the greek economy 3/13

ΙΔΡΥΜΑ ΟΙΚΟΝΟΜΙΚΩΝ & ΒΙΟΜΗΧΑΝΙΚΩΝ ΕΡΕΥΝΩΝ FOUNDATION FOR ECONOMIC & INDUSTRIAL RESEARCH

The Greek Economy

3/13

Quarterly Bulletin No 73, October 2013

IOBE “The Greek Economy” vol. 03/13

2

3

Editorial Policy

The analysis of the Greek Economy is the product of a collective effort by the research staff of the

Foundation. The views presented here represent a reached consensus and no individual bears sole

responsibility for all or part of it. Furthermore, the views expressed do not necessarily reflect those

of other organisations that may support, finance or cooperate with the Foundation.

IOBE

The Foundation of Economic and Industrial Research (IOBE) is a private, non-profit, public benefit

research organisation. Its purpose is to promote research on current problems and prospects of the

Greek Economy and its sectors and to generate reliable information, analysis and proposals for ac-

tion that can be of value to policy makers.

Copyright

ISSN 1108 – 1198

With the financial support of:

This study may not be reproduced in any form or for any purpose without the prior knowledge and

consent of the publisher.

Foundation for Economic and Industrial Research (IOBE) 11, Tsami Karatasou Str, 117 42 Athens, Tel. (+30210 9211200-10), Fax:(+30210 9233977) http://www.iobe.gr

http://www.iobe.gr/


4

Table of Contents

FOREWORD .......................................................................................................................... 5

THE RECOVERY REQUIRES A BREAK WITH THE PROBLEMS OF THE PAST ......................... 7

1. BRIEF OVERVIEW – MAIN CONCLUSIONS................................................................... 11

World economic growth has slowed down slightly in 2013 ............................................................ 11

The recession in Greece significantly eased in the second quarter of 2013..................................... 12

The contraction is expected to weaken further in the third quarter, while a new deterioration is

possible in the final quarter of 2013…………………………………………………………………………………………13

The State Budget deficit kept falling in the first eight months of the year ...................................... 14

The pressures from falling demand on the consumer price index are intensifying ........................... 16

2. ECONOMIC ENVIRONMENT ......................................................................................... 19

2.1 Trends and Prospects of the World Economy .............................................................. 19

The Global Economic Environment…………………………………………………………………………………………19

The Economies of the EU and the Euro area……………………………………………………………………………23

2.2 The Economic Environment in Greece ......................................................................... 28

Α) Economic Sentiment…………………………………………………………………………………………………………28

B) Fiscal developments…………………………………………………………………………………………………………35

3. PERFORMANCE AND OUTLOOK .................................................................................... 41

3.1 Macroeconomic developments .................................................................................... 41

3.2 Developments and outlook in key sectors of the economy ......................................... 56

3.3 Export Performance of the Greek Economy ................................................................ 66

3.4 Employment - Unemployment ..................................................................................... 71

3.5 Consumer Prices .......................................................................................................... 79

Recent Developments……………………………………………………………………………………………………………79

Medium-term Outlook……………………………………………………………………………………………………………81

3.6 Balance of Payments ................................................................................................... 83

Current Account…………………………………………………………………………………………………………………….83

Capital Account……………………………………………………………………………………………………………………..85

Financial Account…………………………………………………………………………………………………………………..85

Assessment…………………………………………………………………………………………………………………………..86

4. THE ECONOMIC IMPACT FROM CARBON LEAKAGE INDUCED BY INDIRECT EMISSION COSTS .............................................................................................................. 91

5. APPENDIX: KEY ECONOMIC INDICATORS ................................................................... 97


5

FOREWORD

This is the third report that IOBE is publishing in 2013 as part of its periodic series on the

Greek economy. The publication takes place at a critical time for Greece, amidst negotia-

tions with the troika about the sustainability of the country’s debt and about the fiscal

measures of the final phase of the fiscal consolidation process (2014 to 2016). As all IOBE

quarterly bulletins, the report contains four sections and an appendix with key structural

indicators. It starts with an introductory text on the outlook of the Greek economy

in late 2013 and early 2014, taking into account its year-to-date performance

and the global environment. The remaining sections of the report are structured as fol-

lows:

The first section presents a brief overview of the report's main points. Section two

examines the general economic conditions, containing: a) an analysis of the global eco-

nomic environment in the first half of 2013, based on the latest report of IMF and data

from other international organisations; b) an outline of the economic climate in Greece in

the third quarter, as compiled in the latest IOBE business surveys; c) an analysis of the

execution of the State Budget and the General Government budget from January to

August of 2013, together with a presentation of the draft State Budget for 2014.

Section three focuses on the performance of the Greek economy until mid 2013. It in-

cludes an analysis of: the current macroeconomic environment and its medium-term

outlook; the developments in key production sectors in the first six or seven months

of 2013, depending on data availability; the export performance of the Greek economy

from January to July; the developments in the labour market in the first half of the year;

the course of inflation from January to August; and, finally, the course of the balance of

payments in the first seven months of 2013.

Section four presents a study of IOBE on the economic impact of indirect emission costs

in sectors exposed to the risk of carbon leakage.

The report refers to and is supported by data, which were available up to 09/10/2013.

IOBE's next quarterly report on the Greek economy will be published in January 2014.


7

THE RECOVERY REQUIRES A BREAK WITH THE PROBLEMS OF THE PAST

The Greek economy is now very near to a stability point. Regardless of the detailed

technical analysis of how various economic magnitudes are measured and forecasted, the

twin deficits of the fiscal and external accounts, which conveyed the longstanding flaws of

the economy, are approaching an equilibrium point. The prices are falling and the six-year

recession gradually seems to be coming to an end. The stabilisation of the economy does

not only signify that the catastrophic scenario has now dwindled, but it also constitutes the

basis for any further improvement from now onwards.

The achieved stabilisation should not be compromised under any circumstances. The

stance that a recovery can be achieved through systemic deficits, as in the past, is naïve

and dangerous. The Greek society and economy should adjust to a paradigm with

two basic rules and corresponding constraints: the consumption growth should

follow the growth of productivity and the public sector should not spend money

that it does not have. This adjustment, together with the discipline that it would bring,

could become a significant consolidation factor, as it would make productivity growth and

competitiveness top priorities. But the current moment also imposes a deeper and broader

assessment and reflection. It should be stressed that if the necessary structural reforms are

not implemented with clarity, persistence and urgency, the Greek economy is in danger of

“moving sideways” for long period in the future, with very weak growth rates, and income

and productivity stuck at low levels.

Regarding the macroeconomic assessment, the performance in the second quarter of

2013 was better than expected. Output is expected to improve in the third quarter as

well (partly due to positive developments in tourism) and to weaken in the last quarter.

Given the overall performance in the first half of the year, as explained in the report, an

improvement of the output projection for the current year is justified. The output contrac-

tion is expected to stand at around 4%, even though the qualitative indicators of the cur-

rent economic environment and most secondary indicators point to a slightly deeper con-

traction. Subsequently, given the most recent projections and reassessments, the contrac-

tion will most probably end in 2014. However, there are still significant risks and pending

issues that could lead to a weaker performance, without ruling out a positive surprise as

well. What are the key qualitative features of the recent adjustment, what do they signify

for the coming period and what are the policy suggestions that stem from them?

