the greek economy 2/11

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.


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


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).


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-


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.


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.


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


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-


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.


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.


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


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-


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-


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


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


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


23

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


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


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-


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.


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.


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.


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


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-


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


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


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-


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.


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


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.


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)


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-


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.


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


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


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-


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


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


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%.


47

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





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


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


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


50

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-


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).


52

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


53

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.


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


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


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-


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


58

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


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.


60

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


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


2006 2007 2008 2009 2010 2011

Source: ELSTAT


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.


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


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


2006 2007 2008 2009 2010 2011

Source: ELSTAT


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-


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.


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.


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


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,


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.


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


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.)


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.


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


Reta

il Tra

de

-50

-40

-30

-20

-10 0

10

20

30

40

50

60


Serv

ices

-40

-30

-20

-10 0

10

20

30

40


Source

: IOBE


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


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


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)


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


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


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.


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


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,


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.


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



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-


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.


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)



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. .


87

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.


88

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-


89

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


90

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


91

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%).


92

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).


93

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


94

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


95

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


96

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.


97

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).


98

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


99

PART A

(BRIEF LIST OF STRUCTURAL Indicators)


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


102

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


103

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


104

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


105

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


106

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


107

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


108

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



109

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


110

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


111

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



112

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


113

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 : : : : : : : : :



114

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)

IOBE “The Greek Economy” vol. 02/11 Appendix

117

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


118

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


119

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


120

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


121

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


122

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


123

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 : : : : : : : : :



124

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


125

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


126

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


127

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


128

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


129

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 : : : : : : : : :



130

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


131

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


132

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

the greek economy 2/11

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