Greek Economy” vol. 02/11
10
b) The rate of economic development during the lending period
c) The amount of primary surpluses
d) The value of the assets that can be valuated, in order to repay old bonds.
In contrast to the above suggestion, which excludes any kind of “credit event” (i.e. bank-
ruptcy, total or partial) and, incidentally, predicts that more than 2/3 of the Greek public debt
will end up in state portfolios, ECB and ESM, the magazine “The Economist” in its issue of
June 25th 2011 suggests, reflecting the opinion of many analysts and academics, the remis-
sion of almost the half of the Greek public debt, recognizing of course that this solution poses
serious risks.
These kinds of solutions that Economist proposes are pursued by countries that have ex-
hausted all other available. They are, in effect, desperation solutions, since countries that
have gone bankrupt, are excluded from the markets for very long periods, resulting in the ex-
change of a short-term benefit (transient reduction of the interest burden and the repayment
of borrowing) with a long-term, permanent cost: Their margin lending (spreads) will almost
never narrow, while their banking system will suffer irreparable damage. This is exactly the
experience of Argentina. Moreover, Greece has still a large primary deficit both in her current
account balance and in the general government, resulting to their forced nullification right af-
ter the bankruptcy, since it will not be able to borrow money to cover them, therefore drasti-
cally reducing salaries, pensions, public investments, expenditures on imports of essentials,
such as pharmaceuticals, fuel, raw material etc. Additionally, the “haircut” of state bonds by
50% will lead the Greek banking system to bankruptcy, which holds €55bn. worth of Greek
state bonds and to significant losses for ECB, foreign banks, mostly French and German, pen-
sion funds in Greece, Greek and foreign private insurance companies etc. Finally, the negative
implications on the GDP and employment will be very important, while the shortage of essen-
tials and the drastic reduction of salaries and pensions will lead, probably, to social instability.
Has Greece reached such a desperation stage, has it exhausted all her “weapons” so as to
raise the white flag and surrender to bankruptcy and its consequences? No well-opinionated
observer that knows the problems, but the opportunities as well that the Greek economy pre-
sents can support such a position.
Firstly, because Greece’s general government owns assets of much higher value than any
other country in the Eurozone.
Secondly, because the opening-up of OECD’s most regulated economy and the elimination of
200 barriers to entrepreneurship and investment will, in the medium-run, create develop-
ment dynamics and employment. This is the experience drawn from the East and the West.
Thirdly, because primary surpluses of the order of 3.5% to 4.0% of GDP are not unknown
for Greece: They were observed during the conversion period, in the end of the 1990’s. If
these primary surpluses are achieved, they will be more than enough for the drastic de-
IOBE “The Greek Economy” vol. 02/11
11
escalation of the debt to GDP ratio, as long as they are combined with privatization, opening
of markets to competition and abolishment of entrepreneurship and investments barriers.
Fourthly, because Greece offers great investment opportunities: infrastructure projects in
roads, energy networks, ports, marinas, airports, water management, solid waste manage-
ment, etc.
Fifth, because it has access to funds of European Community Structural Funds (grants) for
infrastructures of €15 bn that can be leveraged with loans from the European Investment
Bank.
Sixth, because it has the assistance of a first-seen, historically, size from the rescue mecha-
nisms of the Eurozone, the ECB and the IMF that has a totally different attitude today than it
had towards Argentina.
According to the above mentioned elements, what should have already begun is the detailed
information of the citizens of this country, politicians included, for two before-mentioned al-
ternative solutions and, mostly, for the cost and the benefit of each. In IOBE’s point of view,
the “social contract” that in effect our Eurozone partners offer, constitutes the most beneficial
solution that guarantees long-term prosperity after a three-year adjustment period. This solu-
tion can be facilitated if there is political consent at a minimum level in critical points, like the
following:
1. Ten-year development programme: It must be explained in simple terms, what is the vision
and the perspectives in a ten-year timeframe, why these measures are being taken, what is
the cost and the benefit of the alternative solutions for the public debt, which were mentioned
before. In this development program, emphasis should be given in sectors with dynamic
competitive advantage, while predictions on economic elements and the evolvement of the
public debt in a ten-year-horizon should be provided, taking into consideration the macroeco-
nomic consequences from the structural changes and the exploitation of the state assets.
2. Gradual minimisation of the fiscal deficit under 2% of GDP in 2015, mostly through (a) limi-
tation of expenditure, with greater reduction of the payroll expenditure of the general govern-
ance and those social expenditures that have no social impact, (b) restriction of tax evasion.
3. Reforms- privatizations of wide spectrum and exploitation of the state real estate (in the
agricultural sector as well). Number one problem today is the public debt. Anything that con-
tributes to its reduction magnifies social well-being. It may take to sell listed companies in low
(stock market) prices, but with these revenues, state bonds can be repurchased from the sec-
ondary market in prices much lower than the nominal ones. Moreover, in the privatizations
framework, the separation of the Public Power Corporation (as the Italian ENEL) to subsidiar-
ies could be examined. In this way, the liberalization of the electric energy market and the
privatization of PPC can be combined.
IOBE “The Greek Economy” vol. 02/11
12
4. Measures on the enforcement of liquidity in the economy: a) PIP with EU funding: Front-
loaded execution of unabsorbed European funds of NSRF. Small number of big infrastructure
projects that can be easily financed (e.g. roadways), b) Leverage of NSRF funds with EIB
loans, c) Adoption of “fast track” procedures for all private investments, d) Banking system:
Equity capital increases where needed, taking into consideration the stress tests, even by us-
ing the Financial Stability Fund. On the contrary, mergers among domestic banks could be
harmful for the overall liquidity of the economy at this period of time, e) Payment in full of
debts the state owes to the private sector.
5. Raise of the numerous de-motivational factors regarding entrepreneurship and invest-
ments. Due to these factors, Greece ranks very low at the “Doing Business Report”. The cal-
culated benefit, in added value terms (product), employment and competitiveness from the
liberalization of markets and the removal of those de-motivational factors if, according to
IOBE’s estimations, very important and could be equal to a 17% rise of GDP. In order to at-
tract private investments, flexible concession contracts for roadways, airports, ports, marinas
etc should be used. The most important barrier for investments is the lack of a national land
planning, use of land, big number of permits from different public agencies and the great
waiting time for approvals. Adopting relevant modules that hold in European countries, the
relevant Greek legislature should be simplified and codified respectively, one and only permis-
sion should be needed and the should be adopted.
6. Flexibility in the labour market: The focus of the new development model for Greece on
dynamic, extrovert sectors and activities is expected to lead 10-15% of the presumption of
positive answer in case of administrative silence labour force from sectors that produce non-
tradable goods to move to sectors that produce exportable goods and imports substitutes.
The role of the state and of stakeholders in this procedure is important, so as this transition to
be smooth, without great rise in unemployment, combining the necessary flexibility (without
which the reduction of economic activity and of employment in the current economic circum-
stances would be even greater) with social protection of the unemployed and especially with
life-long learning. Both the German paradigm of adjustment to the labour market in recession
times (kurzarbeit) and the Scandinavian paradigm of flexibility and protection combination
(flexicurity) provide useful examples in drawing experiences.
7. Establishment of permanent undersecretaries in Public Administration: This measure is
necessary for the improvement of the public administration quality, the increase of its effec-
tiveness at this crucial time period and its disengagement from the political parties.
8. Measures aiming at the acceleration of justice, especially for cases of great tax evasion.
IOBE “The Greek Economy” vol. 02/11
13
1. BRIEF OVERVIEW- CONCLUSIONS
Mounting uncertainty in the public fi-
nances of developed countries
The unprecedented processes on political
level in Greece regarding the approval of
the Medium Term Fiscal Strategy Pro-
gramme (MTFSP), but mostly the reciprocal
developments in the Eurozone, on economic
and political level, have risen during the
past two months to major consultation issue
on a global basis, but also to an important
beating factor as far as developments in the
international financial markets are con-
cerned. The socio-political events in Greece
did not allow for the mitigation of wobbling
in the Eurozone, which were due to Portu-
gal’s recourse to the EFSF mechanism.
However, the recent decisions (approval of
the MTFSP, approval of the fifth dose loan)
can handle for some time period, but do not
completely resolve the issue of raising capi-
tal of the Greek state, thus not allowing for
decreasing the fears on public finances in
the EU.
The predictions on the rising course of de-
veloped economies have been intercepted
also due to the natural disaster in Japan,
that –already during the first trimester of
2011 have fiercely slowed down its GDP in-
crease. So, the growth rate of the most de-
veloped states in 2011 will shape at 2.5%,
according to recent predictions, from 3.0%
last year. The developing countries have
also partly lost their pumping development
dynamics, mostly due to financial phenom-
ena that usually take place when a country
develops for a row of years with very high
rates (inflation, interest rates rise, deterio-
ration of competitiveness, closer depend-
ence on developed economies). Nonethe-
less, these countries will be able to pre-
sent an increase of their GDP for 2011, at
a 6.5% on average, against 7.3% for
2010. Subsequently, the recovery of the
global economy will slow down in 2011 to
4.0%, almost one percentage unit less
than last year (4.9%).
Recession of the Greek economy at
high levels at the beginning of 2011
After the sharp rise of the GDP fall at the
end of last year, the Greek economy came
through at the first quarter of 2011 a pe-
riod of elaboration on various levels, re-
garding the implementation-boost of struc-
tural reforms (legal framework of opening
“closed” professions, start up of public or-
ganisations restructuring, implementation
of new labour laws). These efforts create
great uncertainty to professional and so-
cial groups that they concern, but intensify
the overall uncertainty, due to the atmos-
phere of broad changes that they create.
These developments, in combination with
the soaring unemployment, created impor-
tant pressure on the household consump-
tion that fell by 7.8% in relation to the
corresponding period last year. The fabling
domestic demand at the second semester
of 2010 functioned very prohibitively to
the implementation of investment plans,
resulting to the shrinkage of investments
IOBE “The Greek Economy” vol. 02/11
14
during the first trimester of the year, for a
third year in a row, and at a great extent,
almost 20%. The recession of the Greek
economy at the beginning of the running
year was held back by the –continuously-
improved results of exports that came from
the shrinkage of imports, since during that
period the overall exports shrank as well (of
products and services). Despite this effect,
GDP receded by 5.5% during the trimester
of January-March this year.
Medium Term Fiscal Strategy Pro-
gramme sustains the fiscal adjustment
effort
The long-standing structural warps of the
Greek economy are reflected not only on
the clinging that are occurring during the
process of their repeal, but also on the
symptoms of the ankyloses that they have
created. Therefore, the decline of public
consumption decelerated during the first
quarter of 2011, at 3.4%, against 8.3% in
2010, although during the respective last
year’s period the efforts of fiscal adjustment
had not commenced. The ankyloses in re-
sources handling from the state and in its
revenues collection, and therefore in the
fiscal adjustment process, are reflected in
the important deviation from its targets of
the state budget implementation during the
first five months of 2011.
The way the budget was implemented in
that period proves that its targets for this
year would not be attainable, without taking
more measures. The extent of the devia-
tions for the January-May period was lead-
ing the deficit to the 2010 levels, according
to the assessment of the Ministry of Fi-
nance. In these urgent circumstances, an
additional package of measures for 2011
was created. This package was embedded
in the rolling MTFSP, which was predicted
in the 3871/2010 law. With the new
measures for this year, the fiscal adjust-
ment is being attempted by 60% from the
expenses side and 40% from the revenues
side.
At the expenses side, the interventions
focus primarily on the cutting down of the
Public Investments Programme, with the
respective ramifications on the economic
activity that are analysed below, on the
retention of expenses on pensions, lump
sums, salaries and grants, while cuts on
overhead expenses and procurements fol-
low. As far as revenues are concerned,
under the pressure of the need for imme-
diate collection, bonus interventions were
chosen, like solidarity levies to individuals..
However, the greatest part of additional
revenues comes from permanent changes,
like the restraint of tax-deductible limit,
the regular contributions to pensioners
and presumptive income, the raise in the
real estate fortune tax and from indirect
taxes.
The Medium Term Fiscal Strategy for
the course of the GDP in 2011 is a
critical factor
Except from the performance that MTFSP
is expected to have directly and in the
years to come on a fiscal level, its role will
be important in the evolvement of the GDP
this year. First of all, the greatest stream-
lining of public expenses implies greater
cut down and therefore, lower expenses
for the state for consumption reasons. The
new measures of direct taxation, in com-
IOBE “The Greek Economy” vol. 02/11
15
bination with the salary readjustment in the
private sector and the forthcoming unified
payroll for the public sector employees limit
the available income. Therefore, they force
pressure on the consumption demand, be-
yond those that come from the important
rise of unemployment. The MTFSP predicts
for this year the limitation for Public Invest-
ments Programme (PIP) as well, irrespec-
tively of whether and to what extent the EU
will have greater participation in its financ-
ing. Nonetheless, the slow rate of imple-
mentation of the PIP in the first five months
of 2011 that has not overcome 23% accord-
ing to its overall revised level implies great
acceleration for the remaining months of the
year. As far as private investments are con-
cerned, the decelerating domestic demand
and the intense socio-political developments
of My-June have created circumstances of
high ambiguity in the Greek society and
economy that are inhibitory or even deter-
rent at some occasions for the implementa-
tion of investment plans from domestic and
foreign possible investors.
On the other hand, the lower domestic de-
mand will continue to function correctively
for the hyperbolic consumption during the
past of imported goods and services. At the
other side of the sector, enlarged exports of
goods will be summed up with the benefit
from tourism, since the touristic inflow
moves at higher levels than last year. Resul-
tant of all the above will be the configura-
tion of the recession at circa 4.0% for
2011.
Continuation of recession inhibitory
of positive developments at the un-
employment field
As supported in the previous three-month
study of IOBE, despite the enhancement
of unemployment during the last trimester
of 2010, the embedment in the labour
market of the overall unfavourable devel-
opments in the production during that pe-
riod could not be immediate. Therefore, a
new, important raise of unemployment at
the beginning of 2011, that indeed took
place, was predictable. However, a most
likely greater expansion of unemployment
that rose to 15.9% during the first quarter
this year was pushed back by the imple-
mentation of the new labour relations to
the private sector. At any case, the strong
recession of the Greek economy for an-
other year does not allow for positive de-
velopments in employment, the shrinkage
of which primarily stokes the accession of
unemployment. Still, a bottleneck of the
strong rise at the rest of 2011 could be the
seasonal effect from tourism, during the
summer months. It is possible this year,
for the first time after two years to see
unemployment limited during that season
of the year, in comparison to the previous
trimester. Nonetheless, a further uprising
of unemployment will not be hindered at
the rest of the year, resulting to reach
approximately 16.5% for the whole
year.
IOBE “The Greek Economy” vol. 02/11
16
De-escalation of inflation due to de-
scending demand
The sudden expansion of unemployment, in
combination to the limitation of the dispos-
able income from the salary developments
in the private sector, had a restraining effect
on the inflation at the beginning of the cur-
rent year, since it retreated from 5.2% of
last January to 3.3.% in April, development
that led to 4.3% during the first four
months of 2011. The continuing effect of
those factors, the added direct taxes-
immediate special contributions, but also
the unified payroll in the public sector will
weaken even more the consumption de-
mand and following, inflation. However, the
equation of the Special Consumption Tax in
the heating and transportation oil for busi-
nesses and the rollover of food services to
higher SCT will function as counterbalancing
forces. These taxes may lead to inflation
recovery towards the end of the year.
Granted this expected buffering effect on its
de-escalation, inflation will be shaped on
average for 2011 at 3.3%.
Special Study on the penetration of
RES in electric power production
The Monitoring and Analysis of Electric
Sector Unit of IOBE has completed a
study, where the effects on the production
and transfer systems of electrical power
are assessed, in financial measurement as
well, from the demanded adjustments for
the success of the national target of RES
penetration, with a time horizon of 2020.
Basic conclusion of the study is that the
transition of Greece towards an economy
of low green house gas emissions, main
characteristic of which will be the impor-
tant penetration of RES, is not possible
without the radical transformation of the
domestic sector of electric power produc-
tion, which will be accompanied by impor-
tant investments in transfer and distribu-
tion channels.
IOBE “The Greek Economy” vol. 02/11
17
2. ECONOMIC ENVIRONMENT
2.1 Trends and Prospects of the Global Economy
The Global Economic Environment
The European Commission, in its Spring
Forecast, has marginally improved its es-
timations on the development of the
global economy in 2011, predicting a
growth rate of the global GDP of 4% (last
estimation 3.9%), contrary to a 4.9% rise
in 20101. This slight improvement is at-
tributed to the smoothing of the financial
crisis, the restoration of the interbank
market and the adoption of effective
monetary and fiscal measures. On the
other hand, the increase of the energy
prices and, therefore, the increase of con-
cerns regarding inflationary pressures, are
expected to lead to a deceleration of the
global demand and restraint of the global
GDP growth, although important devia-
tions in growth rates among economies
are being observed.
Moreover, the IMF, in its latest predictions
on the global economy2, predicts that the
growth rate will formulate to 4.4% in
2011, estimating that the recovery of the
economy is now based on more stable
ground that minimise the double-dip risks
in developed economies.
Nonetheless, the recovery of the eco-
nomic activity shows geographical ine-
quality, with the estimations on the GDP
1 European Economic Forecast, Spring 2011, Euro-pean Commission, May 2011 2 World Economic Outlook (WEO), IMF, April 2011
growth in the developing countries for
2011 to be around 6.5% (from 7.3% in
2010), while in the developed economies,
the economic development is predicted to
be at 2.4% (3% in 2010). Additionally, an
evident shortcoming in employment is ob-
served, since the unemployment rate in
developed economies remains substan-
tially high, while the youth unemployment
in emerging markets is another crucial
issue.
The leading indicators demonstrate a
gradual acceleration of the global econ-
omy recovery, after the slow-down that
took place in the second semester of
2010, due to the stock decrease. Industry
production and investments picked up
their rise, while retail show remarkable
dynamics in emerging economies. Their
change was also positive in developed
markets (mostly the USA). On the other
hand, dismissals and the slow rate of the
restoration of employment restrict the dy-
namics of consumption.
Mixed are the signals from the world
trade. The growth rate of volume in the
January-April period of this year compared
to the same period of 2010 reached 9.0%,
no matter the extensive enlargement
throughout 2010 that surpassed 15%3.
However, a deceleration in the rise of the
3 CPB World Trade Monitor, April 2011, CPB Nether-lands Bureau for Economic Policy Analysis, 22/06/11
IOBE “The Greek Economy” vol. 02/11
18
global trade is observed, since in the
same period last year, it outreached
15.4%. Among the developed geographi-
cal zones, the USA write down the great-
est increase, of a range of 9.0% and the
Eurozone follows with 6.1%. The export-
ing expansion of Japan is milder (+4.8%).
At this point, it should be noted that the
Japanese exports suffered negative ef-
fects from the natural disasters in the
country, since between Q1 2011 and Q4
of 2010 the exports shrank by 1.1%.
Leading role in international trade is still
held by the emerging economies (+8.9%
in the first four months), with the areas of
Central-Eastern Europe and Latin America
to overcome Asia (increase by 13.5% and
12.5% respectively, versus 8.9%).
As far as the debt crisis in Europe and the
worries about the viability of public fi-
nances are concerned, the variability in
the markets was intense after Portugal
joined the rescue mechanism, leading to
increase of the spreads. The total “pack-
age” that Portugal received from the EU
and IMF comes up to €78bn.. According to
estimations of the European Commission,
Portugal is expected to record negative
growth rate in 2011 (-2.2% vs. 1.3% in
2010), while the fiscal adjustment pro-
gram that the newly elected government
is called to implement predicts the reduc-
tion of the fiscal deficit from 9.2% of GDP
in 2010 to 5.4% of GDP in 2011 (an under
the 3% limit in 2014), in parallel with the
promotion of structural reforms and the
support of the banking system. Debt is
expected to increase up to 101.7% of
GDP in 2011 (93% in 2010). In this
framework of developments, downgrading
and revisions of the credit solvency of the
European periphery and of Belgium con-
tinued, contributing to the overall variabil-
ity of investment climate, amidst conver-
sations among governments and respon-
sible Eurozone institutions about finding
effective solutions to the debt crisis and
the participation or not of private inves-
tors in possible new support packages.
Investors are also worried on the bank-
ruptcy risk and the status of banks, the
political instability due to austerity meas-
ures, as well as on the lending costs,
which are expected to sustain in high
level, at least for the first semester of the
current year.
Taking for granted the above elements,
the raise in the reference rate by ECB by
25b.p. to 1.25% and the probability of
further increase to 1.75% until the end of
2011, adopted to inhibit the inflationary
pressures, hampers the liquidity in the
countries that implement strict austerity
measures (Greece, Ireland, Portugal). In
any case, the debt crisis of the periphery
of the Eurozone constitutes a risk that, if
not handled properly, it may threaten the
recovery both of the core of the Eurozone
and of the global economy.
The inflationary pressures are expected to
continue mostly in emerging and develop-
ing economies, due to the hike in energy
prices, commodity and food prices (in the
developing countries in particular, the in-
crease of these prices lead to significant
increase in the consumer price index).
The prices in developing countries are ex-
pected to increase by 7%, according to
the latest estimations by IMF, which re-
IOBE “The Greek Economy” vol. 02/11
19
vised upwards its former predictions by
one percentage point. In developed
economies, the image is different, since
the weak economic recovery keeps expec-
tations on inflation low, to 2% this year,
slightly higher than previous predictions
for 1.5% inflation in 20114.
Specifically in relation to the major world
economies, the US economy grew by
2.3% on annual basis (2.8% in Q4 of
2010). The reason of this slow-down is
mostly the negative contribution of net
exports during the same time, since im-
ports increased at a greater rate (10%)
than exports (8.4%). Important slowdown
was also observed for consumption ( an-
nual increase 2.7% from 4.0%, but con-
tinued to augment at an agreeable rate,
since the growth rate of demand for ser-
vices (that constitutes 65% of consump-
tion expenditure) accelerated (at 1.7% by
1.5%), partially counterbalancing the im-
portant decrease of the growth rate of
demand for products (4.8% from 9.2%).
Investments contributed, but less than the
previous semester, since they rose by
5.7% in the quarter Jan-Mar this year,
from 6.5% in Q4 of 2010. For 2011 over-
all, EU estimations predict that the Ameri-
can economy will grow by 2.6% (2.9% in
2010). The estimated small deceleration
of growth will come, as in Q1, mostly be-
cause of the limitation of domestic de-
mand and the negative contribution of the
external sector, in combination to the in-
crease in commodity prices, despite the
expansion of liquidity support measures
until June 2011.
4 World Economic Outlook (WEO), IMF, April 2011
Regarding the labour market, the creation
of new job positions remains extremely
low, taking into consideration the great
losses of 2008-2009 period (1.5 million
new job positions from 2008, contrary to
losses that are estimated at 8.5 million).
Moreover, it is estimated that the crisis is
going to increase the structural unem-
ployment in the American economy, sine
the significant blows that several sectors
of the economy and geographical areas
faced, resulted in great unbalance be-
tween demand and supply of labour. In
May of the current year, the unemploy-
ment rate rose to 9.1% (9% in April and
8.8% in March), while according to IMF
predictions, the unemployment rate in the
USA is expected to remain at high levels
in 2011 (8.5% vs. 9.6% in 2010).
Another risk that could threaten the re-
covery of the American economy is the
continuous debt crisis in the Eurozone
that creates further unrest in the financial
markets and weakens the global demand.
Additionally, the rise in oil and commodity
prices, stemming from the upheaval in
Middle East and Northern Africa, may
weaken even more consumption expendi-
ture in the USA. In the domestic market,
the fall in housing prices my be greater
than originally expected, due to the large
“shadow” stock of houses that has been
confiscated and is sold at much lower
than purchase price. On the other hand,
the potent corporate balance sheets could
support more hiring and capital invest-
ments, in the case that the business cli-
mate is ameliorated. Moreover, the course
of private consumption, especially for du-
rable consumer goods, could be a pleas-
IOBE “The Greek Economy” vol. 02/11
20
ant surprise, if the latter recover. Inflation
is expected to remain in relatively high
levels in 2011, at 2.3%, a fact that
strengthens the possibility of keeping the
current low level of the intervention rate
(0.25%) till the end of the year.
Regarding fiscal economics, the deficit is
estimated to reach 10.7% of GDP in 2011
(9% last year)- the highest among devel-
oped countries- while debt is believed to
surpass 116% of GDP till 2016, according
to the IMF. The latest data on the budget
implementation show that the total deficit
of the October 2010-March 2011 period
spread by 15% in relation to the respec-
tive period a year ago, since expenditure
increased by 11% and revenues by 7%.
With these facts, the government plans an
ambitious fiscal adjustment programme
for the next years, which predicts the de-
crease of deficit by 5 percentage points by
2013. The target may be considered as
ambitious, given the weak recovery of the
economy and the high unemployment.
For the economy of Japan, the European
Commission estimates that the increase of
GDP in 2011 will be around 0.5%, versus
the previous estimation for 1.3% increase,
from 3.9% in 2010. In Q1 of 2011, the
Japanese economy shrunk by 0.7%, when
in Q4 of 2010, growth reached 2.4%. This
development incorporates also the first
effects from the catastrophic earthquake
of March. Even though the exact impact of
the natural disasters that struck the coun-
try has not been fully calculated, signifi-
cant slowdown is being expected for both
production and exports, while the turn of
investors towards safe investments will
negatively impact the financial markets.
The first estimations on the damages from
the catastrophic earthquake and the tsu-
nami are around 5% of the GDP5. The
most direct impact was observed in logis-
tics and the reduction of production, due
to damages in energy supply and the re-
duction in its production, as well as to the
descending consumer and investment
trust. Subsequently, consumption and ex-
ports are expected to continue their slow-
down throughout 2011, even more than
originally anticipated, while a reduction is
not excluded. More specifically, private
consumption is expected to shrunk by
0.3% in 2011, after its 1.8% raise in
2010, when important deterioration is ex-
pected for exports, with growth rate to
limit to a mere 1% in 2011 (24.2% in
2010).
On the other hand, the process of rebuild-
ing and replacement of the damages is
believed to give a boost to investments,
mostly public ones that could be higher
than 2% of GDP. The primary restructur-
ing package that was announced in May
comes up to ¥4 trillion (or 0.8% of GDP).
Moreover, given the urgent needs and the
deflationary pressures, the Bank of Japan
is expected to maintain the expansionary
monetary policy that was already in place,
in order to avoid further sedimentation of
the economic activity. Due to the troubled
fiscal situation of the country, the restruc-
turing package of the economy is going to
be financed primarily via transport of cen-
tral government funds to the basic pen-
sion system and the budget reserves.
Nonetheless, the European Commission
5 Economic Outlook, No 89, OECD, May 2011
IOBE “The Greek Economy” vol. 02/11
21
estimates marginal spread of the deficit,
to 9.7% of GDP (9.3% of GDP in 2010),
and debt increasing to 236% of GDP
(223% of GDP in 2010). Unemployment is
expected to remain near the 2010 level,
that is 4.9% from 5.1% one year ago.
Regarding the economy of China, growth
rate will shape to 9.3% in 2011 according
to the latest estimations, from 10.3% in
2010. Already in Q1 of the year, the Chi-
nese economy grew by 9.7%, marginally
lower rate than 9.8% in Q4 2010. The
policy of interest rate increase from the
Central Bank in order to suppress infla-
tionary pressures is expected to be the
main reason for the observed deceleration
in 2011, although the growth rate remains
at high levels. In Q1 2011, inflation
reached 5%, making the 4% target for
the end of the year somewhat question-
able. On the other hand, investments con-
tinue to provide the growth stimulus, es-
pecially in construction (34.1% increase in
Q1 2011), intensifying however the wor-
ries for the possible creation of a “bub-
ble”. During the same period of time, ex-
ports increased by 26.5%, mostly because
of the gradual recovery of developed
economies. Nonetheless, predictions on
the growth rate of exports for the whole
2011 refer to a deceleration at 12.4%
(18% in 2010). Therefore, and in combi-
nation to the higher prices of commodities
world wide, which affect upwards the im-
ports, the surplus in the current account
balance is expected to shrink to 4.4% of
GDP in 2011 (from 5.1% of GDP in 2010).
Demand and consumer expenditure are
expected to decelerate, due to the weak-
ening effect of the fiscal measures that
support the economy and of the tight
credit circumstances. As far as foreign ex-
change reserves are concerned, in Q1 of
the year they rose to $3.04 trillion (from
$2.45 trillion the respective period of
2010), an increase of 24%. The forthcom-
ing deceleration of the growth rate may
lead the authorities to suspend the inter-
est rate increase on the one hand, and of
further state control of the economy and
of prices (against competition) on the
other, a fact that could undermine the
long-term perspectives of competition en-
forcement, through the promotion of
structural reforms in the economy.
The economic recovery of Russia contin-
ues, as the annualised GDP growth is ex-
pected to accelerate to 4.5% in 2011,
slightly higher than that of last year
(4.0%), boosting the optimistic expecta-
tions on the stabilisation of the recovery.
Nonetheless, the dynamics of the previous
period will decrease substantially, due to
the anaemic recovery of developed
economies, which is expected to slow
down the growth rate of exports to 7.6%
(11.8% in 2010). Already, in the first
three months of the year, an important
decrease of the growth annual rate is ob-
served, reaching 2.5%, when in Q4 of
2010 it was 8.5 percentage points higher.
The growth rate of the Russian economy
will significantly be affected by the devel-
opments in commodity prices, since the
country is one of the biggest exporting
powers of oil and gas world wide. The rise
in oil prices is expected to lead to increase
of the current account surplus to 7.4% of
GDP in 2011 (6.9% in 2010), leading the
Central Bank to further increase of the
IOBE “The Greek Economy” vol. 02/11
22
main interest rate from 8.25% that was in
previous May. No matter the weak de-
mand and the revaluation of the national
currency against foreign currencies, the
increase of inflation in Russia is largely
affected by food prices, which rose by
14% this March (due to the fires and the
drought during the 2010 summer).
As far as the labour market is concerned,
the reforms regarding employment times
and real salaries seem to have limited the
losses in employment, while estimations
go about a small decrease of the unem-
ployment rate to 7.7% in 2011 (from 8%
in 2010). As far as the fiscal economics
are concerned, the general government
deficit is estimated to shrink to 3.2% of
GDP this year (from 4.6% last year) and
under 3% of GDP till 2013, after the an-
nouncement of the revised fiscal meas-
ures for the relevant period and the in-
crease of revenues that the rise in inter-
national oil prices instigated. An important
role is anticipated for the privatization
program of the government, as a restric-
tive measure of state participation in the
economic activity.