On the positive side, the main (and also very promising for the future) recent element was

the growth of tourism. With domestic demand receiving constant pressures and

the relatively slow realignment of production of goods to the foreign markets,

tourism has a significant role to play in easing the recession. As long as there are


8

no unexpected negative external shocks, tourism will continue to play this role in the near

future as well.

Private consumption fell in the second quarter less than previously anticipated. A possible

explanation for this could be that unregistered income, which has remained resilient to the

crisis, found its way back to consumption with the first signs of stabilisation. In general, the

beneficiary impact of the gradual stabilisation and the recovery of the expectations in an

economy that has been in a recession over such a long period should not be underesti-

mated. Nevertheless, private consumption, while remaining the key GDP component, con-

tinues to contract. Under these circumstances, the persistent recession should not be seen

as a surprise, while recovery would not be feasible without stabilisation and grad-

ual increase of consumption expenditure as well. The prices of goods and services

are now systematically falling. The very significant decrease of labour cost and demand has

resulted, albeit with a large lag, in price reduction in a wide range of sectors. This devel-

opment is positive and significant, even though the continuous reduction of relative prices

hinders the service of accumulated debt (public and private).

Exceptionally sluggish investment and exports are the key points of concern cur-

rently. With total output contracting, the growth of unemployment comes naturally. It

should be noted here that the positive momentum in the external balance would be much

weaker if we isolate the impact of factors that perhaps could not be considered systemic,

such as fuel exports. Overall, in the past two years, the exports of products have remained

stagnant in real terms.

So, if the issue is to turn to a new, export-oriented entrepreneurship, with the

corresponding investment to support it, as a condition for a systemically solid

external balance, the goal has not been achieved. The very significant reduction of

labour cost, together with the fall of domestic demand, were not sufficient to turn the en-

terprises to focus on exports. To an extent this was to be expected – the production tech-

niques change only gradually. The enterprises need time to absorb new paradigms and

subsequently to adjust and restructure accordingly. The restructuring largely depends on

and transpires in terms of new investment – as long as this type of investment remains at

very low levels, positive developments will be observed only at a very slow pace. This type

of investment remains at a low level for at least three reasons – lack of funding at favour-

able terms, excess capacity in many sectors and most importantly the very intense uncer-

tainty, both at macroeconomic level and at the level of fiscal and other specific policies.

A gradually increasing investment activity, both from enterprises already active in the

market and for new entrepreneurship, is the real prerequisite for growth of the Greek

economy from the current starting point. The new investment projects will signify a break

with past practices of largely state-dependent competitiveness and weak competition and


9

innovation, and will gradually lead to growth of the exports of products and services and to

import substitution. The role of economy policy should not be to supplant entre-

preneurship - it is absolutely crucial to clearly state their separate roles, their

distance and neutrality. In addition, the following specific economic policy priorities to

support investment should be put in place: first, create the conditions for the gradual nor-

malisation of the funding terms; second, contain the reduction of domestic private con-

sumption; third, achieve a more effective public investment programme for projects on

necessary basic infrastructure, and fourth, implement structural reforms, especially those

that clarify the relations between the public sector on the one hand and the private sector

(individuals and enterprises) on the other. These reforms should, of course, cover long-

standing issues such as a stable and simple tax system, effective stamping out of tax eva-

sion and tax avoidance, and functional utilisation of new ITC technologies in public admini-

stration.

In summary, the Greek economy, which came completely off-balance, passing through pe-

riods of free-fall since 2009, has avoided collapse. From this viewpoint, the unspoken but

clear covenant between Greece (which undertook the fiscal consolidation burden) and its

partners and donors (who undertook the servicing of the previously accumulated debt) was

crucial and successful. However, with a joint responsibility of both sides, reform momentum

has not emerged. There were individual efforts, but they were fragmented and lacking the

necessary broad support. As a result, while the economy is essentially smaller by a quarter

since the start of the recession, the need to realign its production structure is still not ad-

dressed.

The view that the adjustment achieved thus far has been driven by the bilateral

risk of a disorderly Greek default and contagion to other parts of the Euro area,

is justified. Now that a stabilisation point is approaching and the initial threat is fading, it

would be a policy failure on both sides to consider the job done. On the Greek side, it

would be disappointing and dangerous not to turn the crisis into an opportunity

to correct the deep structural flaws that lead over time to low competitiveness

and deficits. But on the side of the Euro area as well, at least in the medium term, the

solution cannot be exhausted in imposing fiscal discipline and isolating the least competitive

and most indebted member-states, especially given that the adopted monetary policy does

not necessarily reflect the priorities of the weakest member-states. Additional, properly and

jointly designed, broad-ranging programmes to fund projects aimed at reform and growth

could be a mutually beneficial solution. Such programmes could boost competitive-

ness, change the rules of the game and lead to an indirect and gradual but clear

easing of the real debt burden, consolidating the choice for growth rather than stagna-

tion and return to the past.


11

1. BRIEF OVERVIEW – MAIN CONCLUSIONS

World economic growth has slowed

down slightly in 2013

Two counteracting trends dominated in

the world economy in the second quarter

of the current year. In the developed

economies, depending on the particular

phase of their cycle, output growth accel-

erated or contraction weakened, while in

contrast the growth momentum of the

developing economies weakened further.

The slightly stronger GDP growth in the

US (1.6% from 1.3% in the first quarter),

the easing of the Euro zone recession (to

0.5%) in the aftermath of five quarters of

continuous deepening of the contraction,

and the return of Japan to positive

growth rates (+0.9%), boosted economic

activity in the developed economies over-

all. In the US the acceleration came from

recovery of the housing sector and unin-

terrupted funding of its economy, while

exports gave a boost to the Euro area

economies, overcompensating the pres-

sures from the adopted fiscal consolida-

tion policies. In G20 overall, GDP in-

creased by 2.6%, from 2.2% in the first

quarter of 2013.

In contrast, the growth of the developing

economies slowed down further in the

second quarter, more notably in India

(4.4% from 4.8%) and in Russia (1.2%

from 1.6% in the first quarter) where ex-

port demand contracted significantly,

while capital outflows strengthened.

Weaker slowdown was observed in China

(7.5% GDP growth from 7.7% in the first

quarter). Overall, the world economy, ac-

cording to IMF, grew by 2.5% in the first

half of the year, at the same rate with the

same period of 2012.

The recovery of economic activity in the

developed economies is expected to con-

tinue throughout 2013. However, there

are significant risks, coming mainly from

fiscal developments in the US and the re-

jection of the 2014 budget. The conse-

quences from a failure to achieve a deal

on the general government debt ceiling

are hard to access. However, if a dead-

lock is prevented, the US economy is ex-

pected to continue its acceleration, with

the 2013 growth rate reaching 1.6%. In

the Euro area, the negotiations on the

need to continue the funding of Greece

and Portugal will play a critical role. The

government formation process in Ger-

many, which could take more time than

expected, could delay the relevant deci-

sions. However, these developments are

not expected to prevent further easing of

the recession in the Euro area, which

most probably will be less deep than in

the previous year (-0.4% from -0.6%).

Regarding the developing economies,

GDP growth is expected to strengthen

over the coming months, especially in the

Asian countries. This trend, however, will

not be robust enough to prevent their

milder year-on-year growth for 2013

overall, due to the bad performance in

the first half of the year, at 4.5%, from

5.1% in 2012. Given the new trends in

the global economic regions, the

growth rate of the world economy is


12

expected to decline slightly to 3.0%,

from 3.2% in the previous year.

