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Greek Economy Needs Growth Strategy

Economic Bulletin of March 2, 2012

Greek Economy Needs Growth Strategy (PDF, 374.15 KB)

By Karl Brenke in: DIW Economic Bulletin 3/2012.

Greece has been living beyond its means for a long time now and has accumulated foreign debt. The high level of national debt is merely a reflection of the problems; the actual cause is insufficient economic power. The top-priority political objective is to strengthen the substance of the economy-in particular, the export base-to such an extent that in future, the balance of payments is at least equalized. This means Greece needs a growth strategy to catch-up industrialization. So far, revenue in the economic exchange with other countries has been mainly generated by tourism. However, this pillar is far from sufficient; although there are growth prospects in tourism in southern Europe, these should not be overestimated. On the other hand, Greece's industrial base is only small and heavily biased towards the domestic market. Its production structure and foreign trade links for goods show that the Greek economy presents virtually no competition for developed industrialized nations. Consequently, contrary to claims, the wage restraint in Germany has not put the Greek economy under significant pressure, either. The manufacturing sector and large sections of the economy are to a large extent marked by small-scale production. Overall, in Greece, there is one self-employed worker for every two employees; the employment structure more typical of a transition economy.

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