Table 2.1
International Environment – European Commission (real annual % change)
2010 2011 2012
GDP USA 2,9 2,6 2,7
Japan 3,9 0,5 1,6
Asia (excl. Japan) 9,2 7,7 7,7
- China 10,3 9,3 9,0
- India 10,4 8,0 8,2
Euro area 1,8 1,6 1,8
ΕU-27 1,8 1,8 1,9
EU candidate countries 7,6 5,6 5,1
Commonwealth of Independent State (CIS) 4,5 4,7 4,5
- Russia 4,0 4,5 4,2
Middle East and North Africa 3,8 3,1 3,7
Latin America 5,9 4,2 3,9
- Brazil 7,5 4,4 4,3 Sub-Saharan Africa 5,0 5,5 6,0
World 4,9 4,0 4,1
World Trade
Global Imports 14,0 7,8 7,9
Export market (extra ΕU-27) 13,7 8,2 8,2 Middle East and North Africa: Algeria, Bahrain, Djibouti, Egypt, Jordan, Iran, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Qatar, Saudi Arabia, Syria, Sudan, Yemen, Tunisia, United Arab Emirates Sub-Saharan Africa: Angola, Botswana, Camerún, Cape Verde, Chad, Cote d’ Ivoire, Etiopía, Gabón, Guinea Ecuatorial, Kenya, Congo, Mauritius, Moroco, Namibia, Nigeria, Seychelles, South Africa, Swaziland, Tanzania, Tunisia, Uganda etc. Source: European Economic Forecast, Spring 2011, European Commission, May 2011
IOBE “The Greek Economy” vol. 02/11
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Table 2.2 IFO - Economic Climate Index for global economy (Index, 2005=100)
Quarter/Year ΙI/’09 IΙΙ/’09 IV/’09 I/’10 II/’10 IΙΙ/’10 IV/’10 Ι/’11 ΙΙ/’11
Economic Climate 65,2 79,6 91,4 99,5 104,1 103,2 98,6 106,8 107.7
Current Situation 39,3 43,0 54,2 67,3 80,4 93,5 95,3 102,8 108.4
Expectations 89,5 114,0 126,3 129,8 126,3 112,3 101,8 110,5 107.0 Source: IFO, World Economic Survey, WES 02/2011
Table 2.3
IFO - Economic Climate Index in economic zones (Index, 2005=100)
Quarter/Year ΙI/’09 IΙΙ/’09 IV/’09 I/’10 II/’10 III/’10 IV/’10 Ι/’11 IΙ/’11
North America 66,9 78,7 85,4 90,4 95,4 88,7 82,8 104,6 98,7
Western 64,5 76,4 89,3 98,3 99,3 102,2 105,2 113,2 115,1
Asia 69,3 89,5 101,8 108,8 113,2 107,9 95,6 105,3 101,8 Source: IFO, World Economic Survey, WES 02/2011
The reservedness about the width of the
global economy recovery is mirrored in
the development f the economic climate
indicators, where although a slight im-
provement is being observed, the expec-
tations for the forthcoming period seem to
be more negative. The relevant economic
climate indicators, which can be found in
the “World Economic Survey”, run by the
IFO Institute of Germany, are enhanced
for the second consecutive trimester,
while the expectations indicator is lowered
in Q2 of 2011. The results of the research
prove that the recovery of the global
economy will continue in the next months,
but with slightly lower rates.
More specifically, the world economic cli-
mate indicator slightly increased quarter-
on-quarter (Table 2.2). The indicator re-
mained above its long-run average (96.9),
registering its best performance since the
end of 2007, which signified improved
evaluation of both the current state of the
economy and its outlook for the next six
months. Continuing the trend observed in
the previous quarters, the evaluation on
the current state of the economy im-
proved, with the growth rate of this indi-
cator, however, decreasing in comparison
to the preceding period. The expectations
on the global economy’s outlook deterio-
rated in Q2 of the year, after the increase
of last quarter, mostly due to the concerns
about inflationary pressures and the forth-
coming increase of interest rates, as well
as difficulties stemming from the fiscal
deficits and the increase of unemploy-
ment, which are considered to e the most
important economic problems on a global
basis.
Regarding the economic regions (Table
2.3), the economic climate worsened in
North America and Asia, reversing the
hike of the last two quarters. In Asia, and
of course in Japan, after the great natural
disaster that struck the country last quar-
ter, the fall of the indicator is due to the
less favourable assessment of the current
situation. On the contrary, in Western
Europe, the economic climate indicator
IOBE “The Greek Economy” vol. 02/11
24
improved due to the more positive evalua-
tion of the current economic situation.
Nonetheless, it is worth mentioning that in
all economic zones, the future aspects
were worsened.
European Union economies and the
Eurozone
The economic growth rates in EU-27 and
in the Eurozone countries accelerated in
the first quarter of 2011, mostly because
of the positive impact of exports. On an-
nual basis, the GDP growth rate of the
Eurozone in the Jan-Mar quarter shaped
to 2.5% (1.9% last quarter), with Ger-
many having almost double rate against
the average (4.8%)6. For the whole 2011,
according to the Spring Forecast of the
European Commission, the growth rate is
expected to be formulated at 1.6%in the
Eurozone and at 1.8% in EU-27, margin-
ally lower than 2010. It is noted that, the
2011 prospects have been slightly revised
upwards, in relation to former predictions
of the Commission, because of the im-
proved prospects for the American and
the emerging markets, and the positive
impact of the ameliorated business cli-
mate in Europe, despite the pressure and
the ambiguity that stems from the con-
tinuing debt crisis in the Eurozone. Addi-
tionally, there is no negative impact, until
now, on the macroeconomic elements
from the earthquake and the tsunami in
Japan. It is also worth noting that the
elements for the industrial production and
the new orders in industry continue to
move upwards, confirming the estimations
6 News Release Euro Indicators, EUROSTAT, 79/2011, 08/06/11
for gradual accelerations of the economic
activity. Besides, OEC,D in its biannual
report on the global economy, also re-
vised upwards the predictions for the Eu-
rozone growth rate for 2011, to 2% from
1.7% that was initially expected7.
Germany is expected to experience
strong growth in 2011, 2.6% (higher
than previous estimations), while the Aus-
trian economy is estimated to grow by a
2.4% rate. On the other hand, the pros-
pects for Greece (-3.5%), Portugal (-
2.2%), Spain (0.8%) and Ireland (0.6%)8
remain pessimistic, supporting the view
that the course of the Eurozone econo-
mies will be of “multiple gears”. The im-
portant differentiations and deviations of
the various country-members of EU are
due to structural weaknesses of the eco-
nomic zone, such as weakness in domes-
tic demand (in surplus countries) and low
competitiveness (in deficit countries), in
combination to high levels of public debt
in the latter.
It should be noted, however, that in any
case, the economic recovery in Europe will
be slower in relation to other developed
economies, which underlines the fact that
exiting the crisis will be comparatively
slower for the European economy. Despite
the relative normalisation in the financial
markets, uncertainty remains and the
turmoil in the bond market does not allow
for a reversal of the sentiment. The debt
crisis is the most critical problem in the
Eurozone, in parallel with the further fi-
nancing of Greece. Investors seem to be
7 Economic Outlook, No 89, OECD. May 2011 8 European Economic Forecast, Spring 2011, Euro-pean Commission, May 2011
IOBE “The Greek Economy” vol. 02/11
25
rather worried, as far as voluntary partici-
pation of private bondholders in the 2nd
financial package towards the country, an
issue that is strongly resisted by the ECB.
The continuous debt crisis, the important
inequalities in the inner circle of the Euro-
zone, the possibility of further spill-over of
the upheaval in the real economy, as well
as the worries for the capital adequacy of
banks and the sustainability of public eco-
nomics in some member-states, lead to
high long-term yields of some state bonds
of the European periphery and constitute
risks for the recovery of the economic ac-
tivity. Moreover, the fiscal adjustment
measures in many country-members could
negatively affect domestic demand, more
than it had primarily estimated. Nonethe-
less, the measures taken by most gov-
ernments led to a fiscal deficit decrease in
the Eurozone, at 6% of GDP in 2010,
while further shrinkage is expected to
4.3% of GDP for 2011.
Net exports once more have emerged as
key driver of growth for the European
economy. In the first quarter of 2011 ex-
ports in both EU-27 and the Euro area
registered higher growth rate compared to
the other elements of GDP (9.9% for EU-
27, 9.7% for the Euro area on an annual
basis), decelerating however in compari-
son to the previous quarter9. For 2011,
the European Commission has revised its
estimations on the exports increase up-
wards (7.3% in EU-27 and 6.9% in the
Euro area), because of the dynamics in
the developing countries, in relation to the
developed ones. In any case, exports
9 News Release Euro Indicators, EUROSTAT, 79/2011, 08/06/11
growth rate is estimated to be lower in
2011, due to last year’s low comparison
base level of 2009 exports. Another sig-
nificant factor that contributes to the
promotion of exports is the redirection of
the growth model in many Eurozone
economies, towards tradable goods. On
the other hand, the upcoming demand
and the rise in international oil prices are
expected to boost imports. The relevant
predictions for 2011 are about 5.6% for
EU-27 and 5.4% for EZ-17.
The growth rate of investment in
equipment accelerated remarkably dur-
ing Q1 of the year (3.4% in EU-27 and
4.2% in EZ-17), after the 2010 decrease
due to the recession. The upwards course
is expected to continue, due to the
greater production dynamic and the bet-
terment of financing circumstances, since
interest rates remain at historically low
levels. Strong corporate profitability and
healthy balance sheets may contribute to
the boosting of investments, especially in
equipment and less in construction. On
the other hand, public investments that
led a significant part during the crisis are
expected to shrink, due to the wider fiscal
adjustment in the Eurozone.
Private consumption remained at low
levels the quarter Jan-Mar 2011, register-
ing weak growth rates (0.9% in EU-27
and 1.1% in EZ-17), as in the previous
quarter. The prospects for the whole year
remain unstable, since both in EU-27 and
EZ-17 limited growth is expected, of about
0.8-0.9%. Moreover, both the consumer
confidence indicator and the indexes con-
cerning consumption in retail do not pro-
IOBE “The Greek Economy” vol. 02/11
26
vide for marks of dynamic increase of
consumption. More specifically, retail sales
shrunk by 1% in March. Probably, car
market will be an exception, since it
seems to be benefited by the car recall
plans that took place in many country-
members, since the latest data shows that
sales increased by 2% on a quarter basis
in Q1 of the year. The increase in public
consumption has not surpassed 1.1% in
the first months of 2011 in EU-27 and EZ-
17. Even though this level of the respec-
tive index is higher than that of the last
quarter of 2010, the prospects for 2011
remain restrained, since the fiscal consoli-
dation that takes place in several coun-
tries of the Eurozone, through the reduc-
tion of wage costs and intermediate con-
sumption, is expected to lead to a small
positive change of public consumption this
year, by 0.3% in EU-27 (from 0.7% in
2010) and 0.2% in EZ-17 (0.7% in 2010).
Unemployment remains one of the most
important problems for the European
economy. For 2011 the unemployment
rate in EU-27 and the Euro area is ex-
pected to fall marginally to 9.5% and 10%
respectively, tracking its usual lag in rela-
tion with the course of GDP.10 In April
2011, unemployment in the Euro area fell
to 9.9%. It is worth noting that, being in a
crisis, the labour market in Europe proved
to be quite resilient, since the reduction of
demand was handled by companies
10 The labour market usually lags behind production by 2-3 quarters in the business cycle movement. We should bear in mind that the measures adopted for tackling the crisis have not yet fully delivered, while restructuring measures are taking place in various sectors. Meanwhile, fiscal consolidation measures in various member-states are expected to lead to redundancies in the public sector in the coming months.
mostly by reducing working hours of em-
ployees, rather than reduction of job posi-
tions. Critical role in this sector was held
by the outspread of the policies that en-
forced labour market flexibility in many
country-members. However, the expected
benefits in the labour market are expected
to be unequally distributed among coun-
tries with powerful economic growth and
relatively flexible labour market and coun-
tries that face structural problems regard-
ing competitiveness. For example, in Q1
of 2011, Spain, Ireland, Estonia and
Greece had the highest unemployment
rates (20.6%, 14.8%, 14.3% and 14.1%
respectively), when in Italy, Belgium and
Germany unemployment reached 8.3%,
7.3% and 6.4% respectively.11
Regarding inflation, EC upped its fore-
casts for EU-27 and the Euro area com-
pared to autumn, to 3% and 2.6% re-
spectively, mainly due to the increase in
commodity and energy prices observed in
the past few months and the increase in
indirect taxation in quite a few countries.
According to the latest available data from
Eurostat, inflation in the Eurozone
reached 2.7% this year in May. Thus, the
fears over likely inflationary pressures
have intensified, bringing ECB closer to a
second increase of the interest since the
beginning of the year. It is noted that, the
increase in interest rates from ECB by 25
basis points from the historically low 1%,
which took place in April, was imple-
11The differentiation in the course of unemployment among the European countries is due to differences in the production structure of their economies, the utilisation rate of their production capacity, the profitability of their enterprises, the structural char-acteristics of their labour market and relevant policy measures.
IOBE “The Greek Economy” vol. 02/11
27
mented faster than originally anticipated.
According to estimation, in July ECB is ex-
pected to increase the basic interest
rate to 1.5%, while it is considered likely
to follow further increase of the reference
rate to 1.75%. Despite all this, the slug-
gish growth of wages in the Euro area and
the restraint in unit labour cost, as well as
the high unemployment rates and the im-
portant surplus in production dynamics
are expected to counterweight the pres-
sures for price increase. More specifically,
inflation is expected to reach 3% in EU-27
(and 2.7% in the Euro area) in the second
quarter of 2011 and to fall subsequently in
both geographical areas until the end of
the year.
The mixed image and the uncertainty for
the course of the European economy are
reflected in the course of the leading indi-
cators, such as the indicator of eco-
nomic activity12 and the economic sen-
timent indicators of the European Com-
mission (DG ECFIN) that moved to oppo-
site directions, according to the latest es-
timates. More specifically, the economic
activity indicator of CEPR for the Euro
area kept its upward course from the be-
ginning of the year, mostly because of the
positive impact of external trade that
seems to have a dynamic recovery, a fact
that was counterweighted by the falling
course of financial markets. The fact that
the indicator has taken positive values
presages that in Q2 of 2011, GDP in the
euro area is expected to (quarter-on-
quarter).
12 The Center of Economic Policy Research (CEPR) in cooperation with the Bank of Italy each month calculates the €-COIN leading indicator of economic activity for the Euro Area. The indicator provides a forecast of GDP growth and is constructed from a range of different data, such as the course of in-dustrial production and of prices, as well as labour market and financial data.
IOBE “The Greek Economy” vol. 02/11
28
Table 2.4
Main Macroeconomic Figures, ΕU27, Euro area (annual % changes)
ΕU-27 Euro Area
2010 2011 2012 2010 2011 2012
GDP 1,8 1,8 1,9 1,8 1,6 1,8
Private Consumption 0,8 0,9 1,3 0,8 0,8 1,2
Public Consumption 0,7 0,3 0,2 0,7 0,2 0,3
Investment -0,7 2,5 3,9 -0,8 2,2 3,7
Employment -0,5 0,4 0,7 -0,5 0,4 0,7
Unemployment 9,6 9,5 9,1 10,1 10,0 9,7
Inflation 2,1 3,0 2,0 1,6 2,6 1,8
Goods and Services Exports 10,6 7,3 6,5 11,2 6,9 6,2
Goods and Services Imports 9,5 5,6 5,7 9,3 5,4 5,9
General Govern. Balance (% of GDP) -6,4 -4,7 -3,8 -6,0 -4,3 -3,5
General Govern. Dept (% of GDP) 80,2 82,3 83,3 85,4 87,7 88,5
Current account balance (% of GDP) -0,9 -0,6 -0,3 -0,1 0,1 0,2
Source: European Economic Forecast, Spring 2011, European Commission, May 2011
On the other hand, the economic cli-
mate indicators of the European Commis-
sion regarding EU-27 and the Eurozone,
which in Greece are compiled by IOBE,
deteriorate during the last period (even
marginally). In May, a reduction of the
relevant indicator took place in the Euro-
zone, for the third consecutive month. It
should be noted, however, that on a EU-
27 level, the economic climate remains
unchanged, while the levels of the rele-
vant indexes remain above the long-term
average in both zones. The deterioration
of the climate in the Eurozone is due to
the worsening of expectation in all sec-
tors. More specifically, the reduction of
the expectations index in Industry in both
zones contributed significantly in the
weakening of the climate, while a reduc-
tion took place also for the relevant indi-
cator in the Services sector in the Euro-
zone. On the contrary, expectations indi-
cators in Retail and Construction slightly
increased in EU-27, while decreased in the
Eurozone. The improvement in business
expectations essentially signifies that the
concern over the likelihood of slowdown
of the recovery of the global economy has
subsided. Consumer confidence, on the
contrary, recovered in May after the de-
crease of April, stemming from the bet-
terment of expectations as far as the
overall economic situation and the course
of unemployment are concerned.
IOBE “The Greek Economy” vol. 02/11
29
Figure 2.1
€-CΟΙΝ Index (CEPR)
Source: CEPR (www.cepr.org)
Table 2.5
European Commission– Economic Sentiment indicator ΕU-27 & Euro area (1990-2010=100)
Month Jan-10 Feb-10 Mar-10 Apr-10 May-10* Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10
ΕU-27 96,3 97,9 99,8 101,1 100,0 100,2 102,1 103,2 103,6 104,1 105,3 106,4
Euro-Area 95,4 95,8 98,0 100,1 98,3 99,1 101,2 102,2 103,5 104,4 105,7 107,0
Month Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
ΕU-27 105,9 107,3 107,4 105,1 105,4 - - - - - - -
Euro-Area 106,8 108,0 107,3 106,1 105,5 - - - - - - - * Since May 2010, the economic activity classification of the enterprise data used for the estimation of the Economic Sentiment indicator and its components, has switched from NACE Rev. 1.1 to NACE Rev. 2.
Source: European Commission (DG ECFIN), May 2011
2.2 The Economic Environment in
Greece
A) Economic Sentiment
The Economic Sentiment Indicator
for Greece in the quarter March-May
2011 slightly deteriorates in com-
parison to the first two months of
the year and reaches 76 points
(from 78 points), realising modest in-
crease of 2 points compared with the cor-
responding period of the previous year.
The indicator remains at levels lower than
the long-term average (99.3 for 2001-
2010). For comparison, the economic
sentiment decreased marginally both
in the Euro area and in the EU, stand-
ing at 106 points in both zones, while
year-on-year, the indicator has gained
about 5-6 points in both areas.
Business expectations in all sectors
show relative stability in the quarter
March-May in relation to the average of
the first two months of the year, remain-
ing however at low levels. So, in industry,
as well as in Retail Trade, but Construc-
tion too, no important changes take place
in the average indicators of the business
IOBE “The Greek Economy” vol. 02/11
30
expectations, compared to the first two
months of 2011, while Services demon-
strate modest recovery. Year-on-year,
business sentiment improved slightly
in Industry, was stabilised in Ser-
vices and Retail Trade and fell sig-
nificantly in Construction. On the de-
mand side, consumer confidence slug-
gishly improves in the examined quarter,
remaining however in extremely low lev-
els. In greater detail:
The Consumer Confidence Indicator
in Greece fell to its lowest level in history
in December and slightly rebounded up
until March, giving its place to a new dete-
rioration in April and May. The added
tax measures and the estimated
zero/negative growth rate of the
nominal income in many employee
categories advocate in favour of the
further weakening of the purchasing
power of consumers. Moreover, the
increasing unemployment, the in-
tense political processes and the so-
cial reactions enforce the unfavour-
able climate, foment the negative
psychology of households. In the ex-
amined trimester, the index shapes at -68
points (from -70 in the past two months),
6 units lower in comparison to the respec-
tive average level. The Greek consumers
have remained the most pessimistic Euro-
peans for over a year. The average values
for the index in the EU and the Euro area
for the quarter analysed are significantly
higher compared with Greece, at -12 and
-11 respectively, recording marginal quar-
ter-on-quarter deterioration in both areas
and year-on-year improvement, especially
for the Euro area.
The consumer expectations about the fi-
nancial situation of the country and their
households in the coming 12 months re-
main unchanged, while in relation to the
economic situation of the country and the
propensity to save, a mild deterioration
takes place in the quarter examined,
compared to the beginning of the year.
Almost seven in ten households were ex-
pecting their financial situation to worsen
slightly or significantly in the coming 12
months, while 4/5 of the households were
predicting slight or significant deteriora-
tion of the overall economic situation. The
index that increases by 3 points and in
effect boosts consumer confidence con-
cerns the predictions on the course of un-
employment over the next 12 months,
which however remain extremely adverse.
More specifically, the vast majority of con-
sumers (92%) expects slight or significant
deterioration of unemployment within 12
months. In addition, the proportion of
consumers reporting that they were “in
debt” increased to 14% in the March-May
quarter. The percentage of those that
were saving small or large amounts fell to
17% (from 21% in the first two months of
2011). Lastly, the percentage of consum-
ers who reported that they were “just
making ends meet” spreads to 58% (from
55% in the preceding quarter).
In Industry, the Business Confidence In-
dicator stood at 79 points on average for
the first two months of the year, almost at
the same level with the average of the
first two months of the year and slightly
higher than in the corresponding period of
the previous year, when it stood at 77.
Industry remains the only sector of
the economy that has exhibited rela-
IOBE “The Greek Economy” vol. 02/11
31
tive stability, without significant
variations, tending to mild increase
and resists more to the current re-
cession, counting mostly on its ex-
ports. Despite the improvement, the ma-
jority of the constituent indices remained
at low levels in that quarter, too. There
are, however, positive exceptions. More
specifically, predictions for the develop-
ment of production in the next 3-4
months shape in average at +3 units,
higher than the first two months of the
year (-6 units). This development is coun-
terweighted by the decrease of the, al-
ready negative, index on the estimates of
order levels and demand, at-46 units (-39
in the first two months of the year), how-
ever slightly increased compared to the
respective period last year. The estimates
on finished product inventories remain
stable at around 15 units since the begin-
ning of the year, recovering slightly how-
ever in May.
Figure 2.2
Economic Sentiment Indicator, EU27 and Greece (seasonally adjusted data, 1990-2010=100)
40
50
60
70
80
90
100
110
120
130
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
EU Greece Average ΕU27 (2001-2010) Euro-Area
Source: European Commission, DG ECFIN
IOBE “The Greek Economy” vol. 02/11
32
Figure 2.3
Consumer survey data on their household’s financial situation (January – May 2011 average)
high savings
1%
using savings
9%
indebted
14%
don't know
2%
barely make it
58%
low savings
16%
Source: ΙΟΒΕ
Table 2.6
Economic Sentiment Short-Term Indices
Economic
Sentiment
Indicator1
Business Confidence Indicators 2
(Greece)
Month/
Year
EU-27 Greece Industry Constructions Retail Trade Services
Consumer
Confidence
Indicator1
(Greece)
2001 101,0 107,6 101,9 114,0 92,2 105,8 -26
2002 94,9 98,9 101,2 114,0 93,3 82,8 -28
2003 93,2 93,2 97,9 115,0 102,0 85,5 -39 2004 102,5 102,9 99,1 81,5 104,8 94,6 -26
2005 99,4 89,3 92,6 63,0 96,8 93,6 -34
2006 108,4 103,1 101,5 91,1 110,8 103,7 -33
2007 110,8 108,0 102,8 92,5 120,8 106,6 -29
2008 90,7 89,0 91,9 95,2 102,5 97,8 -46 2009 79,9 70,6 72,1 65,5 80,4 70,1 -46
2010 101,6 75,1 76,2 45,2 59,5 62,9 -63
Jan–10 96,3 81,7 75,8 64,1 75,3 67,2 -47
Feb-10 97,9 78,5 72,6 48,5 71,6 63,1 -51
Mar-10 99,8 76,3 75,3 39,6 54,5 61,7 -58
Apr-10 101,1 75,8 80,6 44,6 64,0 64,1 -61
May-10 100,0 70,2 74,9 44,0 64,3 56,8 -67
June-10 100,2 71,8 75,3 51,1 53,3 63,1 -67
July-10 102,1 73,9 75,8 46,1 50,8 64,1 -67
Aug-10 103,2 75,1 76,9 48,0 53,2 67,0 -61
Sep-10 103,6 74,3 78,4 35,5 53,4 66,7 -67
Oct-10 104,1 74,9 78,5 59,7 58,2 67,4 -72
Nov-10 105,3 74,8 74,6 56,1 55,3 60,3 -69
Dec-10 106,4 73,7 71,3 32,2 56,6 61,5 -75
Jan–11 105,9 76,1 76,6 29,1 57,5 60,1 -72
Feb-11 107,3 79,4 80,6 34,6 64,8 57,5 -67 Mar-11 107,4 78,4 80,5 26,3 66,7 59,2 -66
Apr-11 105,1 74,2 78,3 29,4 62,0 62,9 -70
May-11 105,4 74,0 78,1 36,4 52,9 61,9 -69 Sources: 1 European Commission, DG ECFIN, 2 ΙΟΒΕ
IOBE “The Greek Economy” vol. 02/11
33
The negative balance of employment ex-
pectations shifts upwards to -13 units in
the quarter examined (from -21 units in
January-February period), standing higher
to the 2010 average. Meanwhile, the utili-
sation rate of the production factors stood
at 68.3%, at about the same level com-
pared with both the preceding quarter and
the corresponding period of the previous
year. Lastly, the number of months of as-
sured production remains stable (4.2
months), slightly above their level in the
corresponding period of 2010.
The Confidence Indicator in Retail Trade
stands at 61 units in the March-May quar-
ter, that is, at the same level as the aver-
age of the first two months of the year
and the respective period of last year. Al-
though the indicator has stabilised
around 65 units from February till
April, the expectations of businesses
of the sector fell remarkably in May,
pushing the index downwards. Enter-
prises estimate that their sales remain
grave, since the quarter March-May, 65%
of them believe they are lower compared
to the previous time period. The projec-
tions of the sales over the coming three
months are also pessimistic, with the rele-
vant balance to shape at about -33 units,
at the same level as the previous two
months, although higher compared to the
same period last year (-41 units). The ex-
pectations of the enterprises about the
orders placed with suppliers are also low,
while the results on inventories underline
a slight liquidation for the time. The em-
ployment expectations in the sector ex-
perienced intense decrease compared to
the first two months of the year, which
underlines in an emphatic way the re-
duced creation of new job positions, in a
sector that traditionally offered employ-
ment. Lastly, regarding price expectations,
the deflationary pressures have increased
in relation both to the first two months of
the year and the same period last year.
Business confidence in the Construction
sector shapes on average at the same
levels as those in the first two months of
the year, with the relative index to re-
vamp in April and May. The short-term
prospects of the sector remain sig-
nificantly grave, while they have de-
teriorated compared to the respec-
tive period last year, when recession
in the sector had already spread. Pri-
vate Constructions, however, do
move upwards in the quarter under
examination, in relation to Public
Works, which demonstrate much
weakened expectations. So, the Confi-
dence Indicator stands on average the
period March-May at 31 units (43 units
the same period of last year). The ex-
tremely negative predictions of enterprises
for the level of work schedule and em-
ployment are sustained this quarter, too,
with the relative balances to shape at -77
and -64 units respectively.
In the March-May quarter, the negative
balance in the expectations of the enter-
prises about their work schedule expands
to -67 units (-60 in the Jan-Feb period).
This performance is 20 units lower than
the respective period of 2010.
The assessment of the enterprises of their
current work schedule was also disap-
pointing, with the number of months of
assured activity reach 14 months on aver-
IOBE “The Greek Economy” vol. 02/11
34
age since the beginning of the year, while
the sector seems to count more on al-
ready taken works that have been stalled
and not on new works. Regarding the
price level, the predictions are downwards
and at the same level as last year, with
the deflationary expectations to have cli-
maxed in this quarter, compared to the
beginning of the year. Lastly, a stable 3-
4% from January till May included thinks
that it is not facing any obstacles to their
activities, with half of the enterprises to
point as the most significant barrier the
insufficient financing, one in three the low
demand and 12% other factors that are
mostly related to the overall economic
situation of the country and the recession,
the great discounts, bureaucracy, the re-
duced number of auctioned projects, the
uncertainty of responsibilities due to the
Kallikrates, the suspension of works and
the stop of payments etc.
The Confidence Indicator in Services in
the quarter March-May 2011 is shaped on
average at 61 units, slightly higher
compared to the first two months of the
year and at the same levels on a year-on-
year basis. The sector has severy been
affected by the current recession,
with expectations, however,
remaining relatively stable for a long
time period and not showing
significant fluctuations, although the
indicators remain negative.
More specifically, the negative balance of
the enterprises’ assessments on their
current activity lies in the examined
quarter, at -33 units on average, very
close to the level of the first two months
and the respective period of last year. The
negative predictions for the future course
of demand weaken in the March-may
quarter and shape to -13 units (from -22),
while mild increase in relation to the
beginning of the year is registered for the
estimations on current demand. The
employment expectations also improve
slightly, remaining however n their whole
quite grave, while price expectations
underline scaling. One in four enterprises
reported that their business activity was
being conducted without obstacles, while
37% of the companies indicated as the
main obstacle insufficient demand. Other
obstacles are working capital insufficiency
and factors connected with the overall
economic situation and the recession, red-
tape, high taxation, delays in payments
from the public sector, the implementation
of the investment law, the degraded
capital city centre, labour actions etc.