The recession in Greece significantly

eased in the second quarter of 2013

The GDP of Greece fell by 3.8% in the

second quarter of the year, compared

with 5.6% decline in the preceding

quarter and 6.4% contraction in the

corresponding period of 2012. This is

the most notable easing since the start of

the contraction in Greece in 2008. Overall

in the first half of 2013, GDP was

down 4.7% year-on-year, compared

with 6.6% contraction in the same pe-

riod of the previous year. The easing of

the recession came mostly from weaker

reduction of household consumption ex-

penditure and better performance of the

external sector.

In more detail, despite the impact of the

fiscal measures on the income of public

servants and pensioners and the start of a

broad restructuring of employment in the

public sector, the strong contraction of

household consumption demand in the first

quarter (-8.7%) weakened in the second,

resulting in 7.5% drop in the first half of

the year overall, compared with 9.1% con-

traction in the previous year. The consump-

tion expenditure of the public sector fol-

lowed a similar trend, where the reduction

reached 7.4% in the first half of the year,

compared with only 0.2% in the corre-

sponding period of 2012. Intense trend re-

versal between the first two quarters of the

current year was observed in capital forma-

tion, exclusively due to fluctuation of inven-

tory accumulation. While fixed capital in-

vestment was contracting by 11% through-

out the first half of the year, inventories

accumulated by €264 million in the first

quarter (compared with €813 inventory liq-

uidation in the first quarter of 2012 or

+€1.1 billion year-on-year change), with

inventory liquidation of €190 million taking

place in the second quarter (overall year-

on-year fall in the change of inventories by

€269 million). Subsequently, capital forma-

tion was down by 4.6% year-on-year in the

first half of 2013, in the aftermath of their

vertical drop by 25.2% in the previous year.

In the external sector of the Greek econ-

omy, the exports of goods continued to in-

crease, with an average growth rate of

4.0%, slightly stronger year-on-year (from

+2.5%). It should be noted, however, that

their growth was largely due to the growth

of exports of petroleum products, as apart

from this category export growth was only

observed in agriculture products. Despite

the significant boost of foreign tourism

since May, which led to a reduction of the

contraction of exports of services in the

second quarter (but not to growth), overall

in the first half the exports of services

slightly declined (-0.6%), compared with

stagnation in 2012 (+0.1%). First half to-

tal exports have remained at the same

level in constant 2005 prices since

2010 (about €19 billion). The contrac-

tion of the demand for imports strength-

ened, reaching 9.8% in the first half of the

year, which allowed a further, significant

reduction of the external deficit by 43% to

only €2.9 billion (compared with €17.5 bil-

lion in 2008).


13

The contraction is expected to

weaken further in the third quarter,

while a new deterioration is possible

in the final quarter of 2013

The implementation of the structural re-

forms in the public sector, many of which

had stalled, together with the negotia-

tions with the troika on the continuation

of the fiscal consolidation programme for

2014-2016, are the main drivers behind

the socioeconomic developments in

Greece for the rest of 2013. The passing

of the Medium Term Fiscal Strategy 2014-

2017, together with the 2014 Budget,

through parliament are the critical junc-

tures for the corresponding political proc-

esses.

The completion of the cuts (Christmas

and vacation benefits) will put pressure

on the disposable income of public ser-

vants and pensioners, while the accumu-

lation of tax payments in the final four

months of the year will reduce further the

financial liquidity of all households. Be-

sides, the extensive restructuring of the

state since the end of the second quarter,

in enterprises under state control or

through the mobility programme in public

administration entities, despite its neces-

sity, creates significant uncertainty among

the employees regarding their income,

with unfavourable impact on their con-

sumption. The contractionary impact on

household consumption spending will

be moderated by the expected easing of

unemployment in the third quarter and

the relatively low base level of compari-

son in the last quarter of 2012. Hence,

private consumption will contract

stronger in the second half of the

year than in the second quarter

(-6.3%), yet its contraction for 2013

overall at 7.2% will be weaker than

in the previous year (-9.1%).

Undoubtedly, the extensive restructuring

of the public sector will have a contrac-

tionary impact mostly on public con-

sumption. The acceleration of the Public

Investment Programme (PIP) that started

in July is expected to continue until the

end of the year, bringing cuts of the con-

sumption expenditure of the State

Budget. As the achievement of the State

Budget target in the first eight months of

the year came largely from under-

execution of the PIP by €1.3 billion, a

stronger execution of the programme in

the coming months will require further

restraint on public consumption, in order

to achieve the expenditure reduction tar-

get of the budget. On the other hand, the

low base level of public consumption in

the third quarter of the previous year will

slow down its year-on-year contraction.

Taking this into account, the contrac-

tion of public consumption will

slightly slow down in the current

half of the year. Overall in 2013,

public consumption is expected to

decline by about 6.0%, stronger

than in the previous year (-4.2%).

The anticipated acceleration of PIP will

have a beneficiary impact on output by

stimulating investment. The under-

execution of the programme in the first

half of 2013 (only €1.8 billion, from €6.6

billion revised target in the draft 2014

State Budget) implies that about 70% of


14

PIP for 2013 will be implemented during

the current half of the year. No significant

support of investment during this period

is expected to come from the privatisation

– concession programme, the implemen-

tation of which was significantly short of

target in the first nine months of the

year. Regarding private investment, the

sharp decline of construction activity will

carry on, albeit at a slower rate that in

the first half of the year. The very low

level of domestic demand, the credit

crunch (at least until the completion of

the reassessment of the capital adequacy

of the banks) and the high cost of energy

will continue to hinder the execution of

investment plans. The foreign interest in

direct investment has also weakened

since early 2013. Apart from the current

effects, capital formation will also be

curbed by the technical effect from the

exceptionally high level of inventory ac-

cumulation in the last quarter of 2012.

The above outlook in the constituent

elements of investment activity is

expected to boost the contraction of

investment in the current half. As a

result the contraction rate for 2013

is expected to reach about 9%, still

significantly weaker than in 2012

(-17.6%).

In contrast, positive developments are

expected to come from the external sec-

tor, mainly from strengthening of exports

rather than decline of imports, as was the

case in the first half of the year. Foreign

tourism has kept growing in the most im-

portant third quarter as well (11.0%

growth of international arrivals in the

largest airports during this period,

+13.9% increase of the surplus of travel

receipts in July). This will lead to growth

of the exports of services, in the third

quarter at least, with a good chance of

achieving growth in the second half over-

all. The exports of goods, including fuels,

are expected to keep growing at a mild

rate, with the strong boost of demand

from Turkey and certain countries in

North Africa and the Middle East, and the

easing of the recession in the Euro area,

which has already increased notably the

absorption of Greek exports in the current

year. The growth of exports in the

second half of the year will over-

compensate for their fall in the first

half, resulting in a growth of about

1.5% in 2013 overall, compared

with 2.4% reduction in the previous

year. Imports will continue to decline,

probably at a slightly faster rate than in

the first half of 2013, reflecting the fur-

ther weakening of the purchasing power

of the households, for the same reasons

that were already noted in the discussion

on the outlook of private consumption. As

a result, the contraction of imports is

expected to slightly exceed 10% in

the current year, in the aftermath of

13.9% decline in 2012.

