The detailed report of the European Commission on the Greek economy, released on Monday, highlighted the five inherent problems Greece faces, reminding that while the country is preparing to emerge from its enhanced surveillance status, it continues to suffer from excessive macroeconomic imbalances.
The report, which forms part of the European Semester process, noted that Greece has recovered rapidly from the pandemic, but its economy remains exposed to inherited imbalances. It is only Greece, Cyprus and Italy that are in such a state.
The five problems the Commission highlights are the following: the high public debt, the high rate of nonperforming loans, the persistent trade deficit, the high jobless rate and the low rate of potential growth. All these open wounds have, along with a series of other, partial problems, been festering in the Greek economy for years and have not resolved by the bailouts despite progress in some areas.
Although reduced significantly to 12% by last September, the rate of NPLs in Greece remains the highest in the European Union and burdens the profits of banks as well as their potential credit expansion to households and businesses. It is also noted that the capital adequacy ratio in Greece remains one of the lowest in the eurozone, at 15%.
The external position of the Greek economy remains negative: Despite its improvement last year, from 2020, the trade deficit amounted to 5.9% of gross domestic product, far above the level required for Greece to strike a balance internationally.
Foreign direct investments may have grown 13% annually in 2021, but their stock remains far below the EU average, at 27.3% of GDP against 77% in the bloc. Economic activity, the report highlighted, is focused on small and very small enterprises with limited access to financing, while tourism remains focused on the “sea-and-sun” model.
Unemployment remains among the EU’s highest, despite having eased, while competitiveness has improved but remains fairly low, the Commission noted.