IOBE “The Greek Economy” vol. 02/11
35
Figure 2.4
Business Confidence Indicators1
Industry
60
65
70
75
80
85
90
95
100
105
Feb-0
8
May-0
8
Aug-0
8
Nov-0
8
Feb-0
9
May-0
9
Aug-0
9
Nov-0
9
Feb-1
0
May-1
0
Aug-1
0
Nov-1
0
Feb-1
1
May-1
1
Industry
Average (2001-2010)
Construction
15
35
55
75
95
115
135
Feb-0
8
May-0
8
Aug-0
8
Nov-0
8
Feb-0
9
May-0
9
Aug-0
9
Nov-0
9
Feb-1
0
May-1
0
Aug-1
0
Nov-1
0
Feb-1
1
May-1
1
Construction
Average (2001-2010)
Retail Trade
40
50
60
70
80
90
100
110
120
130
Feb-0
8
May-0
8
Aug-0
8
Nov-0
8
Feb-0
9
May-0
9
Aug-0
9
Nov-0
9
Feb-1
0
May-1
0
Aug-1
0
Nov-1
0
Feb-1
1
May-1
1
Retail Trade
Average (2001-2010)
Services
50
60
70
80
90
100
110
120
Feb-0
8
May-0
8
Aug-0
8
Nov-0
8
Feb-0
9
May-0
9
Aug-0
9
Nov-0
9
Feb-1
0
May-1
0
Aug-1
0
Nov-1
0
Feb-1
1
May-1
1
Services
Average (2001-2010)
In the calculation of Business Confidence Indicators a period - base is used, instead of a year- base. Thus the Confidence Indicators of
Industry, Construction and Retail Trade sectors are calculated under a common period - base(1996-2006=100) and the Indicator of the
Services sector under the period – base 1998-2006=100, as there are no available data before 1998. This change allows a more precise
imprinting of fluctuations of expectations in a long-term period, while at the same time it allows the construction of comparable sub –
sector confidence Indexes. Source: ΙΟΒΕ
B) Fiscal Developments
In the second quarter of the year, it was
made clear that the targets of the Eco-
nomic Adjustment Programme were not
going to be met, violating the Memoran-
dum conditions and jeopardising the con-
tinuous lending of the country from the
Eurozone and the IMF. The deviation from
the targets was estimated to be around
€6.5bn (2.9% of GDP), which mean in
IOBE “The Greek Economy” vol. 02/11
36
practice that, the deficit remained at the
2010 levels. The government’s reaction
was the preparation of an “urgent” correc-
tive measures package to be implemented
in the second semester of the year, which
was incorporated in the rolling Medium
Term Fiscal Strategy Programme (MTFSP)
that was predicted by the 3871/2010 law.
After much political turbulence, the
MTFSP, as well as the law for the imple-
mentation of the corrective measures of
2011 were voted by the Parliament during
the last week of June.
As shown in Table 2.7, the estimated bur-
den of the 2011 deficit by €6.5 bn is due
by almost €5 bn to the State Budget (€4
bn revenue shortfalls and €1 expenditure
overruns), €1.1 bn to Local Authorities
and €2.4 bn to national accounts adjust-
ments (total burden €8.5 bn), while it was
estimated that public entities and Public
Corporations will have better results by
€1.7 bn and Social Security Organisations
by €0.3 bn (total extenuation €2bn). It is
estimated that the deviation from the tar-
gets is due to by €1.5 bn to the lower,
compared to primary estimations, GDP,
but mostly to the weakness in correctly
assessing in the Budget the yield of vari-
ous measures and the impact of national
accounts differences.
The under threat deviation from the tar-
gets by €6,486 million rose measures of
€6,744 million, which are about €200 mil-
lion more than the plan drawn before the
latest government reshuffle. The correc-
tion is attempted by 60% from the side of
expenditures and 40% by the side of
revenues. from the expenditure side, the
interventions primarily concern the new
cut of Public Investment Programme, with
the respective consequences on the eco-
nomic activity, the hold-back of expendi-
tures for pensions and lump sums, sala-
ries and grants, followed by reductions in
operating expenses and commissions. The
measures taken may not fully perform, as
for example, the reduction in grants and
the repeal of organisations, the voluntary
part-time employment in the public sector
or controls for beneficiaries of pensions
and allowances. In that case, the devia-
tion margin is the buffer of €580 million of
the reserve.
IOBE “The Greek Economy” vol. 02/11
37
Table 2.7
Deviations between 2011 Budget and MTFSF
Source: Draft Law on «Medium-Term Fiscal Strategy Framework 2012-2015», Ministry of Finance, June 2011
As far as revenues are concerned, under
the pressure of immediate collection, ex-
tra measures were taken, such as the
solidarity levy to individuals. Here, the ef-
fort for fairer burden distribution led to
the progressive rate (from 1% to 4%) for
incomes more than €12,000. At the same
time, existence of undisclosed revenues
from sources besides salary and pension
led to the imposing licence tax. Moreover,
among others, urgent and regular contri-
butions to imputed income and pensioners
are imposed. On the above measures one
can see regulations that make some of
them unfair, such as the exemption of the
early retired military with the initiative of
(1) (2) (3) (4) (5) (6)
mil. €
2011 Budget
2011 estimate
2011 MTFSF
=(2)-(1) =(3)-(2) =(3)-(1)
Revenue 55.560 51.579 54.042 -3.981 2.463 -1.518Regular 53.720 49.480 51.792 -4.240 2.312 -1.928
Direct Taxes 20.880 19.144 20.554 -1.736 1.410 -326Indirect Taxes 31.980 29.657 30.219 -2.323 562 -1.761
Non-Tax Revenue 4.320 4.294 4.634 -26 340 314EU revenue 340 185 185 -155 0 -155Tax Refunds -3.800 -3.800 -3.800 0 0 0
Non-Recurring Revenue 1.840 2.099 2.250 259 151 410
Expenditure 71.838 72.888 71.470 1.050 -1.418 -368Primary expenditure 55.918 56.886 55.468 968 -1.418 -450
Wages-Pensions 21.592 22.018 21.632 426 -386 40Social Security-Protection 16.652 17.784 17.414 1.132 -370 762
Working expenditure 7.727 7.773 7.261 46 -512 -466Third party expenditure 5.978 5.312 5.162 -666 -150 -816
Guarantees to GG 1.051 1.245 1.245 194 0 194Guarantees outside GG 145 224 224 79 0 79
Hospital debt 450 450 450 0 0 0Non categorized 143 0 0 -143 0 -143
Reserves 580 580 580 0 0 0Defense spending 1.600 1.500 1.500 -100 0 -100
Interest Payments 15.920 16.002 16.002 82 0 82
Net Result -16.278 -21.309 -17.428 -5.031 3.881 -1.150Revenue 3.922 3.922 3.925 0 3 3Expenditure 8.500 8.500 7.550 0 -950 -950
Net Result -4.578 -4.578 -3.625 0 953 953Revenue 59.482 55.501 57.967 -3.981 2.466 -1.515Primary expenditure 64.418 65.386 63.018 968 -2.368 -1.400
Interest Payments 15.920 16.002 16.002 82 0 82
Net Result -20.856 -25.887 -21.053 -5.031 4.834 -197
ESA95 arrangements 2.533 458 708 -2.075 250 -1.825Legal Entities 230 997 1.235 767 238 1.005
SOEs 300 1.211 1.248 911 37 948
Net Balance -17.793 -23.221 -17.862 -5.428 5.359 -69
Net Result 500 -564 -372 -1.064 192 -872ESA95 arrangements 225 225 225 0 0 0
Net Balance 725 -339 -147 -1.064 192 -872Net Result 461 787 2.428 326 1.641 1.967ESA95 arrangements -458 -778 -778 -320 0 -320Net Balance 3 9 1.650 6 1.641 1.647
Central Administration -20.326 -23.679 -18.570 -3.353 5.109 1.756Local Governments 500 -564 -372 -1.064 192 -872
SSO 461 787 2.428 326 1.641 1.967ESA95 arrangements 2.300 -95 155 -2.395 250 -2.145
Net Balance -17.065 -23.551 -16.359 -6.486 7.192 706
LGO
(ESA95)
SSO
(ESA95)
Genera
l
Govern
men
t
Ord
inary B
udget
PIP
Sta
te
Budget
Central
Adm
inistr
ation
(ESA95)
IOBE “The Greek Economy” vol. 02/11
38
their corps etc from the contribution for
young in age retirees.
Of more permanent nature if the forth-
coming change in the income tax of indi-
viduals, where main characteristic is the
reduction of the individual untaxed limit
from €12,000 to €8,000, with special
regulations for the number of children etc.
The new measures remain relatively more
generous for people working with family
obligations, if taken into consideration the
poverty line that lies at about €7,000 for
one person up to €15,000 for a family
with two children.
Of permanent nature is also the raise in
the VAT for catering, the end of smoking
for businesses exempted and the raise in
the minimum tax on tobacco. The first
measure is expected to suppress demand
and increase the motive to tax evasion.
The second one is at the right direction,
although it could have spread to all similar
businesses, given that the anti-smoking
law is outwitted, while the third measure
is considered insufficient, given it should
be accompanied by important raise of the
fixed component of the tax and respective
reduction of the proportional component
of the tax, as well as tax increase for
rolled cigarettes, so as to eliminate reve-
nue evasion from substitution and price
war.
As far as the MTFSP is concerned, gradual
reduction of the deficit is predicted to
0.6% of GDP till 2015 (see Table 2.8).
The adjustment, in relation to the basic
scenario, is of the range of 14 bp of GDP
(or €34.7 bn), given that between 2010
and 2015 the reduction of the deficit is
placed at 9.9% of GDP (€ 22.7 bn), while
the basic scenario (without interventions)
predicts deficit increase by 4% of GDP (€
12 bn).
The fiscal effort that the MTFSP predicts,
as this is expressed by the primary bal-
ance, derives by about ¾ from the Cen-
tral Administration and the Organisations
of Social Insurance (OSI), among which it
is equally distributed, while national ac-
counts adjustments also take part by 19%
and the Local Authorities by 8%, as
shown in Graph 2.5. However, the ex-
pected improvement of OSI performance
is impressive, from a circa €2 bn deficit in
2010 to €12 bn surplus, almost the same
as for the Central Administration.
For meeting these targets, MTFSP predicts
a series of interventions that in general
are described in Table 2.9, where it is evi-
dent that they are almost equally distrib-
uted between revenues and expenditure,
while as for it time dimension, MTFSP is
slightly front-loaded. Overall, the interven-
tions of the Programme, in combination
with the previous interventions, are ex-
pected to lead to the betterment of the
primary result by € 32.8 bn and the corre-
sponding improvement of the net deficit
by €22.7 bn.
According to our estimations, the before
mentioned deficit reduction, if fully kept,
will lead the debt at levels just over 160%
of GDP in 2012, so as to de-escalate near
154% in 2015, while in 2020 it will be
back at the 2009 level, that is 127% (as-
suming that the levels of growth rate, in-
terest rate and the primary surplus remain
at those of 2015). Given that MTFSP tar-
IOBE “The Greek Economy” vol. 02/11
39
gets at the creation of primary surplus of
8.7% of GDP in 2015, which is a very am-
bitious target, it is understood that keep-
ing so high surplus for the rest of the
years, increasing them let alone, is a very
tough case. In any case, a sensitivity
analysis shows that one extra unit of pri-
mary surplus increase during the 2016-
2020 period in relation to 2015, will con-
tribute to the debt reduction by almost
five additional units. If, however, for rea-
sons mentioned earlier, the primary sur-
plus remains at the 2015 level, then every
additional percentage unit of GDP increase
(2016-2020) reduces the debt by 7 b.p.
(which lies at 120%). If the primary sur-
plus and the growth rate remain at the
2015 levels, but are combined with the
revenue realisation of €50 bn from privati-
sations and state property use, then this
will contribute to the reduction of debt by
about 9 b.p. in relation to the original
scenario, leading the debt to levels close
to 104% of GDP. this exercise shows that,
if high primary surpluses that will not have
an improvement margin take place, then
the boost in growth rates and of revenues
from privatisations can lead, n combina-
tion, the debt lower than 100%.
Taking the above into consideration, as
well as the fact that many of the interven-
tions of MTFSP have been expressed more
as targets rather than estimations of spe-
cific policies and measures under way, it is
understood that the unswerving imple-
mentation of the 2011 interventions is of
vital importance. After the risk that run
through the continuing flow of lending
capitals from the Eurozone and the IMF,
the assessments for the 6th and 7th dose
will not allow for corrections period. At the
same time, the evolvement of the coun-
try’s borrowing from the troika with new
capital after 2013 will demand the imme-
diate limitation of hesitations or fails that
will have to be proved in a tangible way,
so as to increase the level of certainty re-
garding the Memorandum implementation
(existing and forthcoming) and the coun-
try to improve its credibility, its partners
and markets to accept its efforts and to
raise the chances of final fiscal consolida-
tion and of the removal of the bankruptcy
risk.
IOBE “The Greek Economy” vol. 02/11
40
2009 2010 2 011 2012 2013 2014 2015 2 009 2 010 201 1 20 12 2 013 2014 2015Revenue 48 .545 51 .187 54.042 5 6.229 57.21 2 59.407 61 .318 20,7% 22,2% 24,0% 24 ,6% 24 ,3% 24,5% 24,3% Re venueRegu lar 47 .355 49 .401 51.792 5 3.971 55.31 2 57.480 59 .738 20,1% 21,5% 23,0% 23 ,6% 23 ,5% 23,7% 23,7% Re gu la r
D irect Taxe s 21.431 2 0.223 20 .554 21.711 22.0 35 22.844 23.980 9,1% 8 ,8% 9 ,1% 9,5% 9,4% 9,4% 9 ,5% D ire ct Ta xesI nd irect Taxe s 28.293 3 1.043 30 .219 31.243 32.5 77 34.237 35.254 12,0% 13 ,5% 13 ,4% 13,7% 13,8% 14,1% 14 ,0% Ind ire ct Ta xes
Non-Tax Re venue 2.319 2.797 4 .634 4.566 4.2 81 4.025 4.186 1,0% 1 ,2% 2 ,1% 2,0% 1,8% 1,7% 1 ,7% Non-Tax RevenueEU re venue 264 320 185 148 1 65 174 176 0,1% 0 ,1% 0 ,1% 0,1% 0,1% 0,1% 0 ,1% EU revenueTa x Refunds -4.952 -4.982 -3 .800 -3.697 -3.7 46 -3.800 -3.858 -2,1% -2 ,2% -1 ,7% -1,6% -1,6% -1,6% -1 ,5% Tax Re funds
Non-Recurring Re venue 1 .190 1 .786 2.250 2.258 1.90 0 1.927 1 .580 0,5% 0,8% 1,0% 1 ,0% 0 ,8% 0,8% 0,6% Non-Re curring RevenueExpenditure 74 .626 67 .243 71.470 7 1.071 75.13 6 74.712 77 .049 31,8% 29,2% 31,7% 31 ,1% 31 ,9% 30,8% 30,6% Expend itu rePrimary e xpenditure 62.301 5 4.020 55 .468 54.171 55.6 36 52.712 53.649 26,5% 23 ,5% 24 ,6% 23,7% 23,6% 21,7% 21 ,3% P rimary exp end itu re
Wage s-P ens ions 24.487 2 2.139 21 .632 20.846 20.6 75 20.470 20.460 10,4% 9 ,6% 9 ,6% 9,1% 8,8% 8,4% 8 ,1% Wages-P en sionsSocia l Secu rity-P rotection 17.779 1 5.747 17 .414 15.172 16.1 37 15.247 15.370 7,6% 6 ,8% 7 ,7% 6,6% 6,9% 6,3% 6 ,1% Social Security-Protection
Wo rking exp end itu re 9.326 8.107 7 .261 7.459 7.3 27 6.981 6.791 4,0% 3 ,5% 3 ,2% 3,3% 3,1% 2,9% 2 ,7% W orking expenditureThird party exp end itu re 6.452 5.663 5 .162 5.622 5.9 67 6.096 6.205 2,7% 2 ,5% 2 ,3% 2,5% 2,5% 2,5% 2 ,5% Th ird party expenditure
Guaran tee s to GG 484 827 1 .245 1.518 1.9 79 1.024 1.636 0,2% 0 ,4% 0 ,6% 0,7% 0,8% 0,4% 0 ,6% Guaran tees to GGGuarantee s outsid e GG 100 145 224 134 2 11 139 67 0,0% 0 ,1% 0 ,1% 0,1% 0,1% 0,1% 0 ,0% Guaran te es outsid e GG
Hospital d ebt 1.498 375 450 350 3 00 300 300 0,6% 0 ,2% 0 ,2% 0,2% 0,1% 0,1% 0 ,1% Hospital d eb tNon categorize d 0 0 0 50 50 100 100 0,0% 0 ,0% 0 ,0% 0,0% 0,0% 0,0% 0 ,0% Non ca te gorized
Re serve s 0 0 580 1.520 1.4 90 1.155 1.720 0,0% 0 ,0% 0 ,3% 0,7% 0,6% 0,5% 0 ,7% Rese rvesDefen se spending 2.175 1.017 1 .500 1.500 1.5 00 1.200 1.000 0,9% 0 ,4% 0 ,7% 0,7% 0,6% 0,5% 0 ,4% De fen se spe nd ing
Interest Payments 12 .325 13 .223 16.002 1 6.900 19.50 0 22.000 23 .400 5,2% 5,7% 7,1% 7 ,4% 8 ,3% 9,1% 9,3% Interest Pa ymen ts
Net Result -26.081 -1 6.0 56 -17.428 -14.842 -1 7.92 4 -15.305 -15.7 31 -11,1% -7,0% -7 ,7% -6,5% -7,6% -6,3% -6,2% Net Result
Revenue 2 .040 3 .072 3.925 4.615 4.79 3 3.845 3 .638 0,9% 1,3% 1,7% 2 ,0% 2 ,0% 1,6% 1,4% Re venue
Expenditure 9 .588 8 .447 7.550 7.700 7.70 0 7.700 7 .700 4,1% 3,7% 3,3% 3 ,4% 3 ,3% 3,2% 3,1% Expend itu re
Net Result -7.548 -5.3 75 -3.625 -3.085 -2.90 7 -3.855 -4.0 62 -3,2% -2,3% -1 ,6% -1,4% -1,2% -1,6% -1,6% Net Result
Revenue 50 .585 54 .259 57.967 6 0.844 62.00 5 63.252 64 .956 21,5% 23,6% 25,7% 26 ,6% 26 ,3% 26,0% 25,8% Re venue
Primary e xpenditure 71 .889 62 .467 63.018 6 1.871 63.33 6 60.412 61 .349 30,6% 27,1% 28,0% 27 ,1% 26 ,9% 24,9% 24,4% Primary exp end itu re
Interest Payments 12 .325 13 .223 16.002 1 6.900 19.50 0 22.000 23 .400 5,2% 5,7% 7,1% 7 ,4% 8 ,3% 9,1% 9,3% Interest Pa ymen ts
Net Result -33.629 -2 1.4 31 -21.053 -17.927 -2 0.83 1 -19.160 -19.7 93 -14,3% -9,3% -9 ,3% -7,8% -8,8% -7,9% -7,9% Net ResultESA95 arrangemen ts -528 -4 .145 708 -1.371 -1.04 1 -678 -384 -0,2% -1,8% 0,3% -0 ,6% -0 ,4% -0,3% -0,2% ESA95 a rra ngements
Legal Entities 647 878 1.235 1.151 1.25 9 1.433 1 .767 0,3% 0,4% 0,5% 0 ,5% 0 ,5% 0,6% 0,7% Le gal En tities
SOEs -1 .593 3 .059 1.248 1.818 2.67 7 1.992 2 .795 -0,7% 1,3% 0,6% 0 ,8% 1 ,1% 0,8% 1,1% SOEs
Net Balan ce -35.103 -2 1.6 39 -17.862 -16.329 -1 7.93 6 -16.413 -15.6 15 -14,9% -9,4% -7 ,9% -7,1% -7,6% -6,8% -6,2% Net Balance
Net Resu lt 27 -379 -372 345 1.04 1 1.681 2 .169 0,0% -0,2% -0,2% 0 ,2% 0 ,4% 0,7% 0,9% Net Result
ESA95 arrangemen ts -158 -186 225 223 31 3 0 0 -0,1% -0,1% 0,1% 0 ,1% 0 ,1% 0,0% 0,0% ESA95 a rra ngements
Net Balan ce -131 -5 65 -147 568 1.35 4 1.681 2.1 69 -0,1% -0,2% -0 ,1% 0,2% 0,6% 0,7% 0,9% Net Balance
Net Resu lt 393 369 2.428 3.039 6.47 1 9.691 12 .121 0,2% 0,2% 1,1% 1 ,3% 2 ,7% 4,0% 4,8% Net Result
ESA95 arrangemen ts -1 .466 -2 .357 -778 -150 -20 0 -200 -200 -0,6% -1,0% -0,3% -0 ,1% -0 ,1% -0,1% -0,1% ESA95 a rra ngements
Net Balan ce -1.073 -1.9 88 1.650 2.889 6.27 1 9.491 11.9 21 -0,5% -0,9% 0 ,7% 1,3% 2,7% 3,9% 4,7% Net Balance
Central Admin istration -34 .575 -17 .494 -18.570 -1 4.958 -16.89 5 -1 5.735 -15 .231 -14,7% -7,6% -8,2% -6 ,5% -7 ,2% -6,5% -6,0% Central Adminis tra tion
Local G overnments 27 -379 -372 345 1.04 1 1.681 2 .169 0,0% -0,2% -0,2% 0 ,2% 0 ,4% 0,7% 0,9% Lo ca l Go vernmen ts
SSO 393 369 2.428 3.039 6.47 1 9.691 12 .121 0,2% 0,2% 1,1% 1 ,3% 2 ,7% 4,0% 4,8% SSO
ESA95 arrangemen ts -2 .152 -6 .688 155 -1.298 -92 8 -878 -584 -0,9% -2,9% 0,1% -0 ,6% -0 ,4% -0,4% -0,2% ESA95 a rra ngements
Net Balan ce -36.307 -2 4.1 92 -16.359 -12.872 -1 0.31 1 -5.241 -1.5 25 -15,4% -10,5% -7 ,3% -5,6% -4,4% -2,2% -0,6% Net Balance
SSO
(ESA95)
SSO
(ESA95)
Genera
l
Govern
ment
Genera
l
Govern
ment
Central
Adm
inistr
ation
(ESA95) C
entra
l
Admin
istr
atio
n
(ESA95)
LGO
(ESA95)
LGO
(ESA95)
PIP
PIP
Sta
te
Budget S
tate
Budget
mil. € % of GDP
Ord
inary
Budget
Ord
inary E
xpen
diutu
re
Table 2.8
Medium-Term Fiscal Strategy
IOBE “The Greek Economy” vol. 02/11
41
Figure 2.5
Distribution of the improvement of the Primary Balance
Central Government
37%
SSO36%
Adjustments ESA9519%
LGO8%
Source: MTFSF 2012-2015 Data Processing: ΙΟΒΕ
Table 2.9
MTFSF interventions (mil. €)
2011 2012 2013 2014 2015 Total
Earnings 770 600 448 306 71 2.195 Operational Expenses 190 92 161 323 370 1.136 Closure of public entities 540 150 200 200 150 1.240 Restructuring of SOEs 0 414 329 298 274 1.315 Defense Expenditure 0 0 133 133 133 399 Pharmaceutical Spending 250 493 200 100 100 1.143 Social Benefits 1.188 1.230 1.025 1.010 700 5.153 Health Expenditure 0 184 139 188 288 799 Health Revenue 60 20 10 15 75 180 SSO Revenue 629 259 714 1.139 504 3.245 Tax Compliance 0 0 878 975 1.147 3.000 Tax Spending 2.017 3.678 156 685 0 6.536 Local Governments 150 355 345 350 305 1.505 PIP 950 -446 0 0 0 504
Total 6.744 7.029 4.738 5.722 4.117 28.351
Expenditure 4.058 2.962 2.675 2.583 2.222 14.274 Revenue 2.686 4.067 2.063 3.139 1.896 14.077
Source: Draft Law on «Medium-Term Fiscal Strategy Framework 2012-2015», Ministry of Finance, June 2011
IOBE “The Greek Economy” vol. 02/11
43
3. PERFORMANCE AND PROSPECTS
3.1 Macroeconomic developments
Developments in Q1 of 2011
The implementation of the Memorandum,
especially its parts that concern the liberali-
sation of product and services markets (e.g.
labour market, “closed professions”) and
the restructuring of the public sector (city
transportations, privatisations planning),
was found in the centre of socio-economic
developments in Greece during the first
quarter of 2011. A critical point by the end
of that period was the negotiation within
Eurozone, and the following decision for
one-sided lax of the lending terms to
Greece from the country-members, in the
context of the borrowing agreement that
our country had signed up with the troika
EC-ECB-IMF. The promoted reforms and the
pending for the stance of the European Un-
ion on the Greek matter raised the cau-
tiousness domestically. Positive economic
developments were registered only in the
significant improvement of the relative bal-
ances. As a result, the recession of the
Greek economy the quarter January-
March 2011, even if weakened com-
pared to the Q4 2010 where it reached
7.4%, was shaped at 5.5%, and it was
surely more intense than Q1 2010 (-2.8%),
according to the latest, revised data of Na-
tional Accounts from ELSTAT. Although GDP
marginally increased between following
quarters at the beginning of 2011, for the
first time after a year (+0.2%, compared to
the last quarter of 2010), it stood at lower
than the first quarter of 2006 level.
A characteristic of the continuing for third
year recession of the Greek economy is the
stability of the forces that drive her:
The continuing fall of the investment
activity and the shrinkage of the con-
sumer expenditure of the private sec-
tor, reflect the reforming sickliness, the dis-
tortions and the hyperboles that took place
during the period of economic development.
A proof to the above is the intense slow-
down of public consumption restric-
tion in the first quarter this year, although
the current year is crucial for achieving fis-
cal consolidation. Nonetheless, the reces-
sion is held back mostly by the extended
improvement of the external sector balance,
which tones down its negative effect on the
GDP.
More specifically, as far as the major com-
ponents of GDP are concerned, the intensity
of the shrinkage of the total consumption
expenditure retreats in the first quar-
ter of 2011 at 6.9%, from 9.7% in the
fourth quarter of 2010, having as com-
parison basis the respective quarter of last
year. But this weakening wholly derives
from the milder decrease of public con-
sumption that did not surpass 3.4% in the
Jan-Mar period, while at the end of 2010, it
had reached 15% and on the whole for last
year, it was around 8.3%. It is noted that,
in current prices, public sector demand for
consumer goods in the first quarter this
year remained almost unchanged in relation
to the same period of 2010, when the proc-
IOBE “The Greek Economy” vol. 02/11
44
ess for the fiscal adjustment of the state
expenditures had not commenced. On the
private consumption side, the fall continues
with the high rates that were noted in the
last quarter last year, at about 8%. More-
over, household consumer expenditure is
around the level of the first quarter of 2005.
Investment activity is struck the most
by the prolonged recession. Even
though the latest assessments for 2010
show milder decrease of gross fixed capital
formation due to the circumstances, 8.5%
versus 12.3%, new escalation of the in-
vestment expenditure takes place in
the first quarter of 2011, reaching 21.8%.
During that period, gross fixed capital for-
mation was about half of the Q1 2007 level,
when it had reached its historically highest
level for the specific time of a year. Even if
compared to the second worst level after
2000, this year’s investments were 31%
lower. The new sedimentation of in-
vestments was mainly caused by the
shrinkage of the fixed capital formation in
transport equipment (-48.6%) and residen-
tial construction (-21.7%), with the level of
the latter to be less than 36% of their long-
term highest value, four years ago. Follow-
ing were metal products-machinery (10.9%)
and 7.7% respectively. On the contrary, in-
vestments in agriculture equipment in-
creased by 4.4%, being therefore the only
capital category that moved upwards.
The performance of the external sector
of the Greek economy keeps its im-
proving course. Imports shrink faster than
last year, but on the contrary to 2010, ex-
ports are decreasing as well, even very
mildly. More specifically, during the Janu-
ary-March quarter, imports shrunk by
15.5%, despite the increase in interna-
tional prices of main commodities. The sig-
nificant weakening of demand for imports
was almost of the same intensity for goods
(-16.4%) and services (-12.0%), shaping
them at their lowest level, at least since
2000, regardless of quarter examined.
Exports also moved decreasing,
shrinking by 2.0%, development that
is fully due to the lower services from
abroad demand by 8.3%. On the con-
trary, exports of goods increased by 6.5%.
As a result of the dynamics in the two
scales of the external sector, the degree
of coverage of imports from exports
surpassed 75%, for the first time in
the last 11 years. Subsequently, the defi-
cit of the external sector of the economy
remained at 7.1% in Q1 2011, 4.2 percent-
age units of GDP lower than Q1 of 2010.
On the production side, domestic gross
added value fell by 4.5% in Q1 of
2011, faster than in the respective period
of 2010 (-3.5%). At branch level, changes
are registered regarding the developments
in product value. Now, trade-hotels-
restaurants-transport and construc-
tion show the greatest reduction
(12.4% and 11.9% respectively ver-
sus 6.4% and 3.2% in Q1 of 2010).
Industry, which in the same period last year
was shrinking by 11.7%, more than the
rest, has mitigated its losses, at 5.0%.
Those realignments reflect the course and
spill over of recession in the Greek econ-
omy, which starting from the secondary
sector and constructions, is now obvious in
greater intensity in services, where last year
showed remarkable resiliency. Stabilising
trends hold in financial activities-activities
IOBE “The Greek Economy” vol. 02/11
45
related to real estate (-0.1%). In the rest
of the services, gross output moves
upward (+2.7%), as well as in agricul-
ture-forestry-fishing, where growth contin-
ues for third year in a row, although less
intensely now than in the previous years
(+3.7%, versus 12.3% in Q1 2010 and
13.1% in the same period in 2009).
The abrupt deepening of the recession in
the last quarter of 2010 exercised pressures
on employment in 2011, an effect that was
strengthened by the development of eco-
nomic activity the first months of the cur-
rent year. So, despite the broad consecutive
increases of unemployment on a quarter
basis throughout 2010, the percentage of
unemployment over the labour force moved
upwards once more in the first quarter this
year, getting close to 16.0%. The gap be-
tween this year’s unemployment and the
respective percentage of last year (4.7 per-
centage points) is unprecedented. The rela-
tively weakened demand, in combination to
the feedback relation that connects it to un-
employment, slowed down inflation. Albeit
the increase of the low VAT from 11% to
13% in the beginning of 2011, the signifi-
cant increase in import prices (+7.6% in
industry products in the Jan-April period),
inflation stood at 4.3% during the first five
months of the current year, registering
however during that period a decrease,
from 5.2% to 3.3%.
In a nutshell, the negative dynamics that
were shaped in the domestic economy at
the end of 2010, in combination to the in-
creased cautiousness of society against
structural reforms that were pushed in the
beginning of 2011, as well as its insecurity
for the intention of the EU in order to lax
the fiscal debt crisis of Greece, did not allow
for noteworthy de-escalation of the crisis in
the first quarter of 2011. The procrastina-
tion of the Eurozone’s intervention for an
effective arrangement of the credit as-
phyxia, in which the Greek state may be
found in the beginning of 2012, undoubt-
edly stretches and intensifies Greeks’ dis-
trust regarding their country’s possibility of
exiting this grave position. When this stance
coincides with turbulence in domestic politi-
cal life, their simultaneous effect on the
functioning of the Greek economy is multi-
ple, in comparison to their isolated results.
Understandably, the two-way relationship
between the economic environment and the
political actions exacerbates further the
negative climate.
Medium-term outlook
The planning-implementation of the Me-
dium-Term Fiscal Strategy Framework and
the preparation of the troika to face the
inability of the Greek state to return to the
financial markets at the beginning of
2012, are in the front line of socio-
economic developments in Greece since
the end of March. For the first time since
entering the support mechanism by con-
tracting the Memorandum, the shaping-
implementation of economic policy causes
great wobbling in the political life of the
country, in the effort of the Greek gov-
ernment to grasp as much of wider politi-
cal consent as possible, regarding the
economic policy that it intended to follow.