Taking into account the above

trends in the key components of

GDP, IOBE is estimating that the

contraction of the Greek economy in

the current year will slightly exceed

4% to reach about 4.1%-4.2%.

The State Budget deficit kept falling

in the first eight months of the year


15

The State Budget deficit was lower year-

on-year by €10 billion in the first eight

months of the current year, to reach €2.5

billion. The fall of interest payments due

to the PSI, by €5.7 billion, was the key

contraction driver of the deficit, together

with the reduction of primary expenditure

by €2.4 billion through cuts in salaries,

pensions and social expenditure. Reve-

nues increased as well (+€1.8 billion),

contributing as well to the achievement of

a €2.9 billion primary surplus. However,

the revenue growth came from stronger

inflow of PIP funds (+€1.5 billion), fall of

tax rebates (€1.2 billion) and the collec-

tion of €2.2 billion from ANFAs and SMPs.

Removing the impact from these factors,

the revenues in the first eight months of

the current year were down by €1.9 bil-

lion year-on-year. Still, the revenue short-

fall from the State Budget target of 3.6%

reduction in 2013 is expected to be re-

duced by the accumulation of tax pay-

ments in the last quarter of the year (in-

come and property taxes).

Regarding the draft 2014 State Budget,

General Government deficit (according to

ESA-95) is expected to reach €4.3 billion

or 2.4% of GDP in 2014, about the same

as in 2013 (€4.4 billion or 2.4% of GDP).

However, as the negotiations with the

troika about the fiscal measures in 2014-

2016 are still on-going, the draft does not

specify if the achievement of this level of

deficit requires extension of the imple-

mentation of existing measures (with re-

gards to duration, tax base, tax coeffi-

cients, etc.) and/or the adoption of new

measures.

General Government debt is expected to

decline marginally in 2014, by about €1.6

billion or 1.0% of GDP. The draft does

not specify the impact on debt from the

current execution and the goals for next

year of the privatisation – concession

programme.

Unemployment declined marginally,

remaining high throughout the year

The significant easing of the recession

also has an impact on the labour market,

as unemployment fell to 27.1% in the

second quarter from 27.4% in the pre-

ceding quarter, recording a quarter-on-

quarter decline for the first time since the

second quarter of 2009. In the first half

of the year overall, unemployment

reached 27.2% of the labour force, 4.2

percentage points higher year-on-year. As

evident from the Labour Force Survey of

ELSTAT, the employment boost during

this period came also from about 10

thousand new jobs in Public Administra-

tion – Defence – Compulsory Social In-

surance, the largest absolute increase

among the 21 key branches of the Greek

economy, which is perhaps due to sea-

sonal employment during the summer

months. The increase of foreign tour-

ism since May did not have a posi-

tive impact on employment, at least

in the second quarter, as the number

of jobs in Accommodation and Food Ser-

vices was lower year-on-year by 3.6%

(or about 9,800 people).

The expected weakening of the GDP con-

traction in the third quarter as well is es-

timated to have eased further – tempo-


16

rarily at least – the pressures on employ-

ment. The stronger foreign tourist flows

led to a mild increase of employment in

activities auxiliary to tourism, while the

positive impact from seasonal employ-

ment in the public sector carried over to

the third quarter as well. On the other

hand, in the last quarter of the year,

when the positive impact of the above

factors will fade away, unemployment is

expected to rise again. Job creation in the

private sector is limited, while foreign di-

rect investment has remained low-scale.

Fall of employment in the public sector is

also expected to take place from the

commitment of the government to its

funding partners for 4,000 job cuts in the

current year, unless its implementation is

rescheduled for early 2014. The increase

of unemployment will be ameliorated by

the strengthened job support pro-

grammes for the unemployed by the

Manpower Employment Organization.

The reversal of the growth of unem-

ployment in the second quarter and

most probably in the summer

months as well, until and including

September, is anticipated to lead to

an average unemployment rate for

2013 of about 27.5%, from 24.2%

in 2012.

The pressures from falling demand

on the consumer price index are in-

tensifying

The weakened household demand, to-

gether with the structural changes in the

labour market, continue to exert defla-

tionary pressure on prices. As a result,

deflation of 0.5% was recorded in the

first nine months of the year, compared

with 1.6% inflation in the same period of

the previous year. The impact of the

above factors on prices will continue

throughout 2013, while further impact on

demand in late 2013 is expected to come

from the scrapping of Christmas bonuses

for public sector and pensioners. The

build-up of tax payments in the last four

months of the year (income and property

taxes) will limit further disposable income.

In addition, any positive impact exerted

on inflation by the hike in the excise tax

of heating oil in October 2012 will cease

to exist in the last quarter. All these fac-

tors will boost the deflationary trends.

Limited easing of the deflationary pres-

sures could soon come from a likely rise

of the prices of public transport tickets in

Athens. Therefore, the fall of CPI will

intensify in the last quarter of the

current year, with the rate of change

for 2013 overall standing at -0.6%,

compared with +1.5% in 2012.

IOBE study: “The economic im-

pact from carbon leakage induced

by indirect emission costs”

IOBE is conducting a study aiming at

quantifying the impact on the Greek

economy from passing on the additional

cost of purchasing CO2 emission rights to

electricity prices. The analysis focuses on

branches that are recognised as being

exposed to the risk of carbon leakage due

to the serious deterioration of their com-

petitiveness as a result of the increase of

electricity prices induced from indirect

emission costs.


17

The economic impact from the increased

indirect emissions costs on sectors of

Greek manufacturing is significant. Even

with the current relatively low ETS prices

(close to 5 €/tCO2), the indirect carbon

leakage leads to losses of about €95 mil-

lion value added, about €15 million tax

revenue and more than 1,900 jobs. These

losses increase with the rise of ETS

prices.

To a large extent the negative impact can

be avoided with a compensatory mecha-

nism of the indirect emission cost in

branches that are exposed to the risk of

carbon leakage.

Such mechanisms have already been put

in place in other European countries, such

as Germany, the UK and Norway. The

cost of such a mechanism is largely offset

by avoiding the loss of tax revenue

caused by indirect carbon leakage. As a

result, at a relatively low cost or even

with a positive overall fiscal outcome, the

State has the ability to protect many jobs

in strategic branches of the Greek econ-

omy, an effort that is just as significant as

attracting new investment in the country.


19

2. ECONOMIC ENVIRONMENT

2.1 Trends and Prospects of the World Economy

The Global Economic Environment

The latest report of the International

Monetary Fund on the world economy1

anticipates a mild slowdown in 2013, a

forecast that constitutes a downward re-

vision of the growth forecast, compared

with both IMF’s previous report2 and the

European Commission report,3 as both

international organisations were expect-

ing that the growth rate of the world

economy will remain unchanged in the

current year. In particular, the report

predicts 2.9% growth of the world eco-

nomic activity in the current year, from

3.2% in 2012. The key reasons for the

downward revision can be found in the

prolonged debt crisis in Europe, fiscal

constraints in other developed economies,

such as in the US, and weakening of their

domestic demand, together with growth

slowdown in the developing economies.

In 2014 the growth of the world economy

is expected to strengthen to 3.6%, which

however is lower than the forecast in the

previous report (3.8%). Evidently, the

return of the world economy to high

growth rates is not imminent.

