Executive summary
After the 2008 crisis, the Greek economy initiated its recovery in 2017, bouncing back in 2018 with a 1.9% growth rate that was estimated to reach up to 2.3% by 2019. Unemployment – although still high – has edged down from 27.5% in 2013 to around 17.3% in 2019.
While Greece has contained the COVID-19 pandemic effectively, the negative impact on tourism, investment and public finances is a setback to Greece’s longer-term recovery. The impact of the COVID-19 pandemic on the tourism sector is unprecedented. Tourism has been hard hit, especially in places where the sector supports many jobs and businesses. OECD estimates on the COVID-19 impact point to a 60% decline in international tourism – if recovery starts in July in 2020. This could rise to 75% if recovery is delayed to September and up to 80% if recovery begins in December 2020. Domestic tourism will recoup more quickly but will not be able to fully compensate for the decline in international tourism.
The unique geography of Greece shapes the distribution of population and high concentration of economic activities in urban regions. Compared to other OECD countries with large, sparsely populated regions, relatively more people live in Greece’s rural areas, especially remote ones with rather limited access to cities. The impact of the financial crisis has not been equal across Greek regions. Greece now has the 9th highest level of regional disparities in gross domestic product (GDP) per capita among 30 OECD member countries. The greatest declines in productivity because of the 2008 crisis occurred in remote islands, but also in Western Greece and Attica. The latter, which was contributing to 48% of national GDP and 43% employment by 2017, suffered disproportionally during the crisis, losing around 10% of its total population. Together with Central Macedonia, it experienced over half (58%) of total job losses in Greece. This economic shock was so sharp that “lagging” Greek regions have converged to Attica’s current productivity level – which remains below its potential. This may be considered the “wrong kind” of regional convergence.
OECD estimates show that, at a growth rate of around 2%, Greece would recover to its pre-crisis period level in 15 years. In contrast, if growth in Attica could be restored to 3%, the recovery period in Greece would be halved to around 8 years. Thus, revamping the productivity of Athens is key to fostering Greece’s national growth, especially under the current circumstances of a global slowdown due to COVID-19. Recovery in Attica, however, should not be isolated. Balanced and widespread growth across all Greek regions is needed. European Union (EU) funds have played an important role during the recovery process and will continue to be crucial in the future. They represent over 80% of Greek public investment and OECD analysis estimates that, between 2009 and 2018, each euro of EU Structural Funds in Greece generated an additional 64 cents of GDP.
Since the global financial crisis, Greece has undertaken an impressive number of nationwide structural reforms (from pension and tax reforms to justice, labour market, public investment, social, energy and environmental policies) as well as decentralisation and regionalisation reforms. The country is now facing additional development priorities from fostering digitalisation, improving entrepreneurial and business ecosystems, and addressing environmental challenges. These new priorities must also tackle existing social challenges and mitigate rising inequalities.
The current COVID-19 outbreak is slowing recovery down and putting the Greek economy at risk again. While the medium- and long-term impacts of the pandemic remain uncertain, the Greek government will need to co-ordinate policy action at the local, regional and national levels in order to minimise job losses and business closures in the immediate and medium terms.
Preparation of the current national strategy should be complemented by a new place-based development strategy. Regions, cities, rural communities and municipalities need to align objectives and all have an active role to play in meeting the economy-wide targets while tailoring public investments and service delivery to local needs. To fulfil this task, Greece will need to continue advancing reforms in institutional and fiscal multi-level governance systems and sustain the progress in the governance and utilisation of EU funds in the 2021-27 programming period, with a particular focus on regional development.
To sustain Greece’s economic recovery from the global financial crisis and ongoing COVID-19 pandemic, the review has identified concrete actions in five main areas:
1. Strengthen regional policies
Strengthen the place-based approach to regional development by creating a national place-based policy with a long-term vision, prioritising place-based policies across different types of Greek regions and adapting structural policies to their needs and opportunities. Elaborate long-term evidence-based and integrated development strategies at the regional and local levels and support place-based policy intervention through quality data and public consultations.
Make better use of spatial planning and develop integrated perspectives at the regional level through the facilitation and speeding up of the transition to the new integrated approach to regional spatial planning, aligning regional spatial plans and regional operational programmes.
Develop an explicit national urban policy, strengthening the governance systems of the metropolitan areas of Athens and Thessaloniki and reinforcing inter-municipal co-operation to foster the role of cities and municipalities as economic development actors.
Strengthen the co-ordination of rural development with sectoral policies and develop an integrated medium- to long-term overarching rural development strategy.
Foster rural economic diversification supporting bottom-up initiatives beyond agriculture and traditional sectors, favouring the digital transformation of the rural economy and sustaining the development of a broader view of innovation – beyond the traditional science and technology-based model – through better-tuned regional smart specialisation strategies.
Strengthen the competitiveness of the agro-food sector from the bottom up through the development of new and more focused measures to preserve and consolidate agricultural land, strengthening demand-driven farm advisory and extension services and modernising producer groups and co-operative enterprises.
2. Foster productivity, competitiveness and local job creation in all regions
Focus support on regions’ key economic specialisations, further differentiating smart specialisation strategies among groups of regions in Greece.
Strengthen support to SMEs for local employment generation by mobilising regional networks of entrepreneurs and researchers to better link research and businesses, consolidating the knowledge triangle of education, research and innovation through place-based policies and strengthening and expanding business services for SMEs in all Greek regions.
Develop integrated national and regional tourism strategies for the medium to long term using tourism as a catalyst for regional development and connecting tourism to local value chains by: fostering integrated approaches to thematic tourism product development and marketing; promoting vertical production processes to enhance the delivery of high added-value certified food products; developing an all-year-round supply chain network; developing a comprehensive agro-tourism policy; and promoting measures and actions in regions and localities targeted at fostering digitalisation in the tourism sector.
3. Foster quality employment and social inclusion in all regions
Facilitate the creation of quality jobs and support the development of relevant local skills through aligning education and skills provision with local labour markets, strengthening mechanisms and actions to better match job seekers and employers in local labour markets and developing regional strategies to retain youth and talent.
Reinforce local services to reduce poverty and support social inclusion by strengthening both awareness and the ecosystem to support the social economy in all Greek regions and reinforcing actions at the national and regional levels to better connect local labour markets with existing social services.
4. Enhance connectivity and sustainable development in all regions
Enhance regional connectivity to meet current and future needs by advancing in the National Digital Strategy and strengthening the digital infrastructure across regions – particularly in remote places.
Ensure sustainability from the bottom up and protect natural assets in Greek regions by fully implementing Greece’s Circular Economy Strategy, enforcing its action plan in all regions and increasing the commitment to the environmental agenda at the subnational level.
5. Strengthen multi-level governance for regional development
Consolidate the implementation of the decentralisation and regionalisation reforms by better aligning fiscal and administrative decentralisation and further differentiating territorial governance.
Strengthen the Greek multi-level governance framework and regional development, consolidating and expanding the progress made over 2014-20 for the overall architecture of the ESPA system. Simplify and streamline the rules and procedures both for the management of EU Structural Funds and for the design and implementation of regional development policies. Reinforce the administrative capacities of all regions, municipalities, actors and institutions. Improve efficiency and increase trust among parties through strengthened inter-sectoral and vertical co-ordination across municipalities and regions while building stronger partnerships with subnational governments.