The time-consuming political processes
towards that direction, their unsuccessful
outcome, the tension they caused at the
political level inside and outside of borders
IOBE “The Greek Economy” vol. 02/11
46
regarding the fiscal troubles of Greece, as
well as the political developments that
they instigated, do not allow the ambigu-
ity of the Greek society to weather out.
On the contrary, they have raised the dis-
trust regarding the viability of the sug-
gested policies aiming at ending the fiscal
dead-end of the country, thus escalating
pessimism about the future of the country
in the forthcoming time period. The defi-
nitely shaken trust of the possibilities of
shaping an implementable plan of public
economics consolidation with simultane-
ous ignition of the development proce-
dures in the Greek economy and, more-
over, its systemic implementation is
clearly mirrored in the evolvement of eco-
nomic climate indices. Before the peak of
the political processes in June, almost all
the indices that formulate the economic
climate had returned to downward trajec-
tories, limiting their gap from historically
minimum levels.
Independently from the results of the re-
cent political developments in arranging
the fiscal problems that Greece faces and
their impact on domestic production activ-
ity that will imprint in the relative indices
in the forthcoming months, the Greek
economy was at a recovering trajectory of
the shrinkage trends since the end of the
first quarter, as shown by the course of its
basic economic elements. Industrial pro-
duction decrease was accelerated in
March and April and came up to double-
digit level (11.0%), according to the latest
data, despite the increase of orders, espe-
cially from abroad, in the immediately pre-
ceding months. The shrinkage of turnover
in constructions is continued at a higher
rate (17%) during the first quarter of
2011. Although lower than last year, since
it is sustained for the third year, it shaped
the index at historically lowest level, at
least since 2005. The sedimentation of
construction activity mostly comes from
the side that concerns construction pro-
jects (-27.3%), a fact verified by the steep
decrease of the number of construction
permissions issued at the same period (-
51.1%) and the surface that they concern
(-61.6%). Noteworthy weakening is regis-
tered, at the beginning of the year, in an-
other critical sector of the Greek economy,
tourism. As in constructions, turnover fell
in the Jan-Mar quarter at the lowest level
since 2005, after decreasing by 20.6%.
IOBE “The Greek Economy” vol. 02/11
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Table 3.1
Main Economic Volumes-Quarterly National Accounts (constant 2000 prices)
GDP Final
Consumption Investment Exports Imports
Year/ Quarter
mil. € Annual Rate of Change
mil. € Annual Rate of Change
mil. € Annual Rate of Change
mil. € Annual Rate of Change
mil. € Annual Rate of Change
2001 142.001 4,2% 127.980 4,1% 33.025 3,9% 33.878 0,0% 52.882 1,2%
2002 146.884 3,4% 134.663 5,2% 33.441 1,3% 31.034 -8,4% 52.219 -1,3%
2003 155.614 5,9% 137.952 2,4% 39.627 18,5% 31.940 2,9% 53.768 3,0%
2004 162.411 4,4% 143.158 3,8% 38.686 -2,4% 37.470 17,3% 56.814 5,7%
2005 166.114 2,3% 148.625 3,8% 35.073 -9,3% 38.408 2,5% 55.974 -1,5%
a' 2006 42.814 4,8% 38.761 6,0% 8.859 1,8% 9.862 5,5% 14.693 6,7%
b' 2006 43.601 5,9% 39.195 6,2% 9.683 8,4% 10.103 11,8% 15.390 12,4%
c' 2006 44.053 5,5% 39.558 6,0% 9.329 13,2% 10.593 2,1% 15.448 8,9%
d' 2006 44.228 4,4% 39.873 5,4% 10.306 12,1% 9.899 2,6% 15.854 10,7%
2006* 174.696 5,2% 157.387 5,9% 38.176 8,8% 40.457 5,3% 61.384 9,7%
a' 2007 45.146 5,4% 40.404 4,2% 10.845 22,4% 10.329 4,7% 16.419 11,7%
b' 2007 45.432 4,2% 40.709 3,9% 10.859 12,1% 10.432 3,3% 16.559 7,6%
c' 2007 45.777 3,9% 40.962 3,5% 10.908 16,9% 11.040 4,2% 17.139 10,9%
d' 2007 45.817 3,6% 41.374 3,8% 10.770 4,5% 10.985 11,0% 17.339 9,4%
2007* 182.172 4,3% 163.449 3,9% 43.382 13,6% 42.786 5,8% 67.455 9,9%
a' 2008 45.865 1,6% 41.746 3,3% 9.720 -10,4% 11.619 12,5% 17.315 5,5%
b' 2008 46.104 1,5% 42.100 3,4% 10.093 -7,1% 11.449 9,8% 17.631 6,5%
c' 2008 46.221 1,0% 42.214 3,1% 10.687 -2,0% 10.810 -2,1% 17.553 2,4%
d' 2008 45.845 0,1% 42.063 1,7% 10.734 -0,3% 10.625 -3,3% 17.649 1,8%
2008* 184.035 1,0% 168.124 2,9% 41.234 -5,0% 44.503 4,0% 70.146 4,0%
a' 2009 45.344 -1,1% 42.013 0,6% 8.559 -11,9% 9.197 -20,8% 14.570 -15,9%
b' 2009 44.879 -2,7% 41.955 -0,3% 8.283 -17,9% 9.183 -19,8% 14.716 -16,5%
c' 2009 44.606 -3,5% 42.048 -0,4% 8.431 -21,1% 8.659 -19,9% 14.710 -16,2%
d' 2009 44.901 -2,1% 43.256 2,8% 5.880 -45,2% 8.532 -19,7% 13.099 -25,8%
2009* 179.730 -2,3% 169.272 0,7% 31.152 -24,5% 35.571 -20,1% 57.095 -18,6%
a' 2010 44.053 -2,8% 41.813 -0,5% 6.983 -18,4% 9.340 1,5% 14.329 -1,7%
b΄2010 43.488 -3,1% 39.697 -5,4% 7.974 -3,7% 9.416 2,5% 13.719 -6,8%
c΄2010 42.781 -4,1% 39.487 -6,1% 7.928 -6,0% 8.608 -0,6% 13.377 -9,1%
d΄ 2010 41.583 -7,4% 39.077 -9,7% 5.606 -4,6% 9.574 12,2% 12.901 -1,5%
2010* 171.905 -4,4% 160.074 -5,4% 28.492 -8,5% 36.937 3,8% 54.326 -4,8%
a' 2011 41.651 -5,5% 38.917 -6,9% 5.460 -21,8% 9.154 -2,0% 12.111 -15,5%
* provisional data Source: ELSTAT, Quarterly National Accounts, June 2011
Discussing the elements that reflect more
the situation of the domestic demand, the
index of volume in retail trade was, in Q1
of 2011, 14.7% lower than the same pe-
riod last year, when its fall did not over-
come 5.9%. The feeble demand for con-
sumer goods is evident from the de-
escalation of inflation, which in the Janu-
ary-April period decreased from 5.2% to
3.3%, despite the increase of the low VAT
and the increased prices of imports, espe-
cially oil. Significant slowdown is obvious
IOBE “The Greek Economy” vol. 02/11
48
for new orders in industry, with the re-
spective growth rate to fluctuate between
intense increase in February (16.8%) to
negative the next month (-9.8%), and
then in between those values in April
(2.2%). The great variations that orders
experience are due to the respective
changes in the domestic demand side,
since external demand is continuously in-
creased compared to last year. Positive
message are still coming from exports,
since the change in the overall exportable
goods and services was positive in April
too, compared to the same month of 2010
(+7.4%) and in combination to the limita-
tion of imports (-2.9%), the respective
deficit decreased by 18.5%, a bigger de-
crease than the one that took place in the
first quarter of the year.
The new intense decrease in elements
that are crucial for the economic activity
level in Greece and therefore for employ-
ment, public revenues etc reflects the,
pre-existing the acute juxtaposition for the
content and the voting for the Medium-
Term Fiscal Strategy Framework, distrust,
if not pessimism regarding the possibility
of the country to succeed its fiscal targets
and to regain access to capital markets.
Most probably, the developments in an
international level that took place in that
period, such as a) the chain civil conflicts
in Northern African countries, close to
Greece and the national intervention b)
Portugal’s entering the EFSF support
mechanism of EU-ECB-IMF and the scepti-
cism that caused on the further develop-
ment of the fiscal crisis in Europe, to have
caused additional pressures on the im-
paired, domestic economic environment.
This year’s international economical-
political developments differ greatly from
last spring, when the global economy was
at a course of intense recovery and the
impacts of the financial crisis seemed to
have been overcome, at least on the side
of movableness in the financial markets
and of their liquidity.
The sharpening of the political conflict re-
garding MTFSF, in combination to a) the
strict priority of EU in pursuing wide politi-
cal consent in the MTFSF implementation,
as a prerequisite for its acceptance by EU
and b) the unofficial processes about the
additional funding from the troika to
Greece, about which conflicting rumours
were been circulated, have intensified the
insecurity regarding the possibility of
achieving fiscal consolidation of Greece in
the Memorandum framework and its re-
turn to capital markets. Moreover, the an-
nouncement of the main directions of
MTFSF was opposed by society at large,
which is characterised by discontent. The
following continuous political meetings, in
order to achieve bipartisan collaboration
for the MTFSF implementation did not end
up to this result, caused unrest in the fis-
cal adjustment procedure and, most of all,
allowed for questioning on the govern-
ment’s trust in the economic strategy fol-
lowed.
Nonetheless, MTFSF was approved by the
Greek parliament, along with the execu-
tive law that accompanies it. This devel-
opment functioned as a catalyst for the 5th
loan dose approval on July 3rd from the
Finance Ministers Summit. So, initially, be-
yond the smooth ongoing delivery of the
Greek state’s duties towards its lenders,
the implementation speed, of the all the
IOBE “The Greek Economy” vol. 02/11
49
policies included in the Memorandum, is
expected to be gradually regained- in par-
ticular, the implementation flow of re-
forms. An immediate start of the proce-
dures for the founding-functioning of the
General Secretariat of Real Estate Devel-
opment is expected.
Following, the course of the Greek econ-
omy in the rest of 2011 will be greatly
shaped by the new economic measures
that are included in the MTFSF, not only
through the impact that they are going to
have on the economic functioning of the
state, but also through the effects that
they are going to have on all aspects of
the production activity of the country, de-
pending on the nature and the width of
the predicted relevant interventions. Given
the above, further cut-down in public ex-
penditure is going to take place, in order
to cover significant deviations in the
budget execution that were registered in
the relevant data for the first months of
the year. In this context, public con-
sumption will shrink further, as well.
Nonetheless, the continuous slight de-
crease in the Jan-Mar quarter that did not
overcome 3.4% does not serve the
achievement of fiscal targets that have
been set for this year.
As far as consumption expenditure of
households is concerned, it is quite likely
that their two-quarters-long acute shrink-
age will not spread significantly, especially
for the rest of the year, and possibly to
gradually weaken. The strong fall of 8.0%
in both Q4 of 2010 and Q1 of 2011 is due
to the relatively high comparison base in
the respective quarters a year ago, when
consumption demand had not yet been
influenced by measures of fiscal consolida-
tion. On the other hand, the steep widen-
ing of unemployment since last year, the
gradually and downwards readjustment of
salaries in the private sector since the be-
ginning of the current year through the
implementation of new labour relations,
the implementation of the common payroll
in the public sector, as well as the addi-
tional tax measures of MTFSF regarding
income, restrict the consumption expendi-
ture of households in comparison to last
year. The credit reduction towards house-
holds for consumption reasons, which con-
tinuously widens and reached 4.9% in
April, will function as an additional inhibit-
ing factor to consumption buys. However,
the descending demand will lead, as al-
ready observed, to fast de-escalation of
inflation, a development that will grasp the
fall of the purchasing power.
The escalation of the efforts through the
new fiscal strategy for the deficit elimina-
tion to the level predicted by the Memo-
randum for 2011 includes cuts in the Pub-
lic Investments Programme. According to
the reasoning report of the bill for the
MTFSF, PIP expenditures will not over-
come €7.8 bn this year, almost €800 mil-
lion less than what originally predicted.
Since in the Jan-May period € 1.7bn levies
have been disbursed from the PIP, its im-
plementation is expected to accelerate
during the year, even if additional cuts are
needed by the end of the year, as did last
year, so as to meet the deficit restriction
according to the target. The public in-
vestments increase in the second semes-
ter of 2011 is favoured by the full activa-
tion of the new Development Law, whose
effect began, in practice, in the second
IOBE “The Greek Economy” vol. 02/11
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quarter of the year. Nonetheless, as re-
peatedly IOBE has remarked in its quar-
terly reports, the long-term of new legal
framework for investments functioned in-
hibitory towards the realisation of invest-
ment plans.
On the other hand, the retreating domes-
tic demand, the acute political conflicts
regarding the medium-term fiscal strategy,
with the retractions for various reasons
that took place in the approval process
and finally, the reluctance of the Eurozone
member-states to provide Greece with ad-
ditional funding, but of IMF too regarding
the continuing dose payments for the al-
ready signed loan, if Eurozone does not
decide to further support Greece, do not
allow for the stabilization of the economic
environment that is demanded for the re-
alisation of private investments. Be-
yond that, the unprecedented social reac-
tions against the planned economic policy
have increased the fluidity at a social
level, as well. The domestic socio-political
situation that is not fully predictable as to
its turn consists of one of the primary is-
sues of the international news, which ac-
tually inhibits foreign investors. Since they
have alternative choices for realising their
investments, they prefer less risky geo-
graphical zones, in relation to the afore-
mentioned resultants of the investment
environment, than Greece.
The intense ambiguity over the develop-
ments to come inactivates domestic inves-
tors, too. Now, they rightfully remain cau-
tious about the outcome of political nego-
tiations on fiscal issues, in and out of bor-
ders, deferring back their final decisions.
Waiting for the completion of the new
regulations on labour issues for the young
people that enter the market for the first
time, as well as for the implementation of
the 3899/2010 law, leaves another time
margin for the finalisation of any invest-
ment decision. Besides, abstracting money
from the domestic banking system is not
easy. Although after two years of continu-
ous slowdown of credit expansion from
credit institutions to households, its
growth rate has been stabilised since the
beginning of 2011 slightly over 1%, which
is rather low nonetheless, which leads to
limited available investments. As far as the
increased demand for Greek products is
concerned from abroad, it can be covered
at a great extent from the existing produc-
tion dynamics, since the level of its use in
industry remains extremely low (67.9% in
May). Subsequently, the continuation of
the fall of investments is possible, and as
much as in the first quarter of the current
year.
As far as the external sector is con-
cerned, the declining deficit that charac-
terised the first months of 2011 is ex-
pected to continue, perhaps even at a
faster rate. Critical factor of this develop-
ment was and is going to be the fast
shrinkage of imports. However, their in-
tense decrease in the Jan-Mar quarter that
overcame 15.0% is not due only to the
weakening of the relevant demand, but to
their absolute level during the same
months of 2010 that were definitely higher
than in the quarters that followed, when
the impacts of the contracting fiscal policy
were made apparent. On the other hand,
additional reductive factor of imports at
the second half of 2011 will be the meas-
ures that, as already mentioned, will con-
IOBE “The Greek Economy” vol. 02/11
51
tract household income (new tax levies,
common payroll in the public sector), as
well as the tax increase in heating oil.
Capital equipment imports are closely re-
lated to investment activity, and are there-
fore expected to be affected in a similar
way.
As far as exports are concerned, al-
though preference in Greek products con-
tinued to increase this year, according to
data for Q1 of the current year, it was
compensated however by the lower ser-
vices exports, resulting in the decrease of
the overall exports. Undoubtedly, Greek
products-services exports benefited last
year from the flourish of international
trade after the economic recession. But
the increase of trade globally continuously
slows down in the first four months of the
year, according to the latest data13. Their
demand was also based on the retreat of
their production cost, which was due to
the gradual reduction- compared to last
year- of labour cost that continues amidst
the new labour relations in the private
sector. However, since the equation of
heating oil and diesel for businesses will
enlarge production and operating costs, it
will subsequently limit or even vanish in
some cases the benefits from the lower
13 World Trade Monitor, April 2011, CPB Neth-erlands, June 2011
labour cost. Nonetheless, if the increase
of exportable goods is weakened, it could
be counterweighted by the increase in
service provision to foreigners, through
the increased number of tourists this year.
Recapitalising the predicted shifts in the
basic components of GDP for the rest of
2011, private consumption will continue to
decrease, by the same or slightly slower
rate than in the first quarter, when on the
contrary, public consumption will be re-
stricted more intensely. In investments,
the extensive retreat at the beginning of
the year will continue. Consumption and
investment decrease will be counter-
weighted by the better- compared to last
year- performance of the external sector,
the deficit of which will decrease for an-
other year. Basic element of these
changes will be the shaping of reces-
sion of the Greek economy at 4.0%
this year. This specific estimate does not
differ greatly from the recent, common
prediction of EU-IMF (3.8%), while it is at
a greater distance from the relevant calcu-
lations of the Ministry of Finance in the
MTFSF (3.5%) and the Bank of Greece
estimation for 2010 that concerned a –at
least- 3.0% fall of GDP (Table 3.2).
IOBE “The Greek Economy” vol. 02/11
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Table 3.2 Domestic Expense & Gross Domestic Product – European Commission/IMF Forecasts
2009 2010 2011 2012
Annual Percentage Changes
Gross Domestic Product -2,0 -4,5 -3,8 0,6
Private Consumption -2,2 -4,5 -4,8 -1,2
Public Consumption 10,3 -6,5 -8,4 -5,0
Gross Fixed Capital Formation -11,2 -16,5 -8,9 -1,5
Exports of goods and services -20,1 3,8 6,4 6,7
Imports of goods and services -18,6 -4,8 -4,2 -3,2
Employment -0,7 -2,1 -3,2 -0,3
Compensation of employees / head 3,6 -3,5 -1,8 0,1
Real Unit Cost of Labor 3,7 -3,5 -1,8 -0,2
Harmonized Index of Consumer Prices 1,3 4,7 2,9 1,0
Contribution to real GDP change
Domestic Demand -1,8 -7,7 -6,6 -2,0
Net Exports 2,0 2,3 2,7 2,6
House Inventories -2,3 0,9 0,2 0,0
GDP percentage
Trade Balance -15,4 -10,5 -7,6 -6,5
Current Account Balance -14,0 -11,8 -9,9 -7,7
General Government Debt 127,1 142,7 156,7 161,3
Percentage
Unemployment (% of civilian labor force) 9,5 11,5 14,5 15,0
Source: European Economy, Occasional Papers no. 82, European Commission, July 2011
Table 3.3
Comparison of forecasts on selected Economic Indexes for years 2010- 2012 (constant 2000 market prices, annual % changes and levels)
MFIN ΕC OECD IMF
2010 2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012
GDP -4,5 -3,5 0,8 -4,5 -3,8 0,6 -3,9 -2,9 0,6 -4,5* -3,8* 0,6*
Final Demand : : : -6,8 -6,0 -1,9 -6,9 -6,5 -0,9 : : :
Private Consumption -4,5 -4,8 -1,2 -4,5 -4,8 -1,2 -4,5 -5,4 -0,2 -4,1 -4,6 0,5
Harmonized Index of Consumer Prices
4,7 2,9 1,0 4,7 2,9 1,0 4,7 2,9 0,7 4,7* 2,9* 1,0*
Gross Fixed Capital Formation
-16,5 -7,1 -2,2 -16,5 -8,9 -1,5 -16,5 -10,4 0,3 -17,4 -7,5 -2,6
Unemployment (%) 11,5 14,5 15,0 11,5 14,5 15,0 12,5 16,0 16,4 11,5* 14,5* 15,0*
General Government Balance (% of GDP)
-10,51 -7,41 -5,91 -10,5 -7,6 -6,5 -10,4 -7,5 -6,5 -10,5* -7,6* -6,5*
Current Account Bal-ance (% of GDP)
-10,6 -8,0 -6,6 -11,8 -9,9 -7,7 -10,4 -8,6 -7,2 -11,8* -9,9* -7,7*
Gross Public Debt
(% of GDP) 142,81 155,51 159,81 142,7 156,7 161,3 : : : 142,7* 153,4* 153,3*
1 Scenario with interventions and privatizations *Main findings of the joint Commission/ECB/IMF mission to Greece (3 May – 2 June, 2011), June 2011 Sources: Draft Law on «Medium-Term Fiscal Strategy Framework 2012-2015», Ministry of Finance, June 2011– European Economy, Occasional Papers no. 82, European Commission, July 2011 - OECD Economic Outlook No. 89, May 2010 - Greece, Third Review Under the Stand-By Arrangement, IMF, March 2011
IOBE “The Greek Economy” vol. 02/11
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The continued for a third year recession of
the Greek economy, almost as intense as
last year, will continue to activate pres-
sures in the labour market. Already in
Q1 this year, incorporating the impacts
mostly by the steep deepening of the re-
cession at the end of 2010, unemployment
rate raised to 15.9%, from 14.2% the ex-
actly preceding quarter and 11.7% a year
earlier. Nonetheless, an inhibitory role is
expected to be played by the implementa-
tion of more flexible labour relations in the
private sector, regarding even greater in-
crease in unemployment. The wider adop-
tion of those flexible arrangements, in
combination to the flexibility in the regula-
tions on employees till 25 years old that
the MTFSF includes can lax the shrinkage
of employment that overcame in Jan-Mar
quarter 4.0%, for the first time. Increased
tourism can also be an inhibitory factor
towards the same direction. It is possible
that in the third quarter, unemployment
will be impacted by the specific seasonal
factor, even to stand at lower levels than
in the two previous quarters, for the first
time after two years.
Thus, the increase in unemployment
for the rest of the year will probably be
milder, which is expected to stand
around 16.5% for the whole current
year.
Keeping unemployment at an upward
trend and mostly, the further restriction of
available income for reasons that were
mentioned earlier will continue to have
limiting effects on inflation for the rest of
the year. Its weakening from 5.2% last
January to 3.3% after three months stems
from March and the technical reaction of
the high level-comparison base a year
ago, a result that will continue at least un-
til July, too. On the other hand, the retreat
of the basis result after the middle of the
summer, in combination to the equation of
Special Consumption Tax in diesel and
heating oil for businesses in the fall, as
well as with transfer of catering to the
high VAT, will accelerate the price increase
during the second semester of 2011. Fol-
lowing, on average in 2011 inflation
will stand at a lower level than last year,
around 3.3% from 4.7% in 2010.
All the current and possible developments
that were presented and analysed, mostly
those regarding fiscal issues and their
connection to GDP and its components,
employment and other basic economic
elements and indices reflect the turning
point at which the effort for fiscal consoli-
dation of the country stands, from many
points of view (economic, political, social,
international position of the country). Di-
rectly or indirectly point out some of the
challenges at the present, quite crucial
conjuncture for the Greek economy, poli-
tics and society. This period is thought to
be crucial not only for Greece, but for the
international environment in which the
country functions and EU in particular. The
MTFSF approval from the Parliament and
the provision of a new loan to the Greek
state shortly, secure that Greece will avoid
suspension of payments and the possibility
of continuing the fiscal consolidation ef-
forts. On an international level, these cir-
cumstances primarily sustain the country’s
consistency over its partners and credi-
tors, improving at the same time its repu-
tation.
IOBE “The Greek Economy” vol. 02/11
54
However, as made obvious from the
analysis above, the fiscal effort signifi-
cantly limits liquidity, not only for con-
sumption purposes, but mostly for the re-
alisation of investments that will instigate
a process of relatively stable recovery. The
already tight financial crunch that will
shortly escalate necessitates immediate
interventions for its removal. Given that
capital within the country is non-existent,
a meaningful initiative towards this direc-
tion would be the replenishment of the
national participation in NSRF by European
resources. Also helpful could be the more
intense activation of the European Bank of
Investments in Greek investments, mostly
those that are of big scale or are con-
nected with privatizations. In these and
any other potentials, planning and realisa-
tion should be immediate, inhibiting the
consequences of liquidity shortage becom-
ing even more acute and therefore, pro-
viding valuable advice in the understand-
ing and realisation of fiscal strategy.
3.2 Developments and prospects in
key sectors of the economy
This section presents the quarterly indices
of activity complied by the Hellenic Statis-
tical Authority (ELSTAT), which track the
course of production in Industry and the
turnover of businesses in the sectors of
Construction, Commerce and Services. In
addition, it presents the corresponding
branch indices compiled by IOBE on the
basis of the business surveys it has been
conducting in Greece since 1981. The
combination of these indices and the trend
estimations that occur contribute to a
broader depiction of the supply side of the
economy, reflecting the intensity of do-
mestic demand.
Industry
During Q1 of 2011, industrial production
continues to contract by -5.2%, although
on a slower pace that the respective quar-
ter of 2010 (-7.2%). The overall index of
industrial production therefore stands at
the level of the first semester of 2008.
In contrast, industrial production in the
Euro area countries keeps moving up-
wards (6.9% increase) in relation to the
respective period last year and registers a
marginal increase by 1.2%, quarter-on-
quarter. In most countries, industrial pro-
duction is moving upwards, while decrease
is observed only for Norway, Greece and
Cyprus. Therefore, European industrial
production seems to recover and move
more steadily towards development.
At branch level in Greece, in Q1 of 2011
Manufacturing shrinks by 7.0%, continu-
ing the 4.1% decrease of last year. Elec-
tricity follows that, although it writes down
significant losses compared to last year
(almost 5 percentage units), its losses
come up to 5.5%, when they had reached
10.3% last year. Water Supply decreases
by -3.7%, versus the marginal increase of
last year. On the contrary, Mining-
Quarrying is the only sector that registers
a big increase (6.7%), compared to the
respective period of last year.
More specifically in Manufacturing, the
first quarter of the year, 17 out of 24
branches fell. Similar is the picture in
branches with high share in domestic
value added. So, Petroleum and Cole
IOBE “The Greek Economy” vol. 02/11
55
products fell by -15.6%, compared to -
1.6% last year, while the index in Bever-
ages writes down losses even more in-
tensely (-12.1% versus -8.5% last year).
On the other hand though, Food industry
seems to recover, since its productions
decrease is only marginal (-0.2%), when it
reached -3.1% last year.
The steepest decrease concerns Clothing
products (-30.4%), keeping the 20.4%
reduction of 2010, while Base Metals reg-
ister losses of 27.7%, versus just 4.8% in
2010. The branches of the other manufac-
turing activities follow (26.8% reduction
versus 25.2% increase last year), of Re-
pair and Implementation of Machinery and
Equipment (-21.4%) and the rest equip-
ment and transport (-19.9%). At the same
time, the declining course in the produc-
tion of textiles is slightly strained (-18.7%
versus 16.6% last year).
On the other hand, Manufacture of Ma-
chinery and Equipment seems to have
been significantly reinforced by 16%,
compared though to the quite low levels
of last year (-24.0%). Moreover, Manufac-
ture of Metal Products increases (13.3%),
continuing the upward course that was
made obvious last year (8.5%). Positive,
but definitely of limited spread compared
to last year, is the production of Pharma-
ceutical Products (1.0% compared to
15.7% at the respective period of 2010).
Finally, a marginal increase of 0.4% is
registered for the Manufacture of com-
puters, electrical and optical products, af-
ter the large production decrease of 30%
during the same period last year.
Figure 3.1
Production Index in Manufacturing, Greece and Euro Area-16,
% change w.r.t the same quarter of the previous year (2005=100)
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%Εuro-Area 16 Greece
Source: ELSTAT
IOBE “The Greek Economy” vol. 02/11
56
In Mining-Quarrying, the increase in
production is caused primarily by the sig-
nificant reinforcement of Mining of Metal
Ores by 23.8% (continuing the 15.9% in-
crease of last year) and the Mining of Coal
& Lignite (+12.6% versus -18.8% the
same period last year). On the contrary,
Extraction of Crude Petroleum & Natural
Gas is shrinking once more by 14.1% (af-
ter the hike by 111.1% last year) and the
rest mining and quarrying activities (-9.0%
versus marginal losses by -0.2% last
year).
Overall, all the main branches of industrial
sectors are decreased significantly in Q1 of
2011. Consumer Durables register big
losses (-19.0% versus -2.2% last year),
the production of Intermediate Goods de-
creases by 4.0% (+2.6% last year), while
Consumer Non-Durables continue to fall (-
5.7% versus -4.0% last year). On the con-
trary, significant deceleration of the pro-
duction shrinking is obvious in Capital
Goods (-4.6% from -29.8%), while milder
deceleration is observed for the Energy
branches.
Construction
Slightly milder but definitely high is the
decrease that is registered for Q1 of
2011 in the overall production in
construction index by -16.6%, in
comparison to -23.3% the respective
period last year. However, the index is
at historically low levels of at least six
years (57 units). The adverse situation in
which the sector has come into the last
couple of years is distinctively mirrored in
the index of construction works production
that continues to fall, by -27.3% that is, in
comparison to 2010. Finally, decrease –
although decelerated- of 10% is recorded
in the index of civil engineering projects
production, compared to -23.5% losses of
the corresponding period of 2010.
On the contrary, in the Euro area, the sec-
tor seems to enter a dynamic develop-
ment trajectory after the significant reces-
sion that had already begun from the sec-
ond quarter of 2007. The production index
shifts by +5.5%, in comparison to last
year’s recession by -9.5%.
As far as the individual indexes of con-
struction activity in Greece are concerned,
the first two months of 2011, the overall
number of permissions is halved (change -
51.2%, number of permissions 3,803).
The decrease is evident both in the overall
surface (-61.9%), as well as the volume (-
60.3%) of private and public construction
activity.
The intense recession in the field of con-
struction is evident in all of the country
regions, with significant losses that sur-
pass 40%. In the first two months of
2011, the steeper decrease in the number
of new construction permissions stands for
regions of South Aegean (-59.4%), Epirus
(-59.2%) and Central Macedonia (-
57.7%).
In Q1 2011, estimations/transactions of
residential properties with the mediation
of credit institutions were reduced by
47.8% compared to the respective period
last year, while the reduction compared to
the previous quarter (Q4 2010) surpassed
21%. During the same period, the trans-
actions value index moves n extremely low
levels, decreasing by 44.2% compared to
the first quarter of 2010, when transac-
IOBE “The Greek Economy” vol. 02/11
57
tions had expanded by 38.8% compared
to 2009. The increase in mortgage rate
(fixed rate for over one year) by 1.3%
(average of monthly changes in the first
four months of 2011) is expected to do
the sector no good, leading it to further
tension of the recession within the year,
as underlined in the latest business
sentiment surveys of IOBE.