Without a doubt, the latest forecasts are

characterised with uncertainty related

mainly to the recent developments in the

US economy, regarding the rejection of

the draft 2014 budget and its impact

(temporary closure of many federal ser-

1 World Economic Outlook Update, IMF, October 2013 2 World Economic Outlook, IMF, July 2013 3 European Economic Forecast, Spring 2013, European Commission, May 2013

vices), and with the crucial negotiations in

Congress until mid October regarding a

deal on raising again the general govern-

ment debt ceiling. The direct impact of

not approving the budget for next year

includes temporary interruption of the

operation of many federal services (such

as defence and culture services, health

research centres, etc.), which took about

700,000 public servants temporarily out

of their jobs. At international level, the

direct impact includes fall of oil prices, the

dollar exchange rate, and the Dow Jones

index of the New York Stock Exchange for

at least the first two weeks of the fallout,

together with a reduction of the global

stock market indexes, as for example in

the Asian markets. Nevertheless, the im-

pact from a temporary disruption of fed-

eral services is negligible compared with

the risk from a potential fallout in Con-

gress on setting a new debt ceiling. Such

a dismal scenario, which would lead to an

immediate disorderly US default, would

bring extensive negative economic effects

at a global level.

On the other hand, in the EU the reces-

sion seems to be easing, with the econ-

omy likely to return to mild, at least,

growth rates in the near term. The Ger-

man elections are among the key drivers

among the latest politico-economic

events. The strengthening of the govern-

ing Christian-Democrat party, together

with its inability to form a government in

a short time period, due to the failure of


20

its until recently coalition partner (the

Liberal party) to enter parliament, create

a complex political setup in the strongest

EU economy. A “grand” coalition (Chris-

tian Democrats and Social Democrats)

seems to be the only likely solution for

the formation of a government, yet this

could potentially require 2-3 months.

However, critical decisions at the level of

the Euro area and EU, concerning issues

such as debt sustainability of economies

at the periphery, and the implementation

of the summer decisions on the European

banking union (discussed in more detail in

the next section on the economies of the

Euro area and the EU), might have to be

taken within this period.

In more detail regarding the major world

economies in the second quarter of 2013

and their outlook for the year as a whole

and in 2014:

The GDP of the US economy increased

year-on-year by 1.6% in the second quar-

ter of 2013, accelerating slightly com-

pared with the previous quarter (1.3%).

Quarter-on-quarter, the US economy

grew slightly, by 0.6%. The acceleration

came mainly from stronger private de-

mand, with a robust recovery of the hous-

ing sector and preservation of credit flows

to the real economy, while it could have

been even stronger if it was not affected

by the implementation of large fiscal cuts.

The International Monetary Fund in its

latest forecasts estimates growth rate of

1.6% in the current year overall, while in

the following year it expects growth to

accelerate to 2.6%. Certainly, as already

noted, these forecasts contain significant

uncertainty, coming from issues such as

the ability of the US to avoid the threat of

a fiscal gap, which is more imminent than

ever before, the preservation of a rela-

tively smooth rate of fiscal consolidation

and the lack of change of the approach

concerning the lose monetary policy

adopted until now by the Federal Re-

serve. Regarding the labour market, the

unemployment rate is expected to remain

at relatively high levels for the US econ-

omy, as it is expected to approach 7.2%

in late 2013, falling below 7% in late

2014 to reach 6.8%.

In Japan the economy grew year-on-year

by 0.9% in the second quarter, while

quarter-on-quarter it increased by 0.6%.

In 2013 overall the growth rate is ex-

pected to reach 2.0%, while in 2014 it is

expected to slow down to 1.2%. Never-

theless, the growth in Japan in the cur-

rent year seems to be stronger than ini-

tially anticipated, which is primarily due to

significant contribution of private con-

sumption demand and net exports, which

in turn is supported by strengthening of

consumer confidence and business senti-

ment. The weakening of the yen seems to

have boosted significantly the competi-

tiveness of the economy, while the ag-

gressive monetary policy, with the hike of

interest rates, is expected to keep infla-

tion in check.

In China the growth rate for 2013 overall

is expected to reach 7.6%, compared

with previous forecasts of growth be-

tween 7.8% and 8.1%. In 2014 the

growth of GDP is expected to slow down

further to 7.3%, compared with more op-


21

timistic previous forecasts for 7.7%

growth. Regarding the leading indicators,

in June the purchasing managers’ index in

manufacturing declined to 48.2 (from

49.2 in the preceding month), which

forebodes a slight decline of manufactur-

ing in China in the coming months.

The corresponding index for services

marginally increased (from 51.2 in May to

51.3 in June). The slight weakening of

economic activity mainly reflects the slug-

gish demand from Europe and the slow-

down of the growth of domestic infra-

structure spending, together with other

types of investment. In addition, despite

the significant growth of credit supply, no

evident positive impact has come out of it

thus far, which implies that large part of

credit finance is channelled to activities

that do not support fast economic

growth. A possible cause for this is that

the retail banks are obliged to extend

credit at very low interest rates to state-

owned enterprises that implement large-

scale investment projects. These limita-

tions have led to very low profit margins,

and as a result the domestic banks have

developed a shadow banking system,

where alternative credit channels (such as

Wealth Management Products4) care for

the excess credit demand.

The GDP of Russia in 2013 overall is ex-

pected to increase by 1.5%, significantly

below the rate anticipated just a few

months ago in the summer by IMF

(2.5%). For 2014 the current forecast is

4 The WMPs function similar to bonds in that their matur-ity is from at least 6 months to at most 3 years. These products are lent to companies of “trust” at high interest rate and in such a way so as to appear off the banks’ balance sheets.

that GDP will grow by 3.0%, close to the

2012 rate. The slower rate of economic

growth is mostly due to reduced foreign

demand for Russian exports. The key

growth driver of Russia in the current

year is private consumption, as the con-

sumers seem to benefit from a significant

improvement of the conditions in the la-

bour market, growth of income and easy

access to credit. The central bank carries

on implementing a monetary policy of

high interest rates for a ninth consecutive

month, in order to reduce inflation, how-

ever this has an impact on the borrowing

cost of the enterprises.

According to the leading indicators on

world economic sentiment that are pub-

lished quarterly by IFO, the economic en-

vironment seems to have deteriorated

slightly at global level during the third

quarter of 2013. The economic climate

indicator fell by 2.7 units, after about a

year of continuous improvement (Table

2.2), to return to its level from the first

quarter of the current year, at 94.1,

slightly lower than the long-term average

of 96 units for the period 1997-2012. The

fall of the index came from a slight dete-

rioration of the assessment of the current

economic situation and the economic out-

look in the coming six months. However,

this is not a general trend, as the analysis

at the level of major economic regions

reveals a strong geographic variation.

Therefore, the recovery of the world

economy has not yet gained a strong

momentum. Nevertheless, the signs of

stabilisation of the world economy do not

seem to fade away.


