EU data confirm that Greek economy is mostly isolated

Greece is a laggard among the 25 European Union member states not only in foreign direct investment but also in direct investment abroad, data published yesterday by Eurostat, the EU’s statistics agency, show. The data confirmed earlier statistics published by the Organization for Economic Cooperation and Development (OECD) and the Bank of Greece. Even though the data in the three sources differ (a matter of definition, since the source – the Greek government – is the same) they agree on one thing: Greece is an isolated economy. The country’s poor record in attracting foreign direct investment has been attributed to many causes: bureaucracy, low competitiveness and corruption. It is not only foreign direct investment that is lacking, but also domestic private investment. Some economic experts remark that there seems to be an excess of capital. Banks, for example, appear not to want our savings; that is why they offer such low savings interest rates. This «excess capital,» however, does not translate into Greek investment abroad. According to Eurostat data, the 25 EU member states invested 153 billion euros in 2005 in non-EU countries, up 19 percent from 2004. They also attracted investments worth 70 billion euros from non-EU countries, up 23 percent from 2004. Greece, in 2005, invested just 700 million in non-EU countries (and 100 million in EU members) and attracted 100 million euros in foreign direct investment from non-EU countries. By contrast, EU member states withdrew 300 million euros from Greece in 2005. Thus, Greece has attracted less investment than EU members with far smaller economies, such as Slovakia, Cyprus and the Baltic states (Estonia, Latvia, Lithuania). (Eurostat defines foreign direct investment as international transactions aimed at long-term investment in a country other than the investor’s, where the investor has a significant stake – of above 10 percent – in the management of the enterprise or project that receives the investment.) As mentioned above, the data published by OECD and the Bank of Greece diverge from Eurostat’s but confirm the overall picture: With a foreign direct investment inflow of $600 million in 2005, Greece ranks 30th, and last, among OECD members, while Greek direct investments abroad of $1.5 billion place Greece in 25th place. Bank of Greece data show a net outflow of foreign capital totaling 212.3 million euros in 2005, while Greek investments abroad reached 766.7 million euros.