Retail Trade
Domestic demand decline is depicted in
almost all indexes related to Retail Trade.
So, the overall index in Q1 2011 remains
at a falling course, registering losses of
14.7%, compared to the respective quar-
ter of 2010.
The course of most of the individual indi-
ces is also disappointing, since their vol-
ume index is significantly lower than in the
corresponding periods of the recent past
(Q1 2009 and 2010). In the sectors with
the greatest losses (compared to Q1
2010) one can find clothing-footwear (-
25.5% versus +6.0% last year), furniture
(-24.9% from +4.3%), automotive fuels &
lubricants (-20.2% versus -4.9% last year)
and pharmaceuticals-cosmetics (-19.4%
from 14.9%). On the contrary, the only
sector of Retail Trade that registers posi-
tive rate is that of supermarkets that is
increased by 4.8% (versus -12.4% last
year).
Figure 3.2 Construction Production Index (annual % changes) in Greece and in the Euro area-16,
Business Level Index in Greece(1996-2006=100)
-80
-60
-40
-20
0
20
40
60
80
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Business Level_Greece Product ion Index_Greece Product ion Index_Euro area-16
Source: ELSTAT
IOBE “The Greek Economy” vol. 02/11
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Figure 3.3 Volume Index in Retail Trade (turnover in constant prices, 2005=100) and Business Expectations In-
dex in Retail Trade (1996-2006=100)
80
85
90
95
100
105
110
115
120
125
40
50
60
70
80
90
100
110
120
130
Volume Index (left scale) Business Expectations Index (right scale)
Source: ELSTAT
Overall, private consumption continues to
get restricted as a result of the extended
changes that reshape the socio-economic
situation of the country (lower wages, un-
employment, taxation).
These trends were captured early enough
in the Business Surveys carried out by
IOBE. During the first five months of
2011, pessimism prevails, although weak-
ened in relation to last year: The general
confidence index for Retail Trade con-
tracted anew by 14.8% (against 26.4%
decline in the same period of 2010). In
the constituent categories, pessimism ex-
panded Supermarkets (-31.6% versus -
18.1% last year), while disappointment
prevails also in Household Appliances (-
20.3% vs. -18.6% in 2010). The grave
climate in business expectations slightly
deteriorates in Clothing (-17.3% vs. -
24.5% in 2010), while restrained optimism
is obvious in Food-Beverages-Tobacco
(+2.9% vs. -13.2%). In Motor Vehicles –
Spare Parts, the car recall programme
(that started in end February) contributed
in the increase of business expectations in
the first five months of 2011 by 13.0%
versus -43.9% in 2010, which does not
however seem to get translated into real
sales, due to the overall uncertainty
IOBE “The Greek Economy” vol. 02/11
59
Table 3.4
Annual Changes in the Index of Retail Trade Volume
Volume Index (2005=100)
Store Categories of Retail Trade a’ quart. 2009
a’ quart. 2010
a’ quart. 2011
a' quart.
P.C. '10/'09
a' quart
P.C. '11/'10
Overall Index 97,0 102,7 87,6 5,88% -14,70%
Overall Index (excluding car fuels and lubricants) 94,5 100,0 86,1 5,82% -13,90%
Store Subcategories
Large Food Stores 102,0 105,6 97,6 3,53% -7,58% Multi stores 100,0 93,5 98,0 -6,50% 4,81%
Car Fuels and Lubricants 100,0 95,6 76,3 -4,40% -20,19%
Food-Drink-Tobacco 87,0 92,8 78,2 6,67% -15,73% Medicare-Cosmetics 107,4 124,1 100,1 15,55% -19,34%
Clothing-Footwear 100,1 106,3 79,1 6,19% -25,59% Furniture – Electric household appli-ances - Household Goods 90,5 94,7 71,1 4,64% -24,92%
Books - Stationery- Other gift items 78,1 84,0 76,6 7,55% -8,81% Source: ELSTAT
Table 3.5
Business Expectation Indexes in Retail Trade (1996-2006=100)
2009 2010
% (’10/’09)
Jan. '10-May ΄10
Jan. '11-
May ΄11
% (’11/’10)
Food – Drinks - Tobacco 87,9 76,3 -13,2% 76,3 78,5 2,9%
Textile-Clothing - Footwear 90,6 68,4 -24,5% 80,7 66,7 -17,3%
Household Equipment 67,8 55,2 -18,6% 58,6 46,7 -20,3%
Vehicles – Spare Parts 76,4 42,9 -43,9% 52,4 59,2 13,0%
Multi stores 106,4 87,1 -18,1% 101,8 69,6 -31,6%
Retail Trade Total 80,4 59,2 -26,4% 64,1 54,6 -14,8%
Source: ΙΟΒΕ
Wholesale Trade
The decreasing trend of the turnover in-
dex in wholesale trade continues during Q!
2011. More specifically, further recession
is noted by 11.4%, in relation to the cor-
responding period of last year. The losses
in comparison to Q4 2010 are also impor-
tant (by -10.4%), while in absolute value,
the index stand at historically low level of
the last four years.
IOBE “The Greek Economy” vol. 02/11
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Figure 3.4
Turnover Index in Wholesale Trade -Sector 46- (2005=100)
90
100
110
120
130
140
150
160
Index 102115 112117 117 130118131125147 135136114125 125131120 122107119
A B C D A B C D A B C D A B C D A B C D
2006 2007 2008 2009 2010
Source: ELSTAT
Services
There is a double-digit fall in the activity of
most of the 14 branches in Services. Dur-
ing the first quarter of 2011, in 13 (versus
11 last year) branches, the losses acceler-
ate, resulting in historically low levels of
the turnover indices.
In greater detail, the contraction in Com-
puter Programming, Consultancy and
Related Activities (branch 62) is the
more intense one, since the relevant turn-
over index drops anew by 20.6% (-6.0%
last year). Following is the index in Activi-
ties of head offices; management
consultancy activities (branch 70) with
significant decrease by -20.6% in relation
to Q1 of 2010. Architectural and engi-
neering activities and related techni-
cal consultancy (branch 71) is signifi-
cantly drifted downwards from the overall
recession that is obvious in the construc-
tion sector, and as a result, already from
Q1 of 2011 their turnover moves down-
wards by 20.2% (having already shrunk
by 21.4% in Q1 of 2010). The turnover
decrease evolves at double rates related
to last year for publishing activities
(branch 58), the rate of which surpasses -
15.6% (-8.9% recession last year). Similar
development is observed in Advertising
and market research (branch 73),
where the decrease stands at 15.1%, ver-
sus -7.6% in the previous year. At the
same time, turnover significantly shrinks
for Telecommunications (branch 61),
where the decrease now exceeds 13.4%
(-6.5% in 2010), as well as for Manage-
ment consultancy activities (branch
70.2) by -13.0% (versus -5.0% in 2010).
A decrease is registered in the turnover of
Legal and accounting activities
(branch 69) BY 7.9% (+7.3% last year).
Tourism, at least for the first quarter of
the year –since summer season seems to
improve, according to other preliminary
indices-, is also affected in turnover terms
in Accommodation and Food & Bever-
ages Activities (branches 55 & 56). The
turnover stands at historically low levels of
the past six year, registering anew a
IOBE “The Greek Economy” vol. 02/11
61
20.6% fall, in comparison to the respec-
tive period last year (-23.1% in compari-
son to the previous quarter).
Turnover stands at extremely low levels
for Trade, Maintenance and Repair of Mo-
tor Vehicles. Especially as far as Cars-
Vehicles are concerned, the confidence
indicator retreats in the last quarter
(March-May), after the increase that the
positive expectations for the withdrawal
programme and stood in May at 54.1
points, higher than 2010 level (47.3), but
much lower than the previous years,
amidst of the programme. So, despite the
discount in the registration tax, in combi-
nation with companies’ deals, the grave
macroeconomic environment and the re-
duction in the available income, through
tax increase and nominal payments reduc-
tion, do not seem to be inhibited.
Figure 3.5
Turnover Index in Informatics Services -Sector 62- (2005 = 100)
0
30
60
90
120
150
180
210
Index 94 108 85 159 103 119 89 164 107 139 96 177 90 111 114 137 85 78 55 82 62
A B C D A B C D A B C D A B C D A B C D Α
2006 2007 2008 2009 2010 2011
Source: ELSTAT
Figure 3.6 Turnover Index in Telecommunications -Sector 61- (2005 = 100)
65
70
75
80
85
90
95
100
105
110
115
120
Index 105 109 107 117 101 109 113 108 105 109 111 103 98 96 98 97 91 88 90 75 79
A B C D A B C D A B C D A B C D A B C D Α
2006 2007 2008 2009 2010 2011
Source: ELSTAT
IOBE “The Greek Economy” vol. 02/11
62
Expectations for the development of sales
have tanked, since over half of the enter-
prises estimate that their sales will shrink
in the forthcoming time period, while the
same percentage stands for the compa-
nies declaring that orders to suppliers will
be reduced. This fall is also depicted in the
official data, where passenger cars regis-
trations stand, in the first five months of
the year, at a 45% lower level than 2010.
On demand side, the intention to buy a
car, according to the latest available
measurement (April 2011), slightly de-
creased and returned to the levels of Oc-
tober 2010, since the percentage of those
declaring that is very likely for them to
purchase a new car in the next 12 months
decreased to 4.1% from 6.3% in the pre-
vious measurement.
On the contrary, during the first quarter of
2011, the only index that moves upwards
concerns the turnover of Other profes-
sional, scientific and technical activi-
ties (branch 74) by 12%, compared how-
ever to a very low base period (reduction
by -41.9% in Q1 of 2010).
Nonetheless, as captured early enough in
the Business Surveys carried out by
IOBE for the various Services branches,
expectations continue to worsen during
the first five months of 2011. The fact that
the losses in the respective indicator are
milder has to do with the very low levels
that, anyhow, indicators stand. The overall
indicator for Services stands, on average,
at 60 points, which about 40% lower than
the long-term performance (1998-2006).
Summarising, except for Industry, down-
ward trends escalate in the main sectors
of the Greek economy, in the first quarter
of the current year. The stability excibited
by industry is mainly due to the remaining
strong demand for its products from
abroad, as shown from the data on or-
ders. However, given the greater weight
of the domestic market for the domestic
industrial production, the grave socio-
economic environment in Greece in the
previous couple of months, during the
preparation of the Medium-Term Fiscal
Strategy Framework, and the simultane-
ous rising uncertainty regarding the ac-
complishment of the fiscal adjustment and
the debt repayment, will probably have a
negative impact on production, at least for
the second quarter of the current year.
The descending purchasing power consists
the main reason of the significant de-
crease of turnover in Retail Trade
branches. Further contraction of the avail-
able income deriving from additional fiscal
measures, the readjustment of payments
based on the new labour relations and the
continuing increase of unemployment will
enforce the already existing decreasing
dynamic. Especially for the automotive
market, the increase of the income level
for each displacement class in the taxation
criteria and the imposing of a special con-
tribution on car owners over 1929 cc have
a reverse effect on the motives that came
out from the cash-for-clunkers process.
IOBE “The Greek Economy” vol. 02/11
63
Figure 3.7 Turnover Index in Legal, Accounting and Consulting Services -Sectors 69 & 70.2- (2005 = 100)
0
40
80
120
160
200
240
Index 80 84 86 178 90 104 98 186 99 122 106 202 89 135 84 156 95 112 91 142 85
A B C D A B C D A B C D A B C D A B C D Α
2006 2007 2008 2009 2010 2011
Figure 3.8 Turnover Index in Accommodation and Food Service Activities -Sectors 55 & 56-(2005 = 100)
0
20
40
60
80
100
120
140
160
180
200
Index 64 106 160 85 71 112 166 94 74 115 175 92 59 109 171 75 61 98 158 63 48
A B C D A B C D A B C D A B C D A B C D Α
2006 2007 2008 2009 2010 2011
Source: ELSTAT
IOBE “The Greek Economy” vol. 02/11
64
Figure 3.9
Turnover Index in Trade, Maintenance and Repair of Motor Vehicles and Motorcycles, Trade of Car Parts and Components -Sector 45- (2005=100)
25
35
45
55
65
75
85
95
105
115
125
Index 102 112 92 98 111 113 104 108 108 109 101 83 75 96 91 76 70 62 42 42 40
A B C D A B C D A B C D A B C D A B C D A
2006 2007 2008 2009 2010 2011
Source: ELSTAT
Table 3.6
Sectoral Indices Of Business Expectations in Services (1998-2006=100)
2009 2010 %
’10/’09 Jan.΄10-May ’10
Jan.’11- May’11
% (’11/’10)
Hotels - Restaurants 79,4 73,9 -6,9% 70,2 67,1 -4,4%
Activities of travel agencies and tour operator, tourist assistance activities
71,1 60,4 -15,0% 70,5 68,6 -2,7%
Other Services to Businesses 61,1 60,8 -0,5% 65,1 56,4 -13,4%
Intermediate Financial Organiza-tions
72,4 47 -35,1% 72,9 70,2 -3,7%
Informatics 65,0 74,1 14,0% 45,2 47,0 4,0%
Total Services 70,1 63,6 -9,3% 62,6 60,3 -3,7%
Source: ΙΟΒΕ
3.3 Export Performance of the
Greek Economy
Developments during Q1 of 2011
The decrease of domestic demand pushes
Greek enterprises to the promotion of their
products to foreign markets, taking advan-
tage of the favourable conjunction in which
the global economy has entered. As a re-
sult, the value of Greek exports during Q1
of 2011 stood at about €4.6 billion –the
highest level of the decade- increasing by
31.5% versus 2.8% in the respective quar-
ter of 2010. Meanwhile, imports continued
to contract by 16.7%, versus the 6.6% in-
crease of last year. As a result, the decreas-
ing trends of the trade deficit strengthened
(34.4% reduction), while the imports-
exports coverage ratio rose up to 42.4%,
increased by 15.5 percentage points, com-
pared to the respective period of 2010.
The increase of the total value export in the
beginning of 2011 by €1.09 billion is mostly
due to the increase in fuel exports (2/3 of
the increase) that almost quadrupled in
comparison to Q1 of 2010, with their total
value to be at €947.1 million. This develop-
IOBE “The Greek Economy” vol. 02/11
65
ment shaped the rate of fuels in total ex-
ports to 20.7% from 7.2% last year. Conse-
quently, the increase oil prices have deci-
sively impacted the relevant elements.
However, the value of exports, even if fuel
is exempted, in the first three months of
2011 increased by 12.3% in comparison to
last year.
The exports of industrial products increased
by 11.9% (or €241.2 million), significantly
recovering from the weak increase (1.3%)
of last year. Nonetheless, the important in-
crease on the fuel side contributed so as
their share in the total export value to re-
treat by 8.2 percentage points (49.7%). The
course of exports in industrial products is a
result of the increase in ‘industrial goods
classified by raw material’ (+35.5% or
€250.7 million). Also important is the in-
crease in ‘vehicles and transport equipment’
and (23.1% or €83.6million), which coun-
terweights at a great extent the decrease in
‘chemical and related products’ (-11.1%)-
that stopped the increased trend of the pre-
vious years- and in ‘various industrial goods’
slightly increased (-7.5%), with the decline
in the branches to stand at €93.1 million.
The exports of agricultural products in-
creased by 9%, even though their share in
the total value of Greek exports decreased
by almost 5 percentage points in compari-
son to last year (20.8%). The value of ex-
ports of ‘Food and live animals’, which rep-
resented the largest share of exports in this
product category, increased by 10.8% (or
€73 million), overcompensating for the re-
duction of exports in ‘beverages and to-
bacco’, where the value of exports dropped
by €21.5 million, compared to the corre-
sponding period of 2010 (-17.7%). Also im-
portant is the increase in ‘animal and vege-
table oils and fats’, after last year’s contrac-
tion, with their value to shape at €97.8 mil-
lion. At the remaining categories, significant
increase is observed in ‘products and trans-
actions not classified elsewhere’, whose
value doubled in comparison to last year.
Regarding destination, the exports of Greek
products to the remaining European Union
countries (the main market for Greek prod-
ucts) increased by €444.6 million (+19.6%)
in Q1 of 2010. This is mostly due to the in-
crease from countries in Euroarea-17 and
especially towards Italy (37.7% of €143.7
million) and Cyprus (19.3% or €51.3 mil-
lion). Also significant was the increase to-
wards Finland, since exports over-doubled
in relation to last year (total value of €51.1
million), but Spain too, where exports in-
creased by €20.3 million (+23.5%). More-
over, 4/5 of the increase in the exports
value towards the Eurozone stems from
these countries. On the contrary, regarding
Germany, the largest commercial partner of
the country, a reduction of 6.9% is regis-
tered in the beginning of the year, in rela-
tion to last year, with the exports value to
stand at €402.9 million.
In the non-Eurozone countries, an increase
of 23.2% is registered (or €158.1 million),
with the greater increase to concern United
Kingdom (34% and total value of €223.4
million). An also significant commercial
partner for Greece is Turkey, since in Q1 of
2011 the latter absorbed almost 6% of
Greek exports, having at the same time sig-
nificant increase compared to last year
(59.1% of €103.7 million). Lastly, the case
of Singapore should be noted, where the
exports value came to €112.2 million versus
just €7.3 million last year.
IOBE “The Greek Economy” vol. 02/11
66
Table 3.7
Exports per 1-digit product classification (in million €)
January-March
Value (mil. €) P.C. (%) Structure (%)
2011* 2010* ’11/’10 ’10/’09 2011 2010 2009
Agricultural Products 948,6 870,4 9,0% 1,3% 20,8% 25,1% 25,4%
Food and live animals 751,3 678,3 10,8% 6,2% 16,5% 19,5% 18,9%
Beverages & Tobacco 99,5 121,0 -17,7% -11,4% 2,2% 3,5% 4,0%
Animal, Vegetable oils
and fats 97,8 71,1 37,5% -15,0% 2,1% 2,0% 2,5%
Raw Materials 214,6 231,8 -7,4% 46,2% 4,7% 6,7% 4,7%
Crude materials inedible,
except fuels 214,6 231,8 -7,4% 46,2% 4,7% 6,7% 4,7%
Fuels 947,1 250,5 278,0% -14,0% 20,7% 7,2% 8,6%
Minerals, fuels, lubricants, etc. 947,1 250,5 278,0% -14,0% 20,7% 7,2% 8,6%
Industrial products 2.267,9 2.026,7 11,9% 1,3% 49,7% 58,3% 59,2%
Chemicals and related products 518,3 583,2 -11,1% 19,5% 11,4% 16,8% 14,4%
Manufactured goods classified chiefly by raw material 956,9 706,2 35,5% -3,2% 21,0% 20,3% 21,6%
Machinery and transport equipment 445,0 361,4 23,1% -9,8% 9,7% 10,4% 11,9%
Miscellaneous manufactured articles 347,7 376,0 -7,5% -1,8% 7,6% 10,8% 11,3%
Other 188,8 94,0 100,7% 35,7% 4,1% 2,7% 2,1%
Commodities and transactions not
classified by category 188,8 94,0 100,7% 35,7% 4,1% 2,7% 2,1%
Total Exports 4.566,9 3.473,4 31,5% 2,8% 100,0% 100,0% 100,0% * Provisional Data Sources: PEA-ERC-ELSTAT
In the Balkan region, exports increase by
23.1% versus a 4.1% decrease last year.
Their share, however, decreased by 1 per-
centage point. In Bulgaria – the country of
the region that imports the most of Greek
products- the exports increased by 27.3%,
as in Romania (€146.5 million). The great-
est increase, however, concerns FYROM
941.9%), with the total exports value
(€93.1 million) to have slightly surpassed
that towards Albania (6.9% increase). Also
significant is the 36% increase towards Ser-
bia-Montenegro-Kosovo, at €82.1 million,
which strengthen at the same time their
share among this region’s countries, but
towards Bosnia-Herzegovina as well
(+39.5%). On the contrary, exports to
Croatia decreased, with the value of exports
to be halved compared to the respective
value last year.
IOBE “The Greek Economy” vol. 02/11
67
Table 3.8
Exports per destination, January-March 2011 and 2010
Value (mil. €) Structure
2011* 2010*
P.C. (%)
‘11/’10 2011 2010
ΟECD (29 countries) 2.521,0 2.069,7 21,8% 55,2% 59,6%
ΕU (27) 2.715,8 2.271,1 19,6% 59,5% 65,4%
Euro Area -17 1.876,4 1.589,9 18,0% 41,1% 45,8%
North America 199,2 157,4 26,6% 4,4% 4,5%
Other Developed Countries 24,6 34,1 -27,9% 0,5% 1,0%
Rest OECD (excl. S. Korea) 312,4 222,4 40,5% 6,8% 6,4%
Balkans 711,0 577,7 23,1% 15,6% 16,6% Commonwealth of Independent States (CIS)
115,4 78,8 46,4% 2,5% 2,3%
Middle East and N. Africa 378,5 227,6 66,3% 8,3% 6,6%
African Countries (excl. S. Africa) 17,4 24,5 -29,0% 0,4% 0,7%
S. E. Asia 186,8 47,9 290,0% 4,1% 1,4%
Latin America 22,2 11,2 98,2% 0,5% 0,3%
Rest Countries 297,8 146,1 103,8% 6,5% 4,2%
Total 4.566,9 3.473,4 31,5% 100,0% 100,0% * Provisional data Source: ERC-ELSTAT
Figure 3.10 Countries with the biggest share on Greek exports (mil. €, a’ quart. 2010-2011)
€ 146 .5
€ 173 .8
€ 174 .3
€ 223 .4
€ 267 .6
€ 279 .1
€ 317 .9
€ 402 .9
€ 524 .3
€ 115 .3
€ 158 .3
€ 127 .3
€ 166 .7
€ 210 .2
€ 175 .5
€ 266 .5
€ 433 .0
€ 380 .7
0 100 200 300 400 500
Romania
France
USA
UK
Boulgaria
Turkey
Cyprus
Germany
Italy
1st quarter 2010
1st quarter 2011
Source: PEA Data processing: ΙΟΒΕ
In North America, the increase in exports by
26.5% (€41.8 million) is the result of their
increase in the USA by 37% (or €47.1 mil-
lion). Now, the USAS are the 7th largest
trading partner of Greece. A small increase
was registered for Mexico (€2.1 million),
contrary to Canada, where the value of ex-
ports decreased by 35.6% (or €7.4 million).
The value of exports to the countries of
North Africa and the Middle East increased
significantly by 66.3% (or €150.8 million), in
relation to Q1 of 2010, despite the instabil-
ity observed in those countries.
Exports to the Commonwealth of Independ-
ent States increased by €36.6 million
IOBE “The Greek Economy” vol. 02/11
68
(+46.5%), as a result of increase of exports
to Russia (+31.8%), with their total value
reaching €72 million. Also significant is the
increase towards Moldavia, with the exports
value to have tripled since last year.
Lastly, the value of exports to China de-
creased by 7.2% (€30 million total exports
value), while even more intense was the
decrease towards India (-36.2%), a fact
that slows down the already thin share of
Greek exports toward these countries.
Overall, the extrovert sectors of the Greek
economy have improved their relative per-
formance and they seem to replenish part
of their losses from the domestic market,
while inhibiting the downward trend of do-
mestic products. It is estimated that, on a
yearly basis, in 2011 Greek exports can
achieve a 9% increase or even a greater
one.
3.4 Employment - Unemployment
The developments in the labour market due
to the recession are extremely adverse, and
as a result, unemployment is at its highest
level of the previous decades. In Q1 of
2011, the unemployment rate reached
15.9%, increased by 4.2 percentage points
in relation to Q1 of 2010 and by 1.7 per-
centage points as to the previous quarter.
This development resulted to the increase
in the total number of unemployed at
792.6 thousands, augmented by 205.8
thousands (or 35.1%) in relation to last
year and by 80.5 thousands (11.3%) as to
Q4 of 2010. This level is the second highest
in the Eurozone-17 (average 9.9%), follow-
ing that of Spain (20.5%).
The number of employed in Q1 of 2011
fell at the lowest level of the last eight years
(4,194.4 thousands), having contracted by
5.2% compared to last year (or231.2 thou-
sands) and by 2.4% as to the fourth quarter
of 2010. At the same time, this decrease is
the largest among the Eurozone-17 coun-
tries, where employment marginally in-
creased by 0.1%. The greater decrease of
employment compared to the increase of
the unemployed in Greece leads to the
slight retreat of the total workforce of the
country in comparison to last year (-0.5%)
which corresponds to 59.6% of the popula-
tion of working age.
According to employment flows, during Q1
of 2011 84.3 thousands that were unem-
ployed a year ago found a job, while 47.7
thousand people moved from economically
inactive population to employment posi-
tions. On the contrary, 195.2 thousand peo-
ple that were employed a year ago are un-
employed and 101.6 thousands that were
employed moved to the economically inac-
tive population, a size that mostly reflects
the people retired. Moreover, 102.3 thou-
sand people that last year belonged to the
economically inactive population, entered
the labour market, but remain unemployed.
Regarding the characteristics of the labour
force, unemployment among women
increased in Q1 of 2011 by 4 percentage
points in comparison to last year (19.5%), a
similar trend is registered for the unem-
ployment among men.
In young unemployed, who are people
that enter the labour market for the first
time but cannot find a job, unemployment
rate in Q1 of 2011 slightly decreased com-
pared to Q1 of 2010 (22.8% versus 23.6%
last year), although in absolute number,
IOBE “The Greek Economy” vol. 02/11
69
young unemployed have increased by 42.5
thousand. However, the negative effects of
the increased, but also continuous, unem-
ployment are reflected in the long-term
unemployed, who constitute almost half of
the total people without a job, with their
number increased by 108 thousands
(41.3%) within a year.
Foreign nationals were facing greater ob-
stacles in accessing the labour market, as
the unemployment rate among this group
remained at a higher level compared with
the Greek nationals (19.5% against 15.5%).
Regarding the level of education, unem-
ployment affects more intensely individu-
als with low educational level. The
largest unemployment rate (23.4%) con-
cerns those individuals who have not at-
tended school at all or have completed
some primary education (18.9%). Similar
are the rates for tertiary technical education
graduates (17.9%), intermediate school
graduates (18.2%) and high school gradu-
ates (17.6%). Lower than the average are
the rates for people having completed pri-
mary education (14.8%), university gradu-
ates (10.6%) and for holders of doctorates
or post-graduate diplomas (9.8%), where
the smallest increase in unemployment rate
is registered, compared to Q1 of 2010.
Regarding unemployment at regional
level, in Attica, unemployment rose by 4
percentage points (14.7%), resulting to
273.6 thousand unemployed (1/3 of the un-
employed of the country), while employ-
ment was reduced by 5.2%. In Central Ma-
cedonia –the second in employment terms
region- unemployment rate rose to 17.5%
(146.2 thousands), while the number of
employed was reduced by 6.2%. The most
significant increase in the respective rate is
registered for Western Macedonia, as is the
case for many years now. In East Mace-
donia – Thrace, the unemployment rate
shaped to 18%, having as a result the in-
crease of the number of unemployed in the
wider Macedonia are to reach 220.8 thou-
sands (+37.7%). As observed at the begin-
ning of every year, high unemployment
rates are noted for the islands, especially
for South Aegean (24.3%) and the Ionian
Islands (20.3%). Close to the one for the
whole country is the unemployment rate for
Crete (15.7%), Epirus (15.4%) and Western
Greece (15.1%), while in Thessaly it stood
at about 14.3%. The smallest unemploy-
ment rate, about 12.5%, is met in North
Aegean and the Peloponnese.
As far as the economic sectors are con-
cerned, employment contracts in all three
larger sectors. In the primary sector, em-
ployment decreases for the fourth consecu-
tive quarter. The number of persons em-
ployed shaped at 519 thousands, a reduc-
tion of 7.7% compared to Q1 of 2010, when
in the Eurozone countries the decrease was
about -2.1% on average. However, contrac-
tion of the economic activity still negatively
affects the secondary sector, where the de-
creasing rate of employment was steepened
in the beginning of 2011. Therefore, the
number of employed decreased by 123.1
thousands (-13.8%) compared to last year
and by 48.5 thousands (-5.9%), compared
to Q4 of 2010.
This fall can be explained mostly by the de-
crease of employment in construction that is
six times larger of the respective decrease
in the Eurozone countries (-21.5%), result-
ing to the loss of 73.2 thousand employ-
ment positions in the sector within a year.
IOBE “The Greek Economy” vol. 02/11
70
In Manufacturing, the decrease in employ-
ment was about the same as last year (-
8.5% versus marginal increase by 0.3% in
EZ-17), resulting to the loss of 41.2 thou-
sand employment positions.
Last, in the tertiary sector, employment fell
by 2.2% (or 64.7 thousand job positions) as
to Q1 of 2010, which is the lower level of
the last years. This development is believed
to be due to the decrease in the sector of
Education by 22.4 thousand job positions-
the largest decrease in the sector for at
least 12 years- but to the Accommodation-
Food services by 15.7 thousand job posi-
tions (-5.5%). On the contrary, in Whole-
sale-Retail trade, where the largest em-
ployment in the Services sector is regis-
tered, the reduction was very small (-0.4%
or 3.5 thousand job positions). So, in the
first quarter of 2011, the share of the pri-
mary sector in total employment was
shaped at 12.4%, 18.4% in the secondary
sector and 69.2% in the tertiary sector.
The expansion of unemployment is there-
fore significant, since it reflects the conse-
quences from the activity decrease in sec-
tors that in the previous decade positively
contributed to the labour market. The long-
standing recession, in which the Greek
economy has entered and the hardships of
recovery incommode in the short term the
replenishment of a significant number of
employment positions, especially in the sec-
ondary sector. At the same time, the nega-
tive consequences of unemployment affect
the economic activity, and society too, since
unemployment intensely affects those age
groups that constitute the basic production
tissue of the country. 2/5 of the unem-
ployed in Q1 of 2011 are between 30 and
44 years of age, while youth unemployment
continues to stand at high levels.
The increased stay out of the labour market
involves risks, such as the gradual devalua-
tion of competences, marginalisation and
social exclusion. It also strikes at a greater
extent people of older age, since young
people are more adaptive. At the same
time, the significant income reduction that
non-participation in the production activity
causes works aggravating for the economy
as a whole, since the reduction of expenses
of every household has a consequence the
consecutive striking of the sectors of the
economic activity, especially those that are
supported by domestic demand. Subse-
quently, the State is losing the correspond-
ing levies and is burdened with the cost that
unemployed support implies, which at other
circumstances could be channelled to pro-
ductive investments.
In 2011, the unemployment rate is ex-
pected to shape around 16.5%, since
consumption demand will remain low, while
cuts in investment programmes constrict
the gradual recovery in Constructions. How-
ever, the effect of tourism could be positive,
since the primary indications show that arri-
vals and revenues will move upwards in
2011.