22

Table 2.1

International Environment – IMF, World Economic Outlook (real annual % change)

2012 2013 2014

GDP

USA 2.8 1.6 2.6

Japan 2.0 2.0 1.2

Developing Asia 6.4 6.3 6.5

Of which China 7.7 7.6 7.3

India 3.2 3.8 5.1

AESEAN-5 6.2 5.0 5.4

Euro zone -0.6 -0.4 1.0

European Union -0.3 0.0 1.3

Central and Eastern Europe 1.4 2.3 2.7

Commonwealth of Independent States (CIS) 3.4 2.1 3.4

Of which Russia 3.4 1.5 3.0

Middle East and North Africa 4.6 2.3 3.6

Latin America 2.9 2.7 3.1

Of which Brazil 0.9 2.5 2.5

Sub-Saharian Africa 4.9 5.0 6.0

Global economy

3.2 2.9 3.6

World Trade

World trade volume (goods and services) 2.7 2.9 4.9

Imports: developed countries 1.0 1.5 4.0

Imports: emerging and developing countries 5.5 5.0 5.9

Exports: developed countries 2.0 2.7 4.7

Exports: emerging and developing countries 4.2 3.5 5.8

Developing Asia: Vietnam, India, Indonesia, China, Malaysia, Thailand, Philippines AESEAN-5: Vietnam, Indonesia, Malaysia, Thailand, Philippines MENA (Middle East & North Africa): Algeria, Bahrain, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, United Arab Emirates, Yemen. Sub-Saharan Africa: All countries excl. African MENA countries. Source: World Economic Outlook, IMF, October 2013

The economic climate indicator varies

significantly across the major economic

regions (Table 2.3). In particular, the

economic climate indicator improved

strongly in the third quarter in North

America, by 6.7 units, to reach 93.7,

from 87.0 in the preceding quarter. As a

result, the indicator exceeded its long-

term average of 91.6 for the period from

1997 to 2012. The strong increase of the

indicator in North America came from sig-

nificant boost of both constituent ele-

ments of the indicator, signifying that the

mild growth in this particular region is ro-

bust.

In Europe the economic climate indicator

also increased notably quarter-on-quarter

to reach 99.0 from 93.2. The improve-

ment came from much more positive out-

look for the coming six months. Mean-

while, the assessment of the current eco-

nomic situation also improved, albeit

slightly. Nevertheless, the assessment of

the current economic situation by experts

has still not become encouraging.

In contrast, the economic climate indica-

tor fell sharply in Asia to 89.5 from 106.1

in the second quarter. As a result, imme-

diately after the quarter when the indica-

tor recorded its highest level since late


23

2010, the indicator returned close to its

long-term average of 90.0. The significant

drop came from weaker assessment of

the current economic situation and more

pessimistic expectations about the future

economic growth of China.

The Economies of the EU and the

Euro area

The Euro area and the EU showed signs

of resilience to the recession for the first

time since the start of the current reces-

sion in early 2012. In particular, the GDP

contraction eased in the Euro zone, while

in the EU GDP remained unchanged, in

the aftermath of five and four quarters

respectively of continuous, albeit mild,

deepening. In the second quarter the

GDP of the Euro area fell by 0.5% year-

on-year, compared with a contraction of

1.1% in the first quarter of the year.

Quarter-on-quarter GDP increased by

0.3%, after six consecutive months of

contraction.

In the EU, GDP remained unchanged

year-on-year in the second quarter, in

contrast with a contraction by 0.7% in the

first quarter. Quarter-on-quarter GDP

grew by 0.4%.5 Following these positive

developments, the contraction in the Euro

area for 2013 overall, according to the

latest reports of the international organi-

sations, is expected to be marginally

weaker than in the previous year, at

0.4% from 0.6% in 2012.6 The GDP of

the EU is expected to remain unchanged

in 2013. For the following year, recovery

5 Eurostat, news release 130/2013 6 World Economic Outlook, IMF, October 2013

is anticipated in both regions, by 1.0% in

the Euro area and by 1.3% in the EU.

The halt of the GDP contraction had a

positive impact on the labour market. Un-

employment fell in the second quarter for

the first time in the last two years in both

the Euro area and the EU, to 11.9% and

10.7% respectively, from 12.6% and

11.3%.

About half (13) of the 25 EU member-

states with available data in the examined

period experienced some year-on-year

growth. The countries that achieved the

strongest growth rates were Latvia

(4.3%), Lithuania (4.2%), UK (1.5%),

Estonia (1.4%), Romania (1.4%) and Po-

land (1.1%). In contrast, the countries

with the largest GDP contraction during

this period were Cyprus (-5.2%), Greece

(-4.6%), Slovenia (-2.2%), Portugal

(-2.0%) and Italy (-2.0%).

Regarding the latest politico-economic

developments, small-scale shocks of po-

litical, legislative and judiciary nature took

place in Euro area countries, mainly in

Italy, Greece and Portugal, whose

strength seems to be fading away, for the

time-being at least. The elections in Ger-

many, with the dominant position of the

governing Christian Democratic Party,

was taken to be the major politico-

economic event during this period.


24

Table 2.2

IFO – Estimations for the global economy (Index, 2005=100)

Quarter/Year ΙΙΙ/11 ΙV/11 I/12 IΙ/12 III/12 ΙV/12 Ι/13 II/13 III/13

Economic

Sentiment 97.7 78.7 82.4 95.0 85.1 82.4 94.1 96.8 94.1

Current situation

99.1 86.0 84.1 87.9 78.5 76.6 80.4 84.1 82.2

Expectations 96.5 71.9 80.7 101.8 91.2 87.7 107.0 108.8 105.3

Source: IFO, World Economic Survey, WES Vol.12, No. 03/ August 2013

Table 2.3

IFO – Estimations for the global economy (Index, 2005=100)

Quarter/Year ΙΙΙ/11 IV/11 I/12 ΙI/12 III/12 IV/12 I/13 II/13 III/13

North America 81.2 69.5 87.9 95.4 81.2 80.3 86.2 87.0 93.7

Europe 103.9 80.6 81.6 96.1 86.4 80.6 90.3 93.2 99.0

Asia 94.7 77.2 74.6 90.4 83.3 81.6 97.4 106.1 89.5

Source: IFO, World Economic Survey, WES Vol.12, No. 03/ August 2013

Nevertheless, the outcome of the elec-

tions regarding the parties that entered

parliament and their parliamentary pres-

ence indicate first that the formation of a

government by the incumbent coalition

parties, Christian Democrats and Liberals,

is not possible, as the latter did not man-

age to receive sufficient share of the

votes to enter parliament. Second, the

result reveal as the only solution for the

formation of a government a coalition be-

tween the two largest parties (Christian

Democrats and Social Democrats). Never-

theless, the completion of the required

processes in this case (within and be-

tween the parties) could extend even un-

til the coming January. However, critical

decisions should be taken during this pe-

riod in Germany and at the level of the

Euro area on the implementation of the

measures agreed in June regarding the

consolidation of the national banking sys-

tems, and securing the debt sustainability

of countries in the European periphery

that implement programmes of strict fis-

cal consolidation.

In particular, in October the German par-

liament should take decisions on the rati-

fication of the Outright Monetary Transac-

tions (OMT) mechanism of the European

Central Bank. This particular issue is par-

ticularly critical, as the approval of the

mechanism by the Euro area member-

states will enable ECB to purchase bonds

on the secondary market, issued by

member-states with significant debt prob-

lems. In case a country requires funding

assistance, ECB through OMT and using

the already established ESM could buy

ten-year sovereign bonds that mature in

one to three years, provided that the

countries that issue to bonds agree on

the adoption and implementation of par-

ticular economic measures. In such a


25

way, the borrowing cost will fall for the

countries experiencing debt servicing

problems, limiting to some extent the

hesitation of the investors to buy these

countries’ bonds from the markets and

thus easing the sources of turmoil in the

Euro area.

