“Poor” Greece takes the lead in development

Greece is one of the countries with the best performances in the eurozone recently, but it has also become poorer points out the Financial Times’ Alphaville column.

He notes the outlook upgrade from S&P and Eurostat data on Monday which showed that Greek public debt in relation to GDP fell by 10.8 percentage points in 162% in 2023. The Greek economy grew by 2% in 2023, outstripping the 0.3% contraction in Germany.

The recent recovery, however, has lifted Greece’s standard of living slightly above the EU average over the past two years – and not enough to move it out of last seat in the eurozone.

This is a relatively new figure for Greece, as GDP per capita was similar to that of the EU average until 2009. Since then, 10 countries have seen living standards rise more than Greece’s, leaving it ranked as the second poorest in the EU after Bulgaria which is not in the eurozone.

The “why” is hidden in the 10-year crisis and the austerity that was imposed. The Greek economy shrank by almost 30% In 2016, consumer spending fell 24% from 2007, government spending fell 20%, and investments sank by 65%. Over the same period, manufacturing activity fell by almost half, retail trade and business activity shrank by almost a third. Unemployment soared to an all-time high of nearly 30%.

As a result, the Greek economy is now around 19% smaller than it was in 2007—despite the country’s strong post-pandemic recovery—while the EU economy as a whole has grown by 17%.

In its latest report on the country, the IMF also mentioned the climate change as a risk – as 90% of the country’s tourism infrastructure and 80% of industrial activities are located in areas exposed to high climate risks – and increasingly dismal demographics. Births in Greece fell to a nine-decade low in 2022, worsening the aging of population and shrinking its population as many young people leave the country every year.

Overall, Greece’s economic recovery should be celebrated, but it must be seen in context significant financial crisis that left her in a hole that may take a generation to climb out of, Alphaville concludes.