According to the Medium Term Pro-
gramme14, the number of people employed
in the public sector is expected to shrink by
about 20 thousand in 2011 (and by 26.2
thousand for every year of the 2012-2015
period, while new hiring will cover one job
placement for every five (or more probably)
retirements/quits. Hence, the permanent
14 Medium Term Fiscal Strategy Programme 2012-2015, Draft Law
IOBE “The Greek Economy” vol. 02/11
71
personnel of the general government at the
end of 2015 are expected, according to the
programme, to be around 619.2 thousand
employees. Simultaneously, programmes
(such as subsidies on the insurance contri-
bution, employment contribution, the con-
version of the unemployment levy to em-
ployment levy etc) are running or are ex-
pected to start in mid 2011, targeting at the
promotion of employment and the support
of the unemployed. The young unemployed
up to 25 years of age –for which the 2nd
highest unemployment percentage in EU-27
is registered- may benefit from the adoption
of special employment agreement pro-
grammes, aiming at acquiring work experi-
ence.
Figure 3.11 Labor force (% proportion as to population of 15 years old and over) and unemployed (% proportion as
to labor force)
42
44
46
48
50
52
54
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
%
6
7
8
9
10
11
12
13
14
15
16
17
%
% of labour force to total population_GR (l.f.s)
% of unemploy ed to labour force_GR (r.h.s)
% of unemploy ed to labour force_EA -17 (r.h.s.)
IOBE “The Greek Economy” vol. 02/11
72
Table 3.9 Population of 15 years old and over by employment status (in thousands)
Labor Force
Quarter/Year Grand Total Total
% of popu-lation Employed
% labor force
Unem-ployed % labor force
1998 8.680,4 4.525,8 52,1 4.017,9 88,8 507,9 11,2
1999 8.764,5 4.586,1 52,3 4.031,4 87,9 554,7 12,1
2000 8.839,8 4.611,9 52,2 4.088,5 88,6 523,5 11,4
2001 8.906,4 4.580,3 51,4 4.086,3 89,2 493,9 10,8
2002 8.964,3 4.656,0 51,9 4.175,8 89,7 480,2 10,3
2003 9.014,9 4.734,4 52,5 4.274,5 90,3 460,0 9,7
2004 9.063,5 4.818,8 53,2 4.313,2 89,5 505,7 10,5
2005 9.108,1 4.846,5 53,2 4.369,0 90,1 477,5 9,9
2006 9.157,4 4.886,4 53,4 4.452,3 91,1 434,5 8,9
2007 9.207,4 4.916,8 53,4 4.509,9 91,7 406,9 8,3
2008 9.234,1 4.937,3 53,5 4.559,4 92,4 377,9 7,6
a’ quart. 2009 9.252,7 4.948,1 53,5 4.485,8 90,7 462,3 9,3
b' quart. 2009 9.262,4 4.974,5 53,7 4.531,9 91,1 442,6 8,9
c’ quart. 2009 9.272,3 5.005,3 54,0 4540,1 90,7 465,1 9,3
d’ quart. 2009 9.282,4 4.991,2 53,8 4.476,8 89,7 514,4 10,3
2009 9.267,5 4.979,8 53,8 4.508,7 90,6 471,1 9,5
a’ quart. 2010 9.292,2 5.012,4 53,9 4.425,6 88,3 586,8 11,7
b' quart. 2010 9.301,5 5.021,0 54,0 4.427,0 88,2 594,0 11,8
c’ quart. 2010 9.311,5 5.024,9 54,0 4.402,9 87,6 621,9 12,4
d’ quart. 2010 9.320,6 5.011,1 53,8 4.299,0 85,8 712,1 14,2
2010 9.306,3 5.017,4 53,9 4.388,6 87,5 628,7 12,5
a’ quart. 2011 9.329,4 4.987,0 53,5 4.194,4 84,1 792,6 15,9 Source: ELSTAT, Labor Force Survey
Additional data on the short-term employ-
ment outlook are provided by the Business
Surveys conducted by IOBE.
In the March-May of 2011 quarter, em-
ployment expectations in comparison
to the first months of the year improve
in Industry and Services. On the con-
trary, the already negative predictions of
enterprises decrease marginally in Construc-
tions and intensely in Retail Trade.
Year-on-year, the expectations show mild
improvement in Industry, with the predic-
tions on Services to remain stable and to
deteriorate significantly for Construction and
Retail Trade. The latter sectors have, any-
way, shrunk their expectations to a great
extent during the past year, regarding em-
ployment, when traditionally were more re-
silient and could supply the labour market
with new job positions. In greater detail:
In Industry, the employment expecta-
tions recover in the March-May period
in relation to the first two months of
the year, but also in relation to the corre-
sponding period last year, remaining how-
ever at negative level. The balance of the
respective predictions is therefore shaped at
-13 points, from -21 in the first two months
and -19 in the same period last year. The
percentage of enterprises predicting in-
crease of employment in the next time pe-
riod is shaped in very low levels, at 4% on
average, while on the other hand, 17% ex-
pects further reduction of the employment
positions in the sector in the next period.
IOBE “The Greek Economy” vol. 02/11
73
Nonetheless, the vast majority (79%) of
enterprises still expects stability in the em-
ployment of the sector, as in the first two
months of the year.
The sector with the fiercest strike is
Construction, since the respective predic-
tions for the March-May quarter marginally
deteriorate in comparison to the first
months of the year, but more intensely than
the respective period of last year, reaching
now very grave levels. In the examined
quarter, predictions on employment shape
on average at 64 points (-44 last year), with
a mere 6% of enterprises to predict in-
crease in the employment places of the sec-
tor. On the other hand, seven out of ten
enterprises in the examined period expect
employment to shrink. The picture in this
quarter is much worse when Public Con-
struction is examined, where further dete-
rioration is registered in comparison to the
beginning of the year, in contradiction to
Private Construction, where the relative bal-
ance remains very low, but is slightly im-
proved compared to the first two months of
2011.
In Services, employment expectations
improve in the March-May quarter,
even though they remain negative
overall, with the respective balance to
shape on average at -19 points, from -25 in
the beginning of the year, performance that
stands at the same level as last year. 7% of
the enterprises, percentage slightly higher
than the one in the first two months of the
year, expects increase, while 26% predicts
decrease and the majority of the sector’s
enterprises (67%) to look forward to stabil-
ity, as for the creation of new job positions
in the next time period. Among the
branches in the sector, more favourable are
the employment expectations in Hotels –
Restaurants and unfavourable in Tourist
Agencies and Computing.
Steep decline in the employment pre-
dictions is registered in Retail Trade in
March, compared to February and re-
main in very negative levels from then
on, at -27 points on average in the March-
May quarter (from -5 in the first two months
of the year). In this negative development
the decrease of the index in May at -37
points (which is the historically minimum
point) contributed significantly. The average
performance of the quarter is lower that last
year’s (-11 points), but then the magnitude
of the recession in the sector was not obvi-
ous. 28% of the enterprises of the sector
expect shrinkage in the employment posi-
tions and a marginal 1% expects increase,
while seven out of ten enterprises expect
stability. Among the branches in the sector,
the more optimistic employment expecta-
tions were recorded in Food-Beverages-
Tobacco and the worse in Household Appli-
ances and Vehicles – Spare Parts.
IOBE “T
he Greek E
conomy” vol. 0
2/11
74
Fig
ure
3.1
2
Employm
ent E
xpecta
tions (%
diffe
rence betw
een positive
– negative
answ
ers)
Industry
-50
-40
-30
-20
-10 0
10
20
Aug-06Nov-06Feb-07May-07Aug-07Nov-07Feb-08May-08Aug-08Nov-08Feb-09May-09Aug-09Nov-09Feb-10May-10Aug-10Nov-10Feb-11May-11
Constru
ctio
ns
-80
-60
-40
-20 0
20
40
60
Aug-06Nov-06Feb-07May-07Aug-07Nov-07Feb-08May-08Aug-08Nov-08Feb-09May-09Aug-09Nov-09Feb-10May-10Aug-10Nov-10Feb-11May-11
Reta
il Tra
de
-50
-40
-30
-20
-10 0
10
20
30
40
50
60
Aug-06Nov-06Feb-07May-07Aug-07Nov-07Feb-08May-08Aug-08Nov-08Feb-09May-09Aug-09Nov-09Feb-10May-10Aug-10Nov-10Feb-11May-11
Serv
ices
-40
-30
-20
-10 0
10
20
30
40
Aug-06Nov-06Feb-07May-07Aug-07Nov-07Feb-08May-08Aug-08Nov-08Feb-09May-09Aug-09Nov-09Feb-10May-10Aug-10Nov-10Feb-11May-11
Source
: IOBE
IOBE “The Greek Economy” vol. 02/11
75
Figure 3.13 Headline Inflation and main components
(annual % change)
-2
-1
0
1
2
3
4
5
6
7Sep-0
7
Nov-0
7
Jan-0
8
Mar-08
May-0
8
Jul-08
Sep-0
8
Nov-0
8
Jan-0
9
Mar-09
May-0
9
Jul-09
Sep-0
9
Nov-0
9
Jan-1
0
Mar-10
May-1
0
Jul-10
Sep-1
0
Nov-1
0
Jan-1
1
Mar-11
May-1
1
%
Goods Serv ices C PI Source:ELSTAT Data processing:ΙΟΒΕ
3.5 Consumer Prices
Recent Developments
In the January-May 2011 period, inflation
according to the Consumer Price Index
(CPI) shaped at 4.3% versus 3.9% in the
respective 2010 period. However, since the
beginning of the year, the index de-
escalates, resulting to a retreat in May to
the lowest level of the latest 15 months
(3.3%), realising at the same time a 1.9
percentage points fall, compared to January
2011.
The inflationary pressures are more intense
on the goods side with the respective index
to have risen at a slightly faster pace than
last year (5.1% versus 4.5% last year). An
increase is also registered in raw fruits and
vegetables prices (5.5%), when in the re-
spective period of last year, a significant
decrease took place (-9.4%). On the con-
trary, in services, the increase in the respec-
tive index slowed down in comparison to
the first five months of 2010 (2.8% versus
3.6% last year).
The already high fuel prices due to the Spe-
cial Fuel Tax (SFT), sustain their upward
trend, being affected by the price of crude
oil in the international markets. In the first
five months of 2011, the average annual
increase of the Fuel Index, even though
smaller than last year, is significant (25.4%
versus 39.3%), while the same trend is ob-
vious for the Energy Index (22.2% versus
30% last year). It is indicative that, in the
first five months of 2011, there is an aver-
age increase in gasoline and oil prices of
about 23% and 31% respectively, com-
pared to last year, which affected negatively
the CPI (a range of 1.2 and 0.8 percentage
points on average for every month of 2011).
Figure 3.14 Contribution of the change of Fuel prices to In-
flation (annual % change)
-3
-2
-1
0
1
2
3
4
5
6
Sep-0
7
Nov-0
7
Jan-0
8
Mar-08
May-0
8
Jul-08
Sep-0
8
Nov-0
8
Jan-0
9
Mar-09
May-0
9
Jul-09
Sep-0
9
Nov-0
9
Jan-1
0
Mar-10
May-1
0
Jul-10
Sep-1
0
Nov-1
0
Jan-1
1
Mar-11
May-1
1
%
Fuels Other CPI
Source:ELSTAT Data processing:ΙΟΒE
Core inflation – which excludes fuel and raw
fruits and vegetables – increased slightly in
the first five months of the year, to 2.4%
from 2% last year. There is a large increase
in tobacco (cigarettes), while in services,
the branches with the largest increase of
IOBE “The Greek Economy” vol. 02/11
76
the index are insurance connected with
transport and telephone services. On the
contrary, the course of the price index in
Pharmaceuticals continues to fall by 17.3%
-following the relevant regulations of the
relevant Ministry- compared to the respec-
tive period of 2010. This development
brought about a positive impact of -0.2 per-
centage points in the price index.
Figure 3.15 Core and Headline Inflation (annual % change)
0
1
2
3
4
5
6
Sep-0
7
Nov-0
7
J an-0
8
Mar -08
May-0
8
Jul-08
Sep-0
8
Nov-0
8
J an-0
9
Mar -09
May-0
9
Jul-09
Sep- 0
9
Nov- 0
9
J an-1
0
Mar -10
May-1
0
Jul-10
Sep- 1
0
Nov- 1
0
J an-1
1
Mar-11
May-1
1
%
Core C PI
Source:ELSTAT Data processing:ΙΟΒE
The price index increased in all remaining
categories of goods and services, except
Clothing-Footwear (-1.0%) and Health
(-0.9%). The largest increase in the first
five months was recorded in Alcoholic Bev-
erages – Tobacco (14.7%). In Transport,
the price index increased although at a
milder pace compared to last year (10.0%).
Significant increase was also recorded in
Housing (9.4% against 6.4%), due to the
price increase of mostly heating oil, electric
energy, rents, house maintenance-repair
and water supply-drainage. In Hotels-Cafes-
Restaurants and Telecommunications,
prices increased at about the same rate that
was recorded in the previous year (2.5%
and 2.7% respectively), while in Education,
prices remained unchanged.
The inflation rate of the harmonised index
(HICP) was shaped in the first five months
of 2011 at 4.0% from 3.8% in the respec-
tive period of last year, 1.4 percentage
points higher than the Euro area average.
As a result, the Greek harmonised inflation
rate remained highest in the Euro area and
the seventh largest in the EU. The same
pattern was observed in the first two
months of the year, when HICP was shaped
at 1.5% from 0.9% last year, a develop-
ment that underlines the price increasing
trends of goods, such as food (where 1.9%
increase is registered for the January-May
2011 period, versus a 0.6% fall last year).
Figure 3.16 Harmonized Index of Consumer Prices – Greece & Euro Area (annual % change)
-1
0
1
2
3
4
5
6
Sep- 0
7
Nov-0
7
Jan- 0
8
Mar -08
May-0
8
J ul-08
Sep-0
8
Nov- 0
8
Jan-0
9
Mar-09
May-0
9
Jul-09
Sep-0
9
Nov-0
9
Jan-1
0
Mar-10
May- 1
0
Jul -10
Sep- 1
0
Nov-1
0
Jan- 1
1
Mar -11
May-1
1
%
HCPI (Greece) HC PI (Εuro A rea 17)
Source:ELSTAT Data processing:ΙΟΒE
The cost of production also contributed ad-
versely to inflation. In the first four months
of 2011, producer prices increased year-on-
year in the majority of industry branches.
Intermediary and Capital Goods (30.7%)
and Electrical Equipment (9.2%), Coke and
Refinery Products (7.7%) and Basic Metals
(5.3%) are the branches with the largest
IOBE “The Greek Economy” vol. 02/11
77
price increase. The opposite is true about
Machinery and Equipment (-15.3%) and
Coal-Lignite Products (-15.3%), while milder
is the decrease in Crude Oil and Gas (-2%).
Moreover, production cost continues to be
impacted adversely by the imported raw
materials prices, with the respective index
registering an increase slightly smaller than
last year’s (7.6%) during Q1 of 2011.
Medium-term Outlook
In 2011, inflation in Greece is expected to
stand around 3.3%, perhaps even higher,
after the increase in indirect taxes that the
Medium-Term Programme predicts. Respec-
tively, inflation in the Eurozone countries is
increasing since the beginning of the year.
This development is attributed mostly to the
increased level of prices of food, energy and
other goods and services, too that were
rolled over to consumers. In May 2011, the
average inflation rate in the Eurozone was
at 2.7% -slightly decreasing compared to
the previous month- while the same trend is
observed for core inflation, as well. Examin-
ing the Eurozone countries, only in Ireland
inflation is low (1.2%), while in Portugal it
reached 3.7% and in Germany, it rose to
almost double level compared to last year
(2.4%).
In order to refrain the uprising expectations
in the price of goods and services, the
European Central Bank increased in April its
basic interest rate to 1.25% from 1% that
was kept since mid 2008, while a new rise
of 0.25 percentage points is expected in
July.
Therefore, variations regarding inflation are
registered among the Monetary Union coun-
tries, a fact that evinces the different fac-
tors –economic development, impact of the
energy goods prices, policies adopted by
governments, salary levels etc- that influ-
ence the price level in each country.
In Greece, despite the significant reductions
of public and private sector employees’
wages and the important increase of unem-
ployment, the niveau of CPI continues to
move upwards. So, regarding goods, de-
crease of demand is not capable of coun-
terweighing the pressures on prices that
taxation and increase of imported raw ma-
terials bring about. This course proves that
the distortions in goods and services mar-
kets still hold, striking the competitiveness
of the Greek economy and the citizens’
prosperity as well- it is noted once more,
that the citizens have lost a significant por-
tion of their purchasing power. For example,
an important factor in shaping the price
level is, among others, the non-tradable
goods cost, such the cost of rents, espe-
cially for commercial enterprises. A reduc-
tion of this particular cost is believed to con-
tribute to the setback of prices in certain
categories of goods and services.
Important information on the course of
prices in the coming period is also provided
by the results of IOBE’s monthly business
surveys, which serve as leading indicators of
price developments on the supply side.
Expectations for price reduction domi-
nated in the March-May quarter in all
sectors, apart from Industry where,
nonetheless, the respective positive
balance de-escalates. The anticipated
reduction in prices is mostly due to the
weakening of demand, especially in Private
Constructions and Retail Trade. So, in the
previous months, deflationary expectations
IOBE “The Greek Economy” vol. 02/11
78
intensify compared to the first two months
of the year, except from Services, where
the respective balance slightly normalises.
Compared to the same period last year, ex-
pectations in Industry remain at the same
levels, while in the rest of the sectors price
de-escalation predictions have intensified,
with the most significant shift to concern
Private Constructions. In greater detail:
• In Industry, inflationary expecta-
tions are sustained in the Match-
May quarter, although the rele-
vant balance decreases relevant
to the first two months of the year
and is shaped at +4 points (from
+11). This performance is at the same
levels as the respective of 2010, while
in May the balance returned after six
months to marginally negative level.
15% of enterprises predicted in the
March-May period an increase in
prices, while 11% de-escalation. So,
the vast majority of enterprises (74%)
expect stability in the short-term.
� In Retail Trade, the deflationary
expectations of the sector’s en-
terprises are intensified in the lat-
est quarter. The expectations balance
is even more negative (at -26 points),
in correlation to the first two months (-
10 points) and to the respective period
of 2010 (-6 points). The share of en-
terprises expecting prices to fall has in-
creased to 32% on average in the
March-May period, while the share of
enterprises with inflationary expecta-
tions reached 8% (from 16%). Regard-
ing the branches in this sector, Fab-
rics–Clothing-Footwear, Vehicles- Vehi-
cle Parts and Department Stores held
the most intense deflationary expecta-
tions during this period. Food-Drinks-
Tobacco is an exception, since the
relevant balance remains positive, due
mostly to the smaller elasticity of de-
mand and to the harsh economic con-
ditions as the current, except from
April, when there was a steep decline
in expected prices that was, however,
corrected in May.
� In Services, there is a small
smoothing of the negative balance
in the March-May period, com-
pared to the first two months of
the year. The relevant index is there-
fore shaped at -17 points on average
(from -20), slightly lower than the re-
spective period of last year (-13
points). In the quarter under examina-
tion, 22% of enterprises of the sector
expects prices to fall (from 28%), while
the majority (74%) expects stability.
Regarding the branches of the sector,
the deflationary expectations are
dominant in all branches except from
the Intermediary Financial Organisa-
tions, where the relevant balance re-
mains positive since February.
IOBE “The Greek Economy” vol. 02/11
79
Figure 3.17
Price Expectations (% difference between positive – negative answers)
Industry Private Construction
-20
-10
0
10
20
30
40
Sep-0
7Nov-0
7Jan-0
8M
ar-
08
May-0
8Jul-08
Sep-0
8Nov-0
8Jan-0
9M
ar-
09
May-0
9Jul-09
Sep-0
9Nov-0
9Jan-1
0M
ar-
10
May-1
0Jul-10
Sep-1
0Nov-1
0Jan-1
1M
ar-
11
May-1
1
-70
-60
-50-40
-30
-20
-10
0
1020
30
40
Sep-0
7Nov-0
7Jan-0
8M
ar-
08
May-0
8Jul-08
Sep-0
8Nov-0
8Jan-0
9M
ar-
09
May-0
9Jul-09
Sep-0
9Nov-0
9Jan-1
0M
ar-
10
May-1
0Jul-10
Sep-1
0Nov-1
0Jan-1
1M
ar-
11
May-1
1
Retail Trade Services
-40
-30
-20
-10
0
10
20
30
40
Sep-0
7Nov-0
7Jan-0
8M
ar-
08
May-0
8Jul-08
Sep-0
8Nov-0
8Jan-0
9M
ar-
09
May-0
9Jul-09
Sep-0
9Nov-0
9Jan-1
0M
ar-
10
May-1
0Jul-10
Sep-1
0Nov-1
0Jan-1
1M
ar-
11
May-1
1
-30
-20
-10
0
10
20
30
Sep-0
7Nov-0
7Jan-0
8M
ar-
08
May-0
8Jul-08
Sep-0
8Nov-0
8Jan-0
9M
ar-
09
May-0
9Jul-09
Sep-0
9Nov-0
9Jan-1
0M
ar-
10
May-1
0Jul-10
Sep-1
0Nov-1
0Jan-1
1M
ar-
11
May-1
1
Source:IOBE
� Lastly, in Private Construction the
intensification of deflationary expectations is
stronger than in any other sector and comes
from the adverse image of the sector and
the significant decrease in the current and
predicted estimations for the course of busi-
ness of the enterprises. So, in the period
from March to May, the deflationary expec-
tations are more intense in comparison to
January-February period, while in compari-
son to the corresponding period of last year
the decrease in the average index is steep.
In particular, the balance of the index stood
at -48 in the examined quarter, from -44
points in the first two months and -7 points
in the same period last year. Half of the en-
terprises of the sector predict further reduc-
tion of prices and the rest, short-term stabil-
ity.
3.6 Balance of Payments
Current Account
Current account deficit contracted by
23.4% (almost €3 bn) in the first four
IOBE “The Greek Economy” vol. 02/11
80
months of 2011, mostly due to the im-
provement of the trade balance, but also to
the big increase of current transfer reve-
nues (from February). More specifically, the
current account balance was shaped at €9.6
bn during the January-April period, versus
€12.6 bn in 2010. Except from the shrink-
age of the trade deficit by €877million and
the increase of the current transfer surplus
by €2.1 bn, services balance was improved
at the same time (+€65.3 million) and of
the capital transactions balance by €146
million that led to the shrinking of the cur-
rent account balance, despite the fact that
the income account deficit expanded by €
146 million.
More specifically, the trade deficit fell by
8.2% (€877 million)15 in the first four
months of 2011, following the 3.2% in-
crease of 2010. The purely trade side of the
balance, that is the trade balance ex-
cluding oil and ships fell significantly by
26.9% (€1.6 bn), as exports (of the remain-
ing goods) increased remarkably by 16.6%
(€573.9 million), while imports fell by
11.3% (€1.1 billion), because of the steep
decline of income and the restriction of pur-
chases from abroad. The value of fuel ex-
ports and imports increased by 31.8% (€1
billion), although the increase of exported
fuel was in relevant terms larger than the
expansion of imports (38.6% against
33.6%), but not in absolute terms (€463
million versus €1.5 bn).
Services surplus increased by 4.0%
(€65.3 million) in the first four months of
the year, after the 2010 decline that was
caused by the decrease in tourism; a devel-
opment that seems to be due to the rela-
15 The amounts in brackets express year-on-year change, unless otherwise indicated.
tively lower fall of receipts (-4.8%) against
payments (-7.6%). More specifically, in
tourism there is increase of receipts in the
first four months of the year, by 5.4%
(€43.4 million) versus 4.7% increase (€32.4
million) of payments. However, receipts re-
main lower than the 2006-2010 average
(€921 million). In transports, (mainly mer-
chant shipping) receipts decrease signifi-
cantly by 9.8% (-€484 million), after the
large increase of 2010, while in payments
the same development is observed, with the
relevant fall to reach 12.3% (-€347 million),
which resulted in the reduction of net re-
ceipts by €136 million. The most important
change, however, came from the rest of
services, where the net inflows increased by
€191 million, because of the significant im-
provement by 11.7% of receipts, versus
4.7% of payments.
Income account deficit returned to the
2008-2009 level, since it augmented by
5.7% (€146 million) and shaped at € 2.7
bn.. Receipts (remuneration, wages, inter-
est, dividend and profits) declined by 14.1%
(€183.3 million), while outgoing payments
fell slightly by 1% (€37.2 million).
The surplus of current transfers almost
reached the 2009 level, after the deficit of
2010, since it stood at €1.2 bn, a develop-
ment that is due to the increase of receipts
by €1.9 bn and the decrease of payments
by €161 million. The receipts of General
Government increased remarkably to €2.7
bn, while on the contrary, workers' remit-
tances fell €143 million.
Capital Account
The surplus of capital transfers almost
doubled in 2011 at €305 million, remaining,
IOBE “The Greek Economy” vol. 02/11
81
however, lower than the 2004-2009 average
by €1 bn. Receipts16, mostly grants within
the Common Agricultural Policy, increased
by 48.5% (€123.7 million), a flow that usu-
ally takes place in the first two months of
the year, while outflows declined by 23.3%
(€22.4 million).
16 The capital transfer receipts refer to incoming pay-ments from structural and cohesion funds.
IOBE “The Greek Economy” vol. 02/11
82
Figure 3.18
Imports-Exports 2001-2011 (January-April)
-7,201 -7,539 -7,544
-12,650
-10,750-9,872-10,377
-14,731
-11,921
-9,074
-8,058
Exports of Goods
Imports of Goods
-22,000
-20,000
-18,000
-16,000
-14,000
-12,000
-10,000
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Years
mil. €
Trade Balance Exports of Goods Imports of Goods
Source: Bank of Greece, Data processing: ΙΟΒΕ
Figure 3.19
Exporting goods (excl. fuels) 2001-2011
26.3%
52.4%
16.4%
9.3%
36.3%
57.7%
19.5%
5.3%
-22.1% -23.4%
-2,442
-3,722-4,331 -4,735
-6,453
-10,178
-12,161-12,810
-9,978
-12,602
-9,658
-16,000
-14,000
-12,000
-10,000
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Years
mil. €
-70%
-50%
-30%
-10%
10%
30%
50%
70%
Percenta
ge Change %
P.C. % Current Account Balance
Source: Bank of Greece, Data processing: ΙΟΒΕ
IOBE “The Greek Economy” vol. 02/11
83
Lastly, Current and Capital Account
deficit, which to some extent reflects the
economy’s external borrowing require-
ments, stood at €9.3 billion (from €12.4
billion) in the first four months of 2011,
reduced by 23.7%, however standing
higher than in 2009.
Financial Account
Financial account surplus returns to the
2009 level in the first four months of the
year, since a 23.7% reduction takes place
and the balance is shaped at €9.5 bn, from
€12.5 bn in 2010.
At the level of specific accounts, direct
investment experienced net outflow of
€342 million, against net inflow of €635
million in 2010, since investments of non
residents in Greece almost reached zero,
decreasing to €22 million in 2011 against
€879 million in 2010. At the same time,
residents’ investments abroad increased by
48.7%, at €364 million.
Portfolio investment experienced re-
markable deterioration, remaining at nega-
tive levels as in 2010, after a decade of net
inflow, a development that was, however
expected, due to the change in the portfo-
lio composition mostly of Greek bonds, as
due to the country’s entering the support
mechanism, debt refinancing was realised
through capital from IMF-EU-ECB and not
from private investors. More specifically,
portfolio investments show net outflow of
€5.4 bn, versus €2.8 bn in 2010. Claims
reduced more than half, at €2.5 bn, versus
€5.3bn in 2010, as placements of domestic
institutional investors in bonds and foreign
treasury bills. Liabilities were limited at
€7.9 bn, shrunk by €238.5 million, reflect-
ing the reduction of placements of non
residents in bonds and Greek treasury bills.
In the ‘other’ investment, in the first
four months of the year, there was a small
increase of net inflows, by 4%, at €15.3
bn, against €14.7 bn in 2010. General gov-
ernment borrowing reached €21.1bn in
2011, due to the support mechanism,
which did not exist in 2010. The rest of the
elements, there is now a net inflow of €4bn
in claims, due to the decrease in deposits
and foreign repo holdings but also increase
in non-residents’ deposit by resident credit
institutions and institutional investors.
Meanwhile, placements of non residents to
deposits and Greek repos also declined.
Lastly, the country’s reserve assets stood
in the first four months of the year at €4.6
billion from €4 billion in 2010.
Assessment
The trade balance (without ships and fuel)
improved in April by 38%. Key cause for
this development was the increase of ex-
ports of other goods by 18%, as well as
the reduction of imports of the same ex-
tent. This development takes place in all
first four months of 2011, despite the fact
that the imports’ reduction was smaller in
the beginning of the year. However, the
positive shift of trends in exports in the
previous years is estimated that is not
permanent yet. Undoubtedly, the structural
problems of the Greek economy had led to
exports’ dead-end, since the country faced
intense competition from low labour cost
countries, but also from countries that pro-
IOBE “The Greek Economy” vol. 02/11
84
duced quality products. As a result, Greece
had been caught up in a “stuck in the mid-
dle” situation.
The improvement of exports and the
shrinking of imports are mainly due to the
deep recession of the Greek economy and
the drastic reduction of the available in-
come. So, imports are continuously re-
duced during the previous year, as had
been analysed in the previous bulletin17. It
is reminded that imports of consumer
goods had accounted for ¼ of total im-
ports in the previous years; as a result, the
reduction of the available income inhibited
many of the purchases from abroad.
17 Quarterly Bulletin for the Greek Economy, No. 63, March 2011
At the same time, the reduction of domes-
tic consumption obliged many enterprises
to seek solutions in foreign markets that
have relatively recovered from the financial
crisis. This choice, nonetheless, is not easy
for those enterprises that have not in-
vested in foreign markets. Those enter-
prises that did have an international orien-
tation before the crisis intensified their ef-
forts with positive results that are depicted
in the gradual increase of exports. Indeed,
as shown in Graph 3.20, exports expand,
while it is expected that they cannot fully
make up for the total decreasing domestic
demand, due mostly to the adjustment
time in the international circumstances that
is demanded for the exporting strategy of
enterprises, but also to the high competi-
tion, which is prevalent in an international
level and does not allow for high pricing.