The need for intervention for Greece in

order to ensure the sustainability of its

public debt (e.g. with further interest rate

reduction, or perhaps an additional hair-

cut) is also expected to be reassessed in

the near term. For Portugal as well, the

continuation of the funding from the

“troika” during the next three years

should be decided. The political crisis that

was about to break out recently in Italy

seems to have ended, with the vote of

confidence to the Italian government. In

general, the anticipated return to growth

of the Euro area is a particularly positive

sign, however the credit rating agencies

remain cautious about the timing and the

strength of the recovery.

More detailed information about the mo-

mentum of the economic activity in the

EU in the near term is provided by the

analysis of the trends in key GDP compo-

nents (Table 2.4).

In particular, exports, which increased

by 1.6% in the Euro area and by 1.7% in

the EU, were the key driver behind the

return to positive quarter-on-quarter GDP

growth rates in both economic regions.

Overall for 2013 exports are expected to

increase by 2.2% in the Euro area and by

2.0% in the EU. On the other side of the

trade balance, imports increased quar-

ter-on-quarter by 1.4% in the Euro area

and by 1.2% in the EU. In 2013 overall,

imports are expected to grow marginally

by 0.5% in the Euro area and by 0.8% in

the EU. Hence, net external demand will

continue to have a positive contribution to

GDP growth in 2013 as well.

Private consumption increased mar-

ginally by 0.2% quarter-on-quarter in

both regions. Household consumption in

2013 overall is expected to contract by

0.9% in the Euro area and 0.4% in the

EU. The latest forecasts of the European

Commission indicate that public con-

sumption will remain unchanged in 2013

in the Euro area, which reflects mainly

the contractionary impact of the strict

policies of fiscal consolidation that are

implemented in many countries of the

European periphery, while a marginal

growth by about 0.2% is expected in the

EU.

Investment increased marginally quar-

ter-on-quarter, by 0.3% and 0.4% in the

Euro area and the EU correspondingly, in

the aftermath, however, of contraction by

2.2% and 1.8% in the preceding quarter.

As a result, the contraction of investment

is expected to weaken in 2013, to reach

2.6% in the Euro area (from 4.1% in

2012) and 1.7% in the EU (from 2.8%).

The contraction of investment comes pri-

marily from low final demand and credit

crunch to non-financial entities, which is

quite severe in countries of the European

periphery that exert fiscal consolidation

efforts. Investment is expected to start to

recover gradually in the second half of

2013, which would come primarily from


26

investment in equipment, while the in-

vestment in construction is expected to

remain subdued.

Regarding employment, the number of

employed individuals fell by 1.0% in the

Euro area and 0.4% in the EU in the sec-

ond quarter year-on-year. Quarter-on-

quarter, employment remained essentially

unchanged in both regions (-0.1% in the

Euro area, no change in the EU). The

unemployment rate has deteriorated

significantly in the last two years, due to

the continuously contracting economic

activity and successive structural reforms

in the labour market, which are imple-

mented in quite a few Euro area member-

states. Despite the slowdown in the sec-

ond quarter, the unemployment rate in

the Euro area is expected to increase to

12.3% in 2013, from 11.4% in the previ-

ous year, according to the latest IMF

forecast.

Inflation declined further in the Euro

area in September, to 1.1% from 1.3% in

August, to reach its lowest rate since Feb-

ruary 2010. The disinflation came mainly

from the course of energy prices and the

lower rate of price growth in food, bever-

ages and tobacco. The target of ECB is

for inflation lower than 2.0%, but not far

from this rate. The forecast for 2013

overall indicate that the inflation rate will

be slightly lower in the Euro area, be-

tween 1.4% and 1.6%, and marginally

higher in the EU, between 1.7% and

1.8%.

Regarding the fiscal performance, the

results from the strict fiscal consolidation

in quite a few Euro area countries has

started to show up in significant reduction

of the budget deficits. In 2013 the Gen-

eral Government deficit in the Euro area

is expected to fall marginally to below 3%

of GDP (from 3.7% in 2012). A similar

trend is anticipated in EU-27, where the

General Government deficit is expected to

fall to 3.4% in 2013, from 4.0% in 2012.

In contrast, the prolonged recession,

mainly in the European periphery, com-

bined with increased interest payments,

are expected to lead to an increase of the

General Government debt of the Euro

area to 95.5% of GDP in the current year

(from 92.7% in 2012). Similarly, the debt-

to-GDP ratio in the European Union is ex-

pected to reach 89.8% in 2013, from

86.9% in the previous year.

The improvement of the economic senti-

ment in the Euro area and the EU, and

the signs of exit from the recession in the

current year and recovery in 2014, are

reflected in the course of the leading indi-

cators, such as the indicator of economic

activity €-COIN7 and the economic senti-

ment indicator of the European Commis-

sion (DG ECFIN). In particular, as shown

in Figure 2.1, the economic activity indi-

cator €-COIN for the Euro area reached

positive levels (0.12) for the first time in

two years (since November 2011). This

significant inversion of the trend came

from strong improvement of consumer

confidence and business sentiment.

7 The Center of Economic Policy Research (CEPR) in co-operation with the Bank of Italy each month calculates the €-COIN leading indicator of economic activity for the Euro Area. The indicator provides a forecast of GDP growth and is constructed from a range of different data, such as the course of industrial production and of prices, as well as labour market and financial data.


27

Lastly, the economic sentiment indicator

that is estimated monthly by the Euro-

pean Commission (DG ECFIN) kept im-

proving in September, on an upward

trend since May 2013. The economic sen-

timent indicator in the Euro area reached

96.9, growing by 1.6 month-on-month.

The increase came from more positive

sentiment in all business sectors. Con-

sumer confidence also remained on the

growth trajectory that was set off in De-

cember 2012. The month-on-month

growth is stronger in the wider EU region,

with the index growing by 2.4. It is worth

nothing that as the economic sentiment

indicator in the EU reached 100.6 in Sep-

tember, it exceeded its long-term average

of the period 1990-2010 for the first time

since July 2011.

Table 2.4

Main Macroeconomic Figures, ΕU, Euro area (annual % changes)

EU Eurozone

2012 2013 2014 2012 2013 2014

GDP* -0.2 0.0 1.3 -0.6 -0.4 1.0

Private consumption -0.7 -0.4 1.0 -1.3 -0.9 0.7

Public consumption 0.1 0.2 0.4 -0.4 0.0 0.5

Investment -2.8 -1.7 2.6 -4.1 -2.6 2.3

Employment -0.3 -0.4 0.4 -0.9 -0.7 0.3

Unemployment (% labor force) 10.5 11.1 11.1 11.4 12.2 12.1

Inflation 2.6 1.8 1.7 2.5 1.6 1.5

Exports goods-services 2.3 2.0 4.9 2.7 2.2 4.9

Imports goods-services -0.3 0.8 4.5 -0.9 0.5 4.7

General government balance (% GDP) -4.0 -3.4 -3.2 -3.7 -2.9 -2.8

General government debt (% GDP) 86.9 89.8 90.6 92.7 95.5 96.0

Current account balance 0.9 1.6 1.9 1.8 2.5 2.7 Source: European Economic Forecast, Spring 2013, European Commission, May 2013