IOBE “The Greek Economy” vol. 02/11
85
Figure 3.20
Structure of imports-exports of capital and consumer goods, 2000-2010
-30%
-20%
-10%
0%
10%
20%
30%
40%
J FΜAM J J A S OND J FΜAM J J A S OND J FΜAM J J A S OND J FΜAM J J A S OND J FΜAM J J A S OND J FΜAM J J A S OND J FMAM J J A S OND J FΜΑ
2004 2005 2006 2007 2008 2009 2010 2011
-1,100
-900
-700
-500
-300
-100
100
300
500
700
900
1,100
1,300
1,500
Exports of Goods (excl. ships-fuels) % change
mil. €
Source: Eurostat, Data processing: ΙΟΒΕ
Figure 3.21
Imports-Exports (excl. fuels) 2001-2011 (January- April)
-6,057 -6,381 -5,857
-9,831
-7,426
-5,491
-7,818
-10,708
-8,698-7,138
-6,668
Exports of Goods (excl.
fuels)
Imports of Goods (excl.
fuels)
-18,000
-16,000
-14,000
-12,000
-10,000
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Years
mil. €
Trade Balance (excluding fuels) Exports of Goods (excluding fuels) Imports of Goods (excluding fuels)
Source: Bank of Greece, Data processing: ΙΟΒΕ
IOBE “The Greek Economy” vol. 02/11
86
Table 3.10 Provisional Balance of External Payments (January-April) in mil.€
January-April April
2009 2010 2011 2009 2010 2011
I CURRENT ACCOUNT (I.A+I.B+I.C+I.D) -9.978,3 -12.601,7 -9.658,0 -2.883,6 -2.898,1 -2.309,3
Ι.A GOODS (I.A.1-I.A.2) -10.376,6 -10.749,5 -9.871,6 -2.666,4 -2.527,9 -2.262,1
Oil balance -2.558,9 -3.324,3 -4.380,8 -625,8 -627,3 -1.049,3
Trade Balance excluding oil -7.817,7 -7.425,2 -5.490,8 -2.040,7 -1.900,6 -1.212,8
Ship’s Balance -1.241,1 -1.223,6 -958,9 -359,8 -294,6 -225,8
Trade Balance excluding oil and ships -6.576,6 -6.201,6 -4.531,9 -1.680,9 -1.606,0 -987,0
I.A.1 Exports 4.859,9 4.865,0 5.936,1 1.200,1 1.298,8 1.606,8
Oil 824,7 1.199,6 1.662,9 227,7 375,3 528,2
Ships 346,7 211,5 245,4 77,8 62,3 62,6
Other goods 3.688,5 3.453,9 4.027,8 894,6 861,2 1.016,0
I.A.2 Imports 15.236,5 15.614,5 15.807,7 3.866,5 3.826,7 3.869,0
Oil 3.383,6 4.523,9 6.043,7 853,5 1.002,6 1.577,5
Ships 1.587,8 1.435,1 1.204,3 437,6 356,9 288,4
Other goods 10.265,1 9.655,5 8.559,7 2.575,4 2.467,2 2.003,1
Ι.Β SERVICES (I.B.1-I.B.2) 1.757,4 1.643,2 1.708,5 539,5 483,2 596,5
I.B.1 Receipts 6.366,1 6.744,6 6.420,0 1.768,2 1.829,6 1.752,6
Travel 873,9 804,3 847,7 387,6 327,8 348,9
Transportation 4.550,3 4.945,3 4.461,0 1.144,6 1.269,9 1.120,1
Other services 941,9 995,0 1.111,3 236,0 231,9 283,6
I.B.2 Payments 4.608,7 5.101,4 4.711,5 1.228,7 1.346,4 1.156,2
Travel 808,1 693,6 726,0 221,6 180,4 192,1
Transportation 2.244,8 2.824,9 2.477,5 586,5 744,3 616,6
Other services 1.555,8 1.582,9 1.508,0 420,6 421,8 347,5
Ι.C INCOME (I.C.1-I.C.2) -2.738,5 -2.575,8 -2.721,8 -755,3 -671,0 -635,2
I.C.1 Receipts 1.618,3 1.299,2 1.115,9 373,3 296,0 269,1
Compensation of employees 87,6 67,5 60,7 23,9 15,4 15,7
Investment income 1.530,6 1.231,6 1.055,3 349,4 280,6 253,5
I.C.2 Payments 4.356,7 3.874,9 3.837,7 1.128,6 966,9 904,3
Compensation of employees 132,7 126,0 140,0 31,5 31,2 37,6
Investment income 4.224,1 3.748,9 3.697,7 1.097,1 935,7 866,7
Ι.D CURRENT TRANSFERS (I.D.1-I.D.2) 1.379,3 -919,6 1.226,9 -1,4 -182,4 -8,5
I.D.1 Receipts 2.926,9 759,7 2.744,5 327,4 161,2 235,8
General Government (mainly transfers from EU) 2.272,8 232,2 2.360,2 166,8 53,4 137,4
Other sectors 654,1 527,5 384,3 160,6 107,8 98,5
I.D.2 Payments 1.547,5 1.679,3 1.517,6 328,8 343,6 244,3
General Government (mainly transfers to EU) 1.117,6 1.165,5 1.032,0 208,3 201,0 122,8
Other sectors 429,9 513,8 485,6 120,5 142,7 121,5
II CAPITAL TRANSFERS (II.1-II.2) 814,3 159,1 305,2 334,9 10,7 -6,9
ΙΙ.1 Receipts 909,6 255,3 379,0 356,5 28,7 8,3
General Government (mainly transfers from EU) 834,2 205,3 352,5 331,8 12,4 0,7
Other sectors 75,4 50,0 26,5 24,7 16,4 7,6
ΙΙ.2 Payments 95,3 96,2 73,8 21,6 18,0 15,2
General Government (mainly transfers to EU) 3,3 8,0 3,5 1,0 1,6 1,0
Other sectors 92,0 88,3 70,3 20,7 16,4 14,1
III CURRENT ACCOUNT AND CAPITAL TRANSFERS (I+II) -9.163,9 -12.442,7 -9.352,8 -2.548,8 -2.887,4 -2.316,2
IV FINANCIAL ACCOUNT (IV.A+IV.B+IV.C+IV.D) 9.650,7 12.563,5 9.585,6 2.963,5 3.324,6 2.464,0
IV.A DIRECT INVESTMENT* 611,3 634,5 -341,6 790,1 -102,0 -30,5
Abroad -343,5 -244,8 -363,9 -90,2 -85,7 -46,3
Home 954,9 879,4 22,4 880,3 -16,3 15,8
IV.B PORTFOLIO INVESTMENT* 7.972,8 -2.859,5 -5.422,8 -7.208,7 -7.773,7 632,5
Assets 2.069,0 5.361,7 2.559,9 -4.082,1 1.800,7 1.439,2
Liabilities 5.903,8 -8.221,2 -7.982,7 -3.126,6 -9.574,4 -806,7
ΙV.C OTHER INVESTMENT* 1.038,5 14.771,5 15.359,0 9.388,1 11.159,3 1.914,1
Assets -8.243,7 -12.279,2 3.999,6 584,0 -4.241,3 -991,7
Liabilities 9.282,2 27.050,7 11.359,5 8.804,1 15.400,5 2.905,8
(Loans of General Government) -1.052,1 -604,6 21.104,3 -252,5 -83,3 -0,1
ΙV.D CHANGE IN RESERVE ASSETS** 28,0 17,0 -9,0 -6,0 41,0 -52,0
V BALANCE ITEM (I+II+III+IV) -486,7 -120,9 -232,8 -414,7 -437,2 -147,8
RESERVE ASSETS (STOCK) (end period)*** 2.720,0 4.042,0 4.609,0
Source: Bank f Greece * ( + ) net inflow ( - ) net outflow * * ( + ) increase ( - ) decrease * * * Reserve assets , as defined by the ECB, only include monetary gold, the reserve position at the IMF, Special Drawing Rights and the Bank of Greece’s claims in foreign currency on residents of countries outside the euro area. Conversely, reserve assets do not include claims in euro on residents of countries outside the euro area, claims in foreign currency and in euro on residents of euro area countries, and the Bank of Greece’s participation in the capital and the reserve assets of the ECB. .
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4. IMPACTS AND NECESSARY ADJUSTMENTS FOR THE LARGE SCALE
PENETRATION OF RENEWABLE ENERGY SOURCES (RES) IN THE
PRODUCTION OF ELECTRIC POWER18
The transition of Greece towards a low greenhouse gas emissions economy, core character-
istic of which is the large-scale penetration of RES, is not attainable without the radical re-
structuring of the domestic sector of electric power production, which will be accompanied
by significant investments in transport and distribution channels. The study presents and
where possible valuated the effects in the production system, transport system and in eco-
nomic terms from the necessary adjustments for achieving the national goal of RES penetra-
tion by 2020.
The policy framework for Renewable Energy Sources in the European Union
The fast development of RES consists one of the fundamental keystones of the EU policy,
within the efforts for facing the climate change and its possible catastrophic consequences.
Inextricably connected to policies that aim at the drastic reduction of CO2 emissions and en-
ergy savings, the European policy for RES has set a binding target, according to which, by
2020, 20% of the total energy consumed in the EU will come from RES.
The already set policy framework for encountering the climate change is just the first step of
the reshaping effort towards an economy with low gas emissions. This effort is not going to
stop in 2020, but, as derived from the Roadmap on Climate that the European Commission
recently announced (March 2011), the after 2020 era is already being planned, where the
emission reduction targets will be even greater. A development like this will give attribute
great importance in the uninterrupted transformation of the energy system through the use
of low or zero emission technologies, as the majority of the RES technologies.
Renewable Energy Sources in Greece: Necessity, targets and obstacles
Within the alignment with the EU policy on Energy and Climate, Greece has taken up re-
sponsibilities, regarding the reduction of greenhouse gas emissions till 2020, through the
participation in the European Emission Trading System and elimination of their emissions in
sectors that are not covered by the specific mechanism. As a significant share of the coun-
try’s emissions is due to the production of electric power with fossil fuel burning (50% of CO2
emissions and 42% of emissions in the total greenhouse gases in 2009), reduction of emis-
sions in combination to the additional commitments for launching RES use, demands radical
restructuring of the electricity generation’s fuel mix.
18Part of a study that was realized by the Electricity Observation and Analysis Unit of IOBE, funded by HELAS - Hellenic Electricity Association.
IOBE “The Greek Economy” vol. 02/11
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The national target for RES, according to the 3851/2010 law, defines participation of the en-
ergy produced by RES in the gross total energy consumption at a 20% share by 2020. Given
that RES technological choices for electric power production are wider, compared to the
other energy sectors, like transport, the electric energy production sector holds a crucial role
in the effort of achieving the targets. So, according to the regulatory framework in place,
participation of electric energy produced by RES is predicted (hydroelectric included) in the
gross electric energy consumption, at a share of at least 40% in 2020, from 18% in 2010.
The achievement of the targets should be considered as given, since obstacles rise that con-
cern financing and technical limitation, the circumstances in the economy, the shortage of
appropriate regulatory environment of motives, but also numerous other factors (spatial is-
sue, acceptance from local societies, bureaucracy etc.). Significant delays in the RES projects
in Greece are related to the interconnection of projects with the network and litigations, with
the process of electric interconnection delaying almost every project.
Necessary adjustments for the transition to a new structure of electric power
production
The high penetration of RES units affects the way the existing system of electric power pro-
duction functions. The development of the latter was based till now on the concentration of
production to large capacity conventional units. The RES penetration in the electric power
production system, except from the reduction of greenhouse gas emissions succeeds to save
domestic fuels and reduce the dependence from imported fuels. However, the overall electric
system has to be sufficiently agile, so as to efficiently support and with low cost the need for
increased RES penetration. Possible inefficiency of the agile units of the electric system yields
higher cost and greater wholesale prices variations, while it is more probable to have energy
rejected from RES units during the time that productions surpasses demand. Furthermore,
the RES penetration can lead to reduced efficiency of the other units, due to the impact on
the level of use, but on the number of start-up and shut-down, too. This makes imperative
the functioning of mechanisms outside the energy market, like e.g. the power market, which
will be able to make sure that the power demanded will be available in the system, when-
ever needed.
Adjustments in the way the wholesale market works and in other relevant sectors will signifi-
cantly contribute to the smooth integration of the RES projects and the safe functioning of
the production system. A necessary prerequisite for the RES penetration, at the levels that
the national target demands, is the possibility of controlling the production from wind farms.
Towards this direction moves the implementation of cluster management, which offers new
possibilities for the best inclusion of units of variable production. In circumstances of great
penetration, shortening the gap between the gate closure time and the real distribution time
will allow for the participation of wind farms to the market and simultaneously, will reduce
the balancing cost. An important prerequisite in this solution is the possibility to applying in-
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traday prediction of wind production that will lead to lower reserve requirements. The par-
ticipation of wind units in the wholesale market will also be facilitated by the development of
prediction models of wind production with better prediction accuracy in more extended time
frames. The further automation of the tools handled by the system manager for controlling
in urgent situations and for managing demand will also contribute in this direction.
Also of great importance is the unification of electric energy markets (day-ahead and balanc-
ing market) beyond the strengthening of interfaces. This includes the establishment of cross-
border intraday markets, the transition to implicit auctions of the distribution of cross-border
interfaces and the harmonisation of offers closure timings and the rest rules of functioning.
Cross-border collaboration will contribute to the smoother functioning of the system, as far
as wind production predictions are concerned.
Analysis scenarios
The study examines the RES penetration issue under the hypothesis that the current policy
framework for the RES is sufficient for achieving the goals. The differentiations that were
examined concern to cases regarding the interconnection and pumped storage capacities
and alternative scenarios for the broader economic circumstances that will prevail till 2020.
Overall, six scenarios were developed, which are different as for the width of system inter-
face (only Cyclades, North Aegean or all the islands), the additional pumped storage capabili-
ties (0.365 MW or 865 MW), the additional international interfaces (0 or 1 GW), the eco-
nomic development (stagnations, predominant scenario or high development), the prices of
CO2 rights (10, 25 or 35 €/t CO2 ), natural gas prices, the long-term evolvement of demand
and the speed of RES penetration.
Table 4.1: The study’s scenarios
Scenario
Currently
pla
nned g
rid
pro
jects
North A
egean
Inte
rcon-
nection
Cre
te &
South
Aegean Inte
r-connection
Additio
nal
Pum
ped S
tora
ge
Capacity
Additio
nal
Cro
ss-b
ord
er In
-te
rconnection
Capacity
GDP G
rowth
(2
010-2
0)
Carb
on P
rice
Natu
ral gas
prices
(€’1
0/to
e)
Baseline (Β) √ x x x x 2.2% 25 €/t 388
Intermediate (Μ)
√ √ x 365 MW X 2.2% 25 €/t 388
Ambitious (A) √ √ √ 865 MW 1,000 MW 2.2% 25 €/t 388
M-S(1) √ √ x 365 MW X 0.6% 10 €/t -3% p.a.
Μ-HG(1) √ √ x 365 MW X 3.1% 35 €/t +3% p.a.
NAP(1) √ √ x 365 MW x 2.2% 25 €/t 388
(1) M-S: Intermediate-Stagnation, Μ-HG: Intermediate-High Growth, NAP: National Action Plan Source:IOBE
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RES installed capacity needed to meet the national targets
The installed capacity of the RES units needed for achieving the penetration target is esti-
mated to reach in 2020 10,3 GW in the interconnected system (10.6 GW on the whole). The
size of the installed capacity differs depending on the hypotheses of the analysis (Graph
4.1). Extended connections and circumstances that lead to lower demand of electric power
are connected with smaller RES power demands for achieving the targets. The most preva-
lent RES technology is wind farms, while photovoltaic and small hydroelectric ones follow.
Figure 4.1
Estimated RES installed capacity needed to meet the 2020 national targets
Installed capacity: RES (without large hydro)
0
2,000
4,000
6,000
8,000
10,000
12,000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
MW
B M A
Installed RES capacity: Scenario M
0
2
4
6
8
10
12
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
GW
Wind Solar Small hydro Biomass and other RES Source:IOBE
Estimation of the best mix of electric production Given that a significant share of the load will be covered by RES units, it is estimated that, in
order to cover the rest of the load and the maintenance of the system credibility at an ac-
ceptable level, it will be necessary to place 4 units of combined circle with natural gas com-
bustion (1.7 GW) and 1 unit of lignite combustion (400 MW) in the 2010-2020 period. In the
M-S scenario, the new power of the combined circle units is limited to 850 MW that has al-
ready been covered by the inclusion of two new units in 2010. The new units partly replace
the power of the thermal units that are withdrawn. Taking into consideration the need to
withdraw old units, this means that by the end of the period, the installed capacity of the
natural gas units will surpass the power of the lignite units in all scenarios, except from the
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scenario of economic stagnation (Graph 4.2). In 2020, the installed capacity of the thermal
units in the interconnected system is estimated at 7.2 GW in scenario M (6.3-8.0 GW in the
rest of the scenarios), versus 9.0 GW in 2010. Therefore, that shows that RES units, except
from the big hydroelectric ones, will have in 2010 greater installed capacity than the thermal
units in the interconnected system.
The changes in the composure of the installed capacity of the system will bring about signifi-
cant restructuring in the shares of thermal production of electric energy. The share of elec-
tric energy production with lignite is reduced from 51% in 2010 to 23% in scenario M in
2020. Electric energy production with natural gas increases its share from 19% in 2010 to
30% in 2020 in scenario M. The use of oil is reduced according to the scenario of intercon-
nection of the islands, from 9.5% in 2010 to 6.4% in 2020 in scenario M (0-0.8% in the
other scenarios).
Figure 4.2 Installed capacity in the interconnected system in Scenario M
0
5
10
15
20
25
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
GW
Other RES
Large hydro
Pumped storage
Oil
Natural gas
Lignite
Source:IOBE
These results are the expected, given the withdrawal of lignite units that are replaced by
natural gas units. Moreover, after 2013 when the purchasing cost of CO2 emission allow-
ances is significantly increased, the lignite units take over a load with lower priority in rela-
tion to the new units of natural gas that are burdened with lower carbon cost. Nonetheless,
the results heavily depend on the cost parameters of the units and more specifically of the
prices of natural gas and CO2 emission allowances. So, in the low price of allowances sce-
nario, but of natural gas too, the shares of lignite and natural gas are relatively close (27%
and 24% respectively). On the contrary, in the high prices of allowances scenario, the share
of lignite is further limited (19%), while that of natural gas is strengthened (33%).
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Figure 4.3 Fuel mix
Fuel mix: Scenario M
0
10
20
30
40
50
60
70
802005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
TW
h
Lignite Natural gas Oil RES
Source:IOBE
Fuel Mix 2010 and 2020
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010
2020 - Β
2020 - M
2020 - A
Oil
Natural gas
Lignite
RES
Reserve requirements
On a 30% prediction error hypothesis regarding the production of RES units during the proc-
ess of daily energy planning, it was estimated that the demands of spinning reserves may
reach 1.7 GW in 2020 in scenario M (1.4-1.9 GW in the rest of the scenarios). However, it
should be noted that the high level of spinning reserves will be demanded for only few hours
of the year. In 2020, in 69% of the hours of the year reserve needs will not surpass 400MW,
while over 1 GW are the reserve needs for 3.7% of the hours of the same year. Therefore, it
is obvious that units will be demanded, which will be able to provide the necessary agility
and the regulatory framework that assures satisfactory performance for the provision of the
respective service.
Financial performances
The financial performance of the thermal units based on revenues from the wholesale mar-
ket will take pressures after the abolition of the free distribution of CO2 emission allowances
in 2013. After that, the cost de-escalates as a result of the renewal of thermal units and the
depreciation of the capital value invested in the existing units. The cost of the capacity as-
surance mechanism may be limited via greater system agility, faster withdrawal of older
units and less new units (Graph 4.4).
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Figure 4.4 Annual cost of the Capacity Assurance Mechanism
0
100
200
300
400
500
600
700
800
900
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
€'1
0 M
B M A Source:IOBE
Challenges for the electricity networks
The possibilities of the existing transport system are limited, since many of the areas with
noteworthy usable wind dynamic are at the boundaries of the system. Hence, system expan-
sion and enforcement works are demanded for the smooth inclusion of great power RES. By
completing the works that are predicted in the Transmission System Development Plan
2010-1014 of HTSO, the power absorption threshold from wind farms will increase to at least
8.5 GW.
For Greece, the interconnection of the Aegean islands seems rather alluring of a solution,
since it allows the use of favourable wind dynamic of the pelage. From the various connec-
tion scenarios of the islands Thira, Ios, Chios, Lesvos, Ikaria, Samos, Limnos, Crete and the
Dodecanese it has been estimated that their interconnection, in combination to the develop-
ment of RES, not only doesn’t imply increased cost, but brings about 3-5% reduction of the
overall cost of electric energy provision.
In combination with the expansion and enforcement of the Transfer System works, addi-
tional adjustments are demanded that concern the functioning and implementation of RES
units, in the management and development of the System, as well as the followed policy and
the overall regulatory framework, so as to achieve the double target of safe functioning of
the system and the as big as possible power absorption from RES.
Beyond the expected effects on the system of electric energy transfer, the gradual transition
to the decentralised production of RES (as, e.g., photovoltaic on the roofs) creates new
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standards in the distribution network in which those units are connected. The best manage-
ment of the dispersed and –mostly- agile production demands of the development of innova-
tive and efficient technologies, such as smart networks, which provide the possibility to over-
look and control production. This capability of smart networks is necessary in the case of dis-
tribution network, since by default, but also due to new load conditions that will come up,
the distribution network gets even more vulnerable.
Main characteristic of the smart networks is the transport not only of energy, but of data and
information through which the best incorporation of the dispersed production is achieved
(photovoltaic, micro-turbines, fuel cells, small WT), but the implementation of demand man-
agement programmes, as well.
The effects on the economy
It is derived from the analysis above that, despite the increase in the RES penetration, the
average reasonable charge of electric energy is kept at a stable level from 2013 and on,
when it will, anyhow, increase from the abolishment of the free CO2 emission allowances.
This increase is restrained from the RES, which spare costs for the CO2 emission allowances
purchase. Moreover, the penetration demands additional projects in the transport system,
while it doesn’t confute the need to strengthen the thermal units so as to ensure the suffi-
ciency of power and the system stability.
Figure 4.5 Cost-based electricity tariff (average across consumer categories)
80
90
100
110
120
130
140
150
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
€'1
0/M
Wh
A B M
80
90
100
110
120
130
140
150
160
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
€'1
0/M
Wh
M-HG M-S M Source:IOBE
The additional needs to support RES are counterweighted by improvements in productivity
and the depreciation of the existing capital value in networks and the production system
(Graph 4.6). So, while the final average charge will by quite higher, this will not be due to
IOBE “The Greek Economy” vol. 02/11
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RES penetration, but to the overall effort to reduce emissions, where the high RES penetra-
tion offers the solution at minimum cost. Based on the analysis’ hypotheses, the reasonable
average charge (theoretically, the consumer price) comes up to 134€’10/MWh in 2020 in
scenario M (126-146€’10/ΜWh in the other scenarios) from around 100€’10/MWh in 2010. In
comparison to the reasonable average charge for 2008, when oil had reached extremely high
prices, the average charge in 2020 will be lower by 2.3% in scenario M (-8% to +6% in the
other scenarios).
Figure 4.6
Breakdown of the average cost-based electricity tariff under Scenario M
0
20
40
60
80
100
120
140
160
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
€'1
0/M
Wh
RES support
Avoided CO2 cost
Merit-Order Effect
Avoided Capacity Charge
Supplier margin
TSO expenses
RAE charge
Capacity Assurance
Public Service Obligations
Transmission system charge
Distribution grid charge
Reserve requirement cost
Marginal generation cost
Source:IOBE
It should be, however, noted that an important part of the institutionalized cost of RES sup-
port corresponds to the cost that is avoided due to the RES penetration. RES decrease the
cost for CO2 emission allowances purchase and the Marginal System Price, while they partici-
pate in the provision of power to the system, too (Table 4.2).
Table 4.2
Breakdown of the established RES tariff under Scenario M
2011 2015 2020 Average (11-20)
RES contribution (as % of pre-tax price) 2,6% 2,3% 5,5% 3,3%
RES contribution (as % of RES tariff) 44,1% 33,9% 49,5% 40,8%
Avoided capacity charge (as % of RES tariff) 43,6% 41,3% 12,5% 34,2%
Merit-Order Effect (as % of RES tariff) 12,3% 6,7% 16,1% 9,6%
Cost of CO2 avoided due to RES (as % of RES tariff) 0,0% 18,1% 21,9% 15,3%
Total 100% 100% 100%
Source:IOBE
The increase in the average charge that comes up from the abolition of free distribution of
CO2 allowances will affect the competitiveness of domestic energy-intensive industries, espe-
cially those that compete with enterprises outside EU or with European enterprises, where
RES Tariff
IOBE “The Greek Economy” vol. 02/11
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the cost of CO2 emissions has already been incorporated in the electric energy prices as op-
portunity cost. It will affect, moreover, the poorer parts of the population, if appropriate
mechanisms of social protection are not developed in time. However, the state will have
available an important toll of mitigating the effects of the electric energy provision cost. The
significant increase of the price from auctioning of CO2 emission allowances will be translated
to respective increase of the state revenues. At least 50% of those revenues should be pro-
vided for promotion of RES and energy efficiency. So, the government, through targeted in-
terventions will have the possibility to dynamically intervene in any problems that may arise.
Attaining the penetration of RES target demands the mobilisation of huge, for the Greek
standards, resources that are estimated at €15.4 bn overall, for the 2010-2020 period in
scenario M (€12.6 to €17.2bn in the other scenarios). Investments of this magnitude will
have considerable effect on domestic consumption, GDP and employment. At the same time,
the spread of positive effects may be multiple if the domestic industry is developed, as far as
the increased demand for RES equipment is concerned, since the installment of RES power
in the demanded size by the national target, creates at least 27 thousand new job positions,
20 thousand of which concern equipment construction.
Epilogue
Similar studies from abroad come to the conclusion that attainment of high penetration tar-
gets, with supportable cost and reliable production and transfer systems is technologically
and economically achievable. The present report offers indications that with the demanded
adjustments this conclusion stands for Greece, as well. Nonetheless, the possibility that in-
vestments will not take place is quite high, if the state continues to be inefficient and the
concern over the overall interest is not incorporated into individual and group decisions. If
follow the beaten track, it is very possible that RES investments will be realized spasmodi-
cally, not where it should, without meeting the targets and with limited benefit for the econ-
omy. There is, however, the choice of accepting the cost of adjustment towards an efficient
state and a freer and faster developing economy, showing interest, at the same time, so as
the new developmental model to ensure a clean environment and real social justice. In this
framework, investments in RES projects may be a significant component of the national
economy restoration.
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5. APPENDIX: STRUCTURAL INDICATORS
The following appendix is divided into two parts, so that it incorporates the monitoring
framework of the Lisbon Strategy:
A) Part A shows the performances of the EU member states in 14 out of 25 structural indica-
tors, which comprise the short list of indicators used by the European Commission to monitor
the implementation of the Lisbon objectives from each member-state and the course of
structural changes of the respective economies.
B) Part B presents a selection from the other indicators adopted by the European Commis-
sion in 2000, in an effort to provide the national governments with clear, distinct and meas-
ureable indicators that reflect the degree of structural adjustment of each member-state.
These indicators (together with the 14 indicators from part A) comprise the long list of indi-
cators, which Eurostat systematically monitors and harmonizes for EU-27.
The main aim of the set of structural indicators is to record the progress that has been made
in five key policy domains - employment, innovation and research, changes in the
structure of the economy, social cohesion and environment. At the same time, a
number of key economic indicators are also monitored, in order to perceive the general
economic environment in which the structural changes are being made.
Main target of the overall structural indicators in to write down the progress that has taken
place in five critical policy sectors, which concern employment, innovation and research,
changes in the structure of the economy, social cohesion and the environment. At the same
time, more basic economic indicators are being monitored that reflect the overall economic
environment, within which the structural reforms, implemented in each member-state, take
place.
Each of the indicators presented below is drawn in charts for the European Union in total
(wherever data are available), while Greece's performance compared to EU-27, EU-25, EU-
15 and the Euro area is presented in tabular form (last revision Eurostat August 2007).
IOBE “The Greek Economy” vol. 02/11
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Abbreviations
EU27 European Union
EU25 European Union (except from Bulgaria and Romania, which became EU members in January 2007)
EΑ17 Euro Area of 17 member-states
BE Belgium
CZ Czech Republic
DK Denmark
DE Germany
EE Estonia
EL Greece
ES Spain
FR France
IE Ireland
IT Italy
CY Cyprus
LV Latvia
LT Lithuania
LU Luxembourg
HU Hungary
MT Malta
NL Netherlands
AT Austria
PL Poland
PT Portugal
SI Slovenia
SK Slovakia
FI Finland
SE Sweden
UK United Kingdom
IOBE “The Greek Economy” vol. 02/11
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PART A
(BRIEF LIST OF STRUCTURAL Indicators)
IOBE “The Greek Economy” vol. 02/11
101
I-Α. GENERAL ECONOMIC BACKGROUND
Ι-1a. GDP per capita (Purchasing Power Standards, PPS, EU-27=100)
Purchasing Power Standards (PPS) are indicators of the average price ratios between different coun-tries. Their use enables the comparison of the volume of GDP per capita between different countries.
0
50
100
150
200
250
300
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 100 100 100 100 100 100 100 100 100
EU25 105 104 104 104 104 104 103 103 103
EU15 114 114 113 113 112 112 111 110 110
EA17 111 110 109 109 109 109 108 109 108 EL 90 93 94 91 93 92 94 94 89 Source:Eurostat
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Ι-2a. Labour productivity per person employed (GDP in PPS per person employed EU-27=100)
Persons employed cover employees and self employed. Employees include persons engaged by an
employer under a contract of employment, civil servants, armed forces and owners of corporations.
Persons temporarily not at work because of illness, injury, holidays or vacations, strike or training
leave are also considered as employed. The definitions used are consistent with International Labour
Organization (ILO) definitions.
0
20
40
60
80
100
120
140
160
180
200
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 100 100 100 100 100 100 100 100 100
EU25 104.4 104.3 104.1 104 103.8 103.6 103.3 103.3 103.2
EU15 111.9 111.4 110.9 110.6 110.5 110.1 109.7 109.4 109.2
EA17 110.6 110 109 109.2 109 109.1 108.9 109.1 108.6
EL 100 101.8 101.1 98.8 99.2 97.7 100.4 99.4 95.7 Source:Eurostat
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ΙΙ-Α. EMPLOYMENT
ΙΙ-1a. Total employment rate(Employed persons aged 15-64 as a share of the
total population of the same age group) The employment population consists of those persons who during the reference week did any work for pay or profit for at least one hour or were not working but had jobs from which they were tempo-rarily absent. The survey covered persons aged 15 years and over, living in private households. Per-sons living in collective households (halls of residence, medical care establishments, religious institu-tions, collective worker’s accommodations, hostels etc) and persons carrying out obligatory military service were no included.
0
10
20
30
40
50
60
70
80
90
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2009 2010
2003 2004 2005 2006 2007 2008 2009 2010
EU27 62.7 62.8 63.5 64.5 65.4 65.9 64.6 64.2 EU25 63.0 63.1 64.0 64.8 65.8 66.3 65.0 64.5 EU15 64.4 64.6 65.4 66.2 66.9 67.3 65.9 65.4 EA17 62.6 62.8 63.7 64.7 65.6 66.0 64.7 64.2 EL 58.9 59.6 60.1 61.0 61.4 61.9 61.2 59.6
Άντρες
EU27 70.3 70.2 70.8 71.6 72.5 72.8 70.7 70.1 EU25 70.9 70.7 71.4 72.1 73.0 73.2 71.1 70.4 EU15 72.7 72.5 73.0 73.6 74.2 74.2 71.9 71.4 EA17 71.4 71.2 71.8 72.6 73.3 73.3 71.1 70.4 EL 73.5 74.0 74.2 74.6 74.9 75.0 73.5 70.9 Γυναίκες
EU27 55.0 55.4 56.3 57.3 58.3 59.1 58.6 58.2 EU25 55.2 55.6 56.6 57.6 58.6 59.4 58.9 58.6 EU16 56.2 56.7 57.8 58.7 59.6 60.4 59.9 59.5 EA17 53.8 54.3 55.6 56.8 57.9 58.7 58.3 57.9 EL 44.5 45.5 46.1 47.4 47.9 48.7 48.9 48.1
Source:Eurostat
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ΙΙ-2a. Total employment rate of older workers (Employed persons aged 55-64 as a share of the total population of the same age group)
0
10
20
30
40
50
60
70
80
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 38.2 39.9 40.5 42.3 43.5 44.6 45.6 46.0 46.3
EU25 38.4 40.1 40.8 42.6 43.6 44.8 45.7 46.2 46.6
EU15 39.8 41.5 42.3 44.2 45.3 46.5 47.4 47.9 48.4
EA17 35.9 37.4 38.2 40.4 41.7 43.2 44.3 45.1 45.8
EL 38.9 41.0 39.4 41.6 42.3 42.4 42.8 42.2 42.3
Άντρες
EU27 48.2 49.7 50.1 51.6 52.7 53.9 55.0 54.8 54.6
EU25 48.6 50.1 50.6 51.9 52.8 54.1 55.0 54.9 54.8
EU15 49.8 51.4 52.0 53.2 54.1 55.3 56.2 56.1 56.2
EA17 46.4 47.7 48.4 49.8 50.9 52.4 53.3 53.5 53.8
EL 55.3 58.3 56.4 58.8 59.2 59.1 59.1 57.7 56.5 Γυναίκες
EU27 28.9 30.6 31.4 33.6 34.9 35.9 36.8 37.8 38.6
EU25 28.8 30.6 31.5 33.8 35.0 36.1 36.9 37.9 38.9
EU15 30.2 32.0 32.9 35.5 36.8 38.1 39.0 40.1 40.9
EA17 25.8 27.6 28.4 31.4 32.9 34.5 35.7 37.1 38.1
EL 24.2 25.3 24.0 25.8 26.6 26.9 27.5 27.7 28.9 Source:Eurostat
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ΙΙΙ-Α. INNOVATION & RESEARCH
ΙΙΙ-1a. Gross domestic expenditure on R&D (as a percentage of GDP)
0
0,5
1
1,5
2
2,5
3
3,5
4
4,5
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2008 2009
2001 2002 2003 2004 2005 2006 2007 2008 2009
EU27 1.86s 1.87s 1.86s 1.82s 1.82s 1.85s 1.85s 1.92s 2.01s
EU15 1.92s 1.93s 1.93 1.89s 1.89s 1.92s 1.93s 2.01s 2.10s
EA16 1.85s 1.87s 1.87s 1.85s 1.84s 1.87s 1.88s 1.96s 2.05s
EL 0.58 : 0.57e 0.55e 0.59e 0.58e 0.58e : :
(s): Eurostat estimation
Source: Eurostat
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ΙΙΙ-2a. Youth education attainment level (% of the population aged 20 to 24 having completed at least upper secondary educa-tion)
0
10
20
30
40
50
60
70
80
90
100EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 76.7 76.9 77.1 77.5 77.9 78.1 78.4 78.6 79.0
EU25 76.7 77 77.3 77.6 77.9 78 78.3 78.5 78.9
EU15 73.7 74.1 74.4 74.7 75.0 75.2 75.7 76.1 76.6
EA17 73.4 73.5 74.1 74.3 74.5 74.9 75.5 75.7 76.1
EL 81.1 81.7 83.0 84.1 81.0 82.1 82.1 82.2 83.4
Men
EU27 74.0 74.4 74.4 74.8 75.0 75.4 75.6 75.9 76.2
EU25 74.0 74.4 74.3 74.8 74.9 75.2 75.3 75.6 76.0
EU15 70.9 71.3 71.2 71.8 71.7 72.2 72.5 72.9 73.5
EA17 70.2 70.2 70.5 70.8 70.9 71.5 72.1 72.3 72.7
EL 76.1 76.6 79.2 79.7 75.5 77.5 78.0 77.8 79.5 Women
EU27 79.3 79.4 80.0 80.2 80.8 80.8 81.3 81.4 81.8
EU25 79.4 79.7 80.2 80.4 81.0 80.9 81.4 81.5 81.9
EU15 76.6 76.9 77.5 77.8 78.4 78.3 79.0 79.3 79.7
EA17 76.7 76.8 77.7 77.7 78.2 78.4 79.0 79.1 79.5
EL 86.0 86.8 86.8 88.5 86.6 87.0 86.6 86.9 87.2 Source: Eurostat
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ΙV-Α. ECONOMIC REFORM
ΙV-1a.Comparative price levels (comparative price levels of final consumption by private households including indirect taxes, EU-25=100)
0
20
40
60
80
100
120
140
160
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 100 100 100 100 100 100 100 100 100
EU25 101.1 101.1 101.2 101.1 101.1 101.1 101.1 101.1 101.1
EU15 104.8 105.2 105.4 104.9 104.8 104.8 104.4 105.1 104.8
EA16* 100.4 102.9 103 102.0 101.9 101.3 103.5 106.0 104.2
EL 80.2 85.9 87.6 88.4 89.1 89.8 91 96.5 95.5 * There is no available information for the EZ-17
Source:Eurostat
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ΙV-2a. Business investment (Gross f ixed capital formation by the private sector as a percentage of GDP)
0
5
10
15
20
25EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 17.3 17.1 17.2 17.8 18.2 18.7 18.4 16.2 15.9
EU25 17.3 17.1 17.2 17.7 18.2 18.6 18.2 16.1 15.8
EU15 17.3 17 17.2 17.7 18.1 18.5 18.2 16.1 15.9
EA17 17.9 17.7 17.9 18.2 18.9 19.3 19.0 16.9 16.7
EL 19.1 19.8 18.5 17.1 17.5 17.6 15.5 14.1 11.9 Source:Eurostat
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V-A. SOCIAL COHESION
V-1a. At-risk-of-poverty rate (share of persons with a balanced disposable income below the risk-of- poverty threshold, which is set at 60% of the national median balanced disposable in-come)
0
5
10
15
20
25
30
35
40
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2008 2009
2001 2002 2003 2004 2005 2006 2007 2008 2009
EU27 : : : : 25.9 26.1 25.9 25.1 25.1
EU25 24.0 : : : : : : : :
EU15 24.0 : 25.0 26.0 25.4 25.8 25.7 24.8 25.2
EA17 : : : : 24.2 24.7 24.7 23.7 23.9
EL 23.0 : 23.7 22.5 22.6 23.4 23.7 23.3 22.7 Άντρες
EU27 : : : : 25.0 25.1 24.8 24.0 24.1
EU25 24.0s : : : : : : : :
EU15 : : 23.0 24.0 24.2 24.5 24.4 23.5 24.0
EA17 : : : : 23.1 23.6 23.6 22.6 22.9
EL 21.0 : 22.9 21.2 21.1 22.1 22.7 22.3 21.6 Γυναίκες
EU27 : : : : 26.9 27.0s 26.9 26.1 26.1
EU25 26.0 : : : : : : : :
EU15 : : 26.0 27.0 26.6 26.9 26.9 26.0 26.2
EA17 : : : : 25.3 25.7 25.8 24.8 24.8
EL 24.5 23.8 24.1 24.7 24.7 24.3 23.7 (s): Eurostat assessment
Source:Eurostat
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V-2a. Dispersion of regional employment rates (Coeff icient of variation of employment rates (of the age group 15-64) across regions (NUTS 2 level) within countries)
0
2
4
6
8
10
12
14
16
18
20
EU27
EU25
EU15
EA15
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2008 2009
2001 2002 2003 2004 2005 2006 2007 2008 2009
EU27 13.2 13.2 12.9 12.1 11.9 11.4 11.1 11.3 11.8
EU25 : : : : : : : : :
EU15 13.1 12.4 11.8 11 10.8 10.6 10.6 11.1 11.9
EA15* 12.7 12.1 11.5 10.5 10.5 10.6 10.8 11.4 12.4
EL 4.3 3.8 3.2 4.1 4.3 3.7 3.5 3.6 3.4 *∆ενυπάρχουνδιαθέσιµαστοιχείαγιατηνευρωζώνητων 16 αλλάκαι 17
Πηγή:Eurostat
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V-3a Long-term unemployment rate (Long-term unemployed (12 months and more) as a percentage of the total active population)
Unemployed persons are those aged at least 15 years old, not l iving in col lective
households, who are without work within the next two weeks or available to start work
within the next two weeks and are seeking for a work. The duration of unemployed is
defined as: The period of searching for a job (over 12 months).
0
1
2
3
4
5
6
7
8
9
10
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 4.0 4.1 4.2 4.1 3.7 3.1 2.6 3.0 3.8
EU25 3.9 4.0 4.1 4.1 3.7 3.0 2.6 3.0 3.9
EU15 3.1 3.3 3.4 3.4 3.2 2.8 2.6 3.0 3.8
EA17 3.7 4.0 4.2 4.1 3.9 3.3 3.0 3.4 4.3
EL 5.3 5.3 5.6 5.1 4.8 4.1 3.6 3.9 5.7
Άντρες
EU27 3.6 3.8 3.9 3.8 3.5 2.8 2.4 2.9 3.9
EU25 3.4 3.7 3.7 3.7 3.4 2.8 2.4 2.9 3.9
EU15 2.7 3.0 3.1 3.1 3.0 2.6 2.4 2.9 3.9
EA17 3.2 3.5 3.7 3.7 3.5 3.0 2.7 3.2 4.2
EL 3.1 3.0 3.0 2.6 2.6 2.2 2.1 2.4 3.9
Γυναίκες
EU27 4.5 4.5 4.6 4.5 4.0 3.3 2.8 3.1 3.7
EU25 4.4 4.5 4.6 4.5 4.0 3.3 2.8 3.1 3.8
EU15 3.6 3.7 3.9 3.7 3.5 3.1 2.8 3.1 3.7
EA17 4.4 4.6 4.8 4.6 4.3 3.8 3.3 3.6 4.3
EL 8.6 8.9 9.4 8.9 8.1 7.0 6.0 6.0 8.1 Source:Eurostat
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VΙ-Α. ENVIRONMENT
VI-1a.Total greenhouse gas emissions (percentage change since base year and targets according to Kyoto Protocol/EU Council Decision for 2008-2012 - ( in CO2 equivalents) indexed on actual base year = 100)
0
20
40
60
80
100
120
140
160
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
2008 Στόχος
2001 2002 2003 2004 2005 2006 2007 2008 Στόχος
EU27 : : : : : : : : :
EU25 : : : : : : : : :
EU15 97.5 96.8 98 97.9 97.2 96.3 94.9 93.1 92
EA17 : : : : : : : : :
EL 117.9 117.6 121.1 121.4 124.2 120.3 123.3 118.6 125 Πηγή: Eurostat
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VI-2a. Energy intensity of the economy (Gross inland consumption of energy divided by GDP (at constant prices, 1995=100) - kgoe (kilogram of oil equivalent) per 1,000 Euro)
0
100
200
300
400
500
600
700
800
900
1.000
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
2008 2009
2001 2002 2003 2004 2005 2006 2007 2008 2009
EU27 187.7 184.9 186.7 184.1 181.0 175.5 168.7 167.4 165.2
EU25 182.8 179.9 181.7 179.4 176.4 170.9 164.3 163.2 161.4
EU15 167.9 165.3 167.0 165.2 162.4 157.1 151.2 150.3 148.8
EA17 : : : : : : : : :
EL 202.5 198.8 192.6 187.4 186.7 178.5 171.4 171.0 167.9 Source:Eurostat
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VI-3a.Volume of freight transport (Index of inland freight transport volume relative to GDP; measured in tonne-km / GDP (in constant 2000 Euro), 2000=100)
0
20
40
60
80
100
120
140
160
180
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
2008 2009
2001 2002 2003 2004 2005 2006 2007 2008 2009
EU27 99.0 100.2 99.3 105.2 105.1 105.7 106.4 103.8 96.4
EU25 98.8 99.7 98.6 104 103.2 103.8 104.6 102 95.0
EU15 99.1 99.6 97.7 103 101.3 100.9 100.5 96.9 88.9
EA17 : : : : : : : : :
EL 100 : : : : : : : : Source:Eurostat
115
PART B
(OTHER STRUCTURAL INDICATORS)
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I-Β. GENERAL ECONOMIC BACKGROUND
I-1b. Real GDP growth rate (constant prices 2000, percentage change on previous year)
GDP at constant prices is used to measure the volume growth of GDP. Changes in the price level (inflation) are illuminated.
-6
-4
-2
0
2
4
6
8
EU27
EA17
BE
BG
CZ
DK
DE
EE
I E EL
ES
FR I T CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2010 2011 2012
2004 2005 2006 2007 2008 2009 2010 2011 2012
EU27 2.5 2.0 3.3 3.0 0.5 -4.3 1.8 1.8(f) 1.9(f)
EU25 2.5 1.9 3.2 2.9 0.4 -4.2 1.8 1.8(f) 1.9(f)
EU15 2.4 1.8 3.1 2.7 0.2 -4.3 1.8 1.7(f) 1.8(f)
EA17 2.2 1.7 3.1 2.8 0.4 -4.2 1.7 1.6(f) 1.8(f)
EL 4.4 2.3 5.2 4.3 1.0 -2.0 -4.5 -3.5(f) 1.1(f)
(f): Prediction
Source:Eurostat
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I-2b. Total employment growth (annual percentage change in total employed population)
-14
-12
-10
-8
-6
-4
-2
0
2
4
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
I E EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 0.4 0.4 0.7 0.9 1.7 1.8 0.9 -1.8 -0.5
EU25 0.4 0.3 0.8 1.0 1.7 1.8 1.0 -1.8 -0.3
EU15 0.7 0.5 0.8 0.9 1.5 1.6 0.7 -1.8 -0.3
EA17 0.7 0.4 0.8 1.0 1.7 1.8 0.8 -1.9 -0.5
EL 2.3 1.2 2.4 0.8 3.3 1.7 0.2 -0.7 -2.1 Άντρες
EU27 0.0 0.0 0.3 0.7 1.4 1.6 0.5 -2.7 -0.6
EU25 -0.1 -0.1 0.3 0.7 1.5 1.6 0.5 -2.7 -0.5
EU15 0.1 0.0 0.2 0.4 1.3 1.3 0.2 -2.8 -0.4
EA17 0.0 -0.2 0.2 0.4 1.4 1.4 0.1 -2.9 -0.7
EL 1.6 0.7 1.8 0.5 2.5 1.7 -0.4 -1.7 -2.8 Γυναίκες
EU27 0.8 0.8 1.2 1.3 2.0 2.1 1.5 -0.7 -0.3
EU25 1.1 0.9 1.3 1.5 2.0 2.2 1.6 -0.6 -0.2
EU15 1.5 1.1 1.5 1.6 1.9 2.0 1.4 -0.6 -0.2
EA17 1.6 1.3 1.6 1.8 2.1 2.3 1.6 -0.6 -0.2
EL 3.3 2.0 3.5 1.3 4.6 1.9 1.1 0.8 -1.1 Πηγή:Eurostat
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I-3b. Inflation rate (Annual average rate of change in Harmonized Indices of Consumer Prices (HICPs))
Harmonized Consumer Price Index (HCPI) are designed for international comparisons of consumer price inflation. Harmonized Consumer Price Index (HCPI) are used by European Central Bank (ECB) for monitoring of inflation in the EMU and the assessment of inflation convergence.
-4
-2
0
2
4
6
8
10
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE GR ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
Ιαν.-Μάιος 2010 Ιαν.-Μάιος 2011
Source:Eurostat
2003 2004 2005 2006 2007 2008 2009 2010 2010
Ιαν-Μάιος
2011 Ιαν-Μάιος
EU27 2.1 2.3 2.3 2.3 2.4 3.7 1.0 2.1 1.9 3.0 EU25 1.9 2.1 2.2 2.2 2.3 3.5 0.9 2.0 1.8 2.9 EU15 2.0 2.0 2.1 2.2 : : : : : : EA17 2.1 2.2 2.2 2.2 2.1 3.3 0.3 1.6 1.6 3.4 EL 3.4 3.0 3.5 3.3 3.0 4.2 1.3 4.7 3.8 4.0
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I-4b. General Government Balance (% of GDP)
-35
-25
-15
-5
5
15
25
35EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 -2.5 -3.1 -2.9 -2.5 -1.5 -0.9 -2.4 -6.8 -6.4
EU25 -2.5 -3.1 -2.9 -2.5 -1.5 -0.9 -2.3 -6.8 -6.4
EU15 : : : : : : : : :
EA17 -2.6 -3.1 -2.9 -2.5 -1.4 -0.7 -2 -6.3 -6
EL -4.8 -5.6 -7.5 -5.2 -5.7 -6.4 -9.8 -15.4 -10.5 Source:Eurostat
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I-5b. General government debt (% of GDP)
General Government debt is defined as the stock of gross debt at end-year nominal value.
0
20
40
60
80
100
120
140
160EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 60.4 61.8 62.2 62.8 61.5 59 62.3 74.4 80
EU25 60.6 62.1 62.5 63.2 62 59.6 63 75.1 80.7
EU15 : : : : : : : : :
EA16* 67.9 69 69.5 70 68.4 66.2 69.9 79.3 85.1
EL 101.7 97.4 98.6 100 106.1 105.4 110.7 127.1 142.8 *No available information for EZ-17
Source:Eurostat
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II-B. EMPLOYMENT
II-1b. Total unemployment rate (Unemployed persons as a share of the total active population)
Unemployed persons are those aged at least 15 years not living in collective households who are without work and available to start work within the next two weeks and are seeking for a work.
0
5
10
15
20
25
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2009 2010
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Total
EU27 8.5 8.9 9.0 9.1 8.9 8.2 7.2 7.0 8.9 9.6 EU25 8.4 8.8 9.0 9.1 9.0 8.2 7.2 7.1 9.0 9.7 EU15 7.3 7.6 8.0 8.1 8.2 7.7 7.0 7.1 9.0 9.5 EA17 8.1 8.4 8.8 9.0 9.0 8.4 7.5 7.5 9.5 10.0 EL 10.7 10.3 9.7 10.5 9.9 8.9 8.3 7.7 9.5 12.5
Men
EU27 7.8 8.3 8.4 8.5 8.3 7.6 6.6 6.6 9.0 9.6 EU25 7.6 8.1 8.4 8.4 8.3 7.5 6.6 6.6 9.1 9.7 EU15 6.5 6.9 7.3 7.5 7.6 7.1 6.4 6.7 9.1 9.6 EA17 7.0 7.5 7.9 8.1 8.2 7.5 6.7 6.9 9.3 9.9 EL 7.2 6.8 6.2 6.6 6.1 5.6 5.2 5.1 6.9 9.9
Women
EU27 9.4 9.7 9.7 9.8 9.6 8.9 7.8 7.5 8.8 9.5 EU25 9.5 9.7 9.8 9.9 9.8 9.0 8.0 7.6 9.0 9.6 EU15 8.3 8.5 8.8 8.9 8.9 8.5 7.8 7.7 9.0 9.4 EA17 9.5 9.7 10.0 10.1 10.1 9.5 8.5 8.3 9.6 10.1 EL 16.1 15.7 15.0 16.2 15.3 13.6 12.8 11.4 13.2 16.2
Source:Eurostat
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II-2b. Life-long learning (% of the population aged 25-64 participating in education and training over the four weeks prior to the survey)
The reference period is the last four weeks preceding the survey (except for France, the Netherlands and Portugal for which information is collected only if education or training is under way on the date of the survey). Education include initial education, further training, training within the company ap-prenticeship, on the job training, seminars, distance learning self learning etc, as well as other courses for example language art/culture, data-processing, management etc. Before 1998, education was re-lated only to educational and vocational training, which was related for the current or possible future job of the respondent.
0
5
10
15
20
25
30
35
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
I E EL
ES
FR I T CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 7.2 8.5 9.3 9.8 9.6 9.4 9.4 9.3 9.1
EU25 7.6 9 9.8 10.3 10.1 9.9 9.9 9.8 9.6
ΕU15 8.1 9.8 10.7 11.3 11.1 10.7 10.8 10.7 10.4
EA17 : : : : : : : : :
EL 1.1 2.6 1.8 1.9 1.9 2.1 2.9 3.3 3.0
Men
EU27 6.6 7.9 8.7 9.0 8.7 8.5 8.5 8.4 8.3
EU25 7.0 8.4 9.1 9.5 9.2 8.9 8.9 8.8 8.7
EU15 7.5 9.1 10.0 10.4 10.1 9.7 9.7 9.7 9.4
EA17 : : : : : : : : :
EL 1.1 2.6 1.8 1.9 2.0 2.2 2.8 3.2 3.1 Women
EU27 7.8 9.1 10.0 10.5 10.4 10.2 10.2 10.2 10.0
EU25 8.2 9.6 10.6 11.1 10.8 10.8 10.8 10.7 10.5
EU15 8.8 10.4 11.4 12.1 12.1 11.8 11.7 11.7 11.4
EA17 : : : : : : : : :
EL 1.1 2.7 1.8 1.8 1.8 2.1 3.1 3.3 2.9 Source:Eurostat
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III-R. INNOVATION & RESEARCH
III-1b. Public expenditure on education (% of GDP)
0
2
4
6
8
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
I E EL
ES
FR I T CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2007 2008
2000 2001 2002 2003 2004 2005 2006 2007 2008
EU27 4.9 5.0 5.1 5.1 5.1 5.0 5.0 5.0 5.1
EU25 : : : : : : 5.1 5.0 5.1
EU15 : : : : : : : : :
EA17 : : : : : : : : :
EL 3.4 3.5 3.6 3.6 3.8 4.0 : : : Source:Eurostat
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III-2b. Internet access (% of households who have Internet access at home)
0
10
20
30
40
50
60
70
80
90
100EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 : : 41 48 49 54 60 65 70
EU25 : : 43 48 51 56 62 67 72
EU15 39 43 46 53 54 59 64 68 73
EA17 : : : : : : : : :
EL 12 16 17 22 23 25 31 38 46 Source:Eurostat
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IV-B. ECONOMIC REFORM
IV-1b. Price of telecommunications, 2008 (Euro per 10 min call)
0
1
2
3
4
5
6
7
EU27
EU25
EU15
BE
BG
CZ
DK
DE
EE
IE GR
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT PL
PT
RO SI
SK FI
SE
UK
ευρώ ανά 10 λεπ
τά οµιλίας
Αστικές κλήσεις Υπεραστικές κλήσεις ∆ιεθνείς κλήσεις προς ΗΠΑ
2000 2001 2002 2003 2004 2005 2006 2007 2008
Local calls
EU27 : : : 0.38 0.37 0.35 0.35 0.36 0.38
EU25 0.39 0.39 0.39 0.39 0.37 0.35 0.35 0.36 0.39
EU15 0.4 0.4 0.39 0.39 0.37 0.35 0.33 0.35 0.37
EA17 : : : : : : : : :
EL 0.31 0.36 0.31 0.31 0.31 0.31 0.31 0.31 0.31
Long-distance calls
EU27 1.33 1.18 1.08 1.06 0.92 0.77 0.76 0.76 0.67
EU25 1.33 1.17 1.07 1.05 0.92 0.76 0.77 0.77 0.70
EU15 1.33 1.14 1.03 1.01 0.87 0.69 0.70 0.70 0.71
EA17 : : : : : : : : :
EL 1.4 0.98 0.77 0.77 0.73 0.74 0.74 0.74 0.74
International calls to the USA
EU27 : : : 3.16 2.21 2.14 2.13 2.07 1.88
EU25 : : 3.08 2.98 2.13 2.11 2.11 2.12 1.92
EU15 3.03 2.57 2.16 2.07 1.83 1.84 1.86 1.89 1.73
EA17 : : : : : : : : :
EL 3.26 2.91 2.95 2.95 2.91 2.93 2.93 2.93 2.93
Source:Eurostat
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IV-2b. Electricity prices - Industrial users (Euro per kWh)
0,00
0,02
0,04
0,06
0,08
0,10
0,12
0,14
0,16
0,18
EU27
EU25
EU15
EA
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
ευρώ ανά kwh
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 : : : 0.0672 0.0752 0.0845 0.0901 0.0932 0.0918
EU25 : : 0.0623 0.0672 0.0755 : : : :
EU15 0.062 0.0648 0.0634 0.0682 0.0766 : : : :
Eurozone* : : 0.0667 0.0713 0.0774 0.0828 0.0896 0.0943 0.0920
EL 0.059 0.0614 0.063 0.0645 0.0668 0.0789 0.0891 0.0901 0.0855 *(EA11-2000, EA12-2006, EA13-2007, EA15-2008, EA16, ΕΑ17)
Source:Eurostat
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IV-3b. Electricity prices – Households (Euro per kWh)
0,00
0,02
0,04
0,06
0,08
0,10
0,12
0,14
0,16
0,18
EU27
EU25
EU15
EA
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
ευρώ ανά
kwh
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 : : : 0.1013 0.1068 0.1173 0.1175 0.1227 0.1223
EU25 : : 0.1002 0.1023 0.1077 0.1183 : : :
EU15 0.1032 0.1036 0.1027 0.1042 0.1094 0.1205 : : :
Eυρωζώνη* : : 0.108 0.1103 0.1137 0.1203 0.1167 0.1246 0.1234
EL 0.058 0.0606 0.0621 0.0637 0.0643 0.0661 0.0957 0.1055 0.0975 *(EA11-2000, EA12-2006, EA13-2007, EA15-2008, EA16, ΕΑ17)
Source:Eurostat
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IV-4b. Value of public procurement which is openly advertised (% of GDP)
0
2
4
6
8
10
12
14EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
I E EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2008 2009
2001 2002 2003 2004 2005 2006 2007 2008 2009
EU27 : : : : 2.9 3.2 3.0 3.1 3.6
EU25 : : : 2.7 2.9 3.3 3.0 3.1 :
EU15 2.4 2.6 3.5 2.7 2.8 3.1 2.8 2.9 :
EA17 : : : : : : : : :
EL 4.1 5.21 4.41 3.72 4.9 5.6 3.5 2.8 3.7 Source:Eurostat
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IV-5b. Foreign Direct Investment intensity (average value of inward and outward Foreign Direct Investment f lows di-vided by GDP, multiplied by 100)
-10
-5
0
5
10
15
20
EU27
EU25
EU15
EA16
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2008 2009
2001 2002 2003 2004 2005 2006 2007 2008 2009
EU27 : : : 0.9 1.7 2.3 3.9 2.2 2.1
EU25 2.4 1.3 1.3 1 1.7 2.4 4.0 2.3 2.1
EU15 2.6 1.4 1.4 1.1 2.0 : 4.2 2.3 2.2
EA16* : : : : : : : : 2.8
EL 0.8 : : 0.7 0.4 1.8 1.2 1.0 0.7
*No available data for Euro Area-17 Source:Eurostat
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V-B. SOCIAL COHESION
V-1b. Inequality of income distribution (The ratio of total income received by the 20% of the population with the highest income (top quintile) to that received by the 20% of the population with the lowest income (lowest quinti le))
0
1
2
3
4
5
6
7
8
EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
2008 2009
2001 2002 2003 2004 2005 2006 2007 2008 2009
EU27 : : : : 5.2 5.1 5.0 5.1 5.1
EU25 4.5 : : : : : : : :
EU15 4.5 : 4.6 4.8 4.8 4.8 5.0 5.0 5.0
EA17 : : : : : : 4.9 4.9 4.9
EL 5.7 : 6.4 5.9 5.8 6.4 6.3 6.2 6.2 Source:Eurostat
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V-2b. Early school-leavers (% of the population aged 18-24 with at most lower secondary education and not in further education or training)
0
5
10
15
20
25
30
35
40EU27
EU25
EU15
EA17
BE
BG
CZ
DK
DE
EE
IE EL
ES
FR IT CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO SI
SK FI
SE
UK
%
2009 2010
2002 2003 2004 2005 2006 2007 2008 2009 2010
EU27 17.0 16.6 16.1 15.8 15.5 15.1 14.9 14.4 14.1
EU25 16.6 16.1 15.7 15.5 15.4 15.0 14.9 14.3 13.9
EU15 18.6 18.2 17.7 17.5 17.3 16.9 16.7 15.9 15.5
EA17 18.9 18.5 17.9 17.6 17.4 16.8 16.6 15.9 15.6
EL 16.5 16.0 14.7 13.6 15.5 14.6 14.8 14.5 13.7 Men
EU27 19.1 18.7 18.4 17.8 17.6 17.1 16.9 16.3 16.0
EU25 18.8 18.3 18.1 17.6 17.6 17.2 17.0 16.3 15.9
EU15 21.0 20.6 20.3 19.8 19.8 19.3 19.1 18.2 17.7
EA17 21.6 21.2 20.9 20.3 20.2 19.5 19.2 18.4 18.0
EL 20.6 20.0 18.1 17.6 20.2 18.6 18.5 18.3 16.5
Women
EU27 14.9 14.5 13.8 13.7 13.4 13.0 12.9 12.5 12.2
EU25 14.4 13.9 13.3 13.3 13.1 12.7 12.7 12.2 11.8
EU15 16.3 15.8 15.1 15.2 14.9 14.5 14.3 13.7 13.2
EA17 16.2 15.8 14.9 15.0 14.6 14.1 13.9 13.4 13.1
EL 12.5 11.9 11.3 9.7 10.8 10.6 10.9 10.6 10.8
Source:Eurostat