*Source: World Economic Outlook, IMF, October 2013

Figure 2.1

€-CΟΙΝ Index (CEPR)

Source: CEPR (www.cepr.org) and Bank of Italy

http://www.cepr.org/


28

Table 2.5

European Commission– Economic Sentiment indicator ΕU-28 & Euro area (1990-2013=100)*

Month Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sept-13

EU-28 87.1 89.1 89.3 91.0 91.5 91.5 89.7 90.9 92.6 95.0 98.2 100.6

Eurozone 85.4 86.9 88.0 89.7 90.5 90.1 88.6 89.5 91.3 92.5 95.3 96.9 * The weights of the countries and the time series of the index in EU have been revised due to the inclusion of Croatia from July 1, 2013 Source: European Commission (DG ECFIN), September 2013

2.2 The Economic Environment in

Greece

Α) Economic Sentiment

The IOBE economic sentiment studies offer

significant indications on the developments

in the economy in the last few months,

from the perspective of both the enter-

prises and the consumers. Besides, the key

statistics constitute leading indicators for

various economic magnitudes and can be

used to predict near-term development and

even the course of GDP.

In more detail:

In the third quarter of 2013, the overall

economic sentiment steadied, as expecta-

tions in Construction and Services

strengthened, while consumer confidence

deteriorated. In the summer months, the

negotiations for the next tranche of the

loan from the troika, which did not become

a source of friction with the lenders as

usual in the past, were the key socio-

economic development. The restructuring

of the employment in the public sector

went on a larger scale, especially in entities

under state control outside the narrow

sphere of public administration, which

caused reaction mostly in those parts of

society that were hurt directly by the

measure. The further cuts of the income of

public servants and pensioners (no vaca-

tion bonus) and the build-up of tax obliga-

tions since September for most individuals,

did not allow for further easing of the pes-

simistic sentiment in the third quarter.

On the other hand, stronger tourist flows

had a positive impact on many activities

related to tourism. The recapitalisation of

the banks and the merger and acquisition

processes that took place in the banking

industry were finalised without any prob-

lems, while despite strong growth of non-

performing loans, the exposure of the do-

mestic banking sector to ECB fell signifi-

cantly. However, the supply of liquidity in

the economy continues to contract, with a

negative impact on the operation of enter-

prises and on investment, a trend that is

not expected to change until the critical

stress test in December. The most impor-

tant event in the past period is the signifi-

cant easing of the output contraction, ac-

cording to ELSTAT data, for the first time

since 2009, even though further deteriora-

tion is expected towards the end of the

year. Nevertheless, quite a few enterprises

now agree that either due to exogenous

factors and the inclination of the lenders to

agree with a milder fiscal consolidation, or

due to further moderation of various forms

of uncertainty that have dominated in the

Greek economy, the exit from the recession

phase of the cycle is approaching. The


29

extent to which the expected stabilisation

of the economy will lead to sustainable

growth remains a crucial issue, connected

with a number of other factors, such as

attraction of productive investment from

abroad for job creation and improvement

of the economic conditions in the Euro

area, which is the most significant export

destination for Greek products.

In this context, the Economic Sentiment

Indicator in Greece reached 91.3 in

the third quarter, marginally up quar-

ter-on-quarter, while year-on-year it

increased significantly (from 79.7 on

average). As a result, the economic sen-

timent in Greece has essentially reached its

highest level in five years. At European

level, the indicator improved quarter-

on-quarter both in the Euro area and

the EU, to reach 94.9 and 97.9 respec-

tively (from 89.8 and 91.1), up also year-

on-year (from 87.4 and 88.3 in both re-

gions).

The business sentiment in Greece

improved in the quarter under inves-

tigation, compared with the preceding

quarter, with the largest improvement

recorded in Construction (14 points),

followed by Services (6 points). In

Retail Trade, the indicator marginally

fell, while in Industry it remained

unchanged quarter-on-quarter.

Lastly, consumer confidence weak-

ened marginally in the quarter under

investigation.

Year-on-year, however, the average indica-

tors strengthened significantly in all sec-

tors. The indicator increased by 13 points

in Industry, by 9 points in Retail Trade, by

32 points in Construction and by 20 points

in Services. In contrast, consumer confi-

dence weakened year-on-year in the third

quarter. In more detail:

The Consumer Confidence Indicator in

Greece fell quarter-on-quarter in the third

quarter by 6, to reach -73.2 on average,

lower year-on-year as well (-68.5). The

confidence of the consumers that had

shown signs of stabilisation since the end

of the previous year started deteriorating

from July onwards, with the Greek con-

sumers remaining steadily the most pessi-

mistic in Europe in the past 3 and a half

years. In contrast, the corresponding Euro-

pean indicators improved quarter-on-

quarter by 6 points in the EU and by almost

5 points in the Euro area, to reach -13.1

and -16.0 respectively, up also year-on-

year (by 9 and 8 points respectively).

The constituent indicators deteriorated

quarter-on-quarter. In particular, the dis-

mal expectations of the Greek consumers

about the financial situation of their house-

hold and the general economic situation

over the next 12 months deteriorated fur-

ther, while decline was also observed in the

indicator tracing unemployment expecta-

tions, which became even more pessimis-

tic. The intension to save indicator followed

a similar trend in the third quarter, falling

quarter-on-quarter to reach mid-quarter its

lowest level in history.


30

Figure 2.2

Economic Sentiment Indicators: ΕU28, Euro Area and Greece (1990-2012=100, seasonally adjusted data)

Source: European Commission , DG ECFIN

In greater detail, the share of the con-

sumers who were pessimistic about the

financial outlook of their household

slightly increased, to reach 75% in the

quarter under examination, with 16% in

the second quarter expecting their fi-

nances to remain unchanged in the com-

ing months. Also, about 4/5 of the con-

sumers in Greece (from 75%) were ex-

pressing once more negative expectations

regarding the economic situation in the

country, with 11% expecting it to remain

unchanged (from 13%). Regarding the

intention to save, almost 9/10 of the

households were considering not likely or

not at all likely to save any money over

the next 12 months, with the correspond-

ing indicator falling slightly on average to

-78 (from -76), at levels close to its his-

toric lows. The unemployment expecta-

tions over the next 12 months remained

dismal, despite the slight improvement of

the indicator in September, as it had

deteriorated strongly in July, dragging up

the quarter average to 78. The unem-

ployment expectations in the same period

of 2012 had been less pessimistic, with

the indicator standing at 73 on average.

Here too, almost nine out of ten consum-

ers were expecting unemployment to

increase in the coming period. Meanwhile,

the percentage of consumers reporting

that they were “in debt” fell further in the

third quarter, to 12% on average (from

16% in the preceding quarter and 22% in

the first quarter), with 10% of the re-

spondents declaring that they were sav-

ing small or very small amounts. Lastly,

the share of consumers reporting that

they were “just making ends meet” in-

creased on average to 63% (from 59%),

while the percentage of those declaring

that they were “dipping into their savings”

fell slightly to 15% (from 17%).

50

60

70

80

90

100

110

120

130 Se

p-0

0

Ma

r-01

Se

p-0

1

Ma

r-02

Se

p-0

2

Ma

r-03

Se

p-0

3

Ma

r-04

Se

p-0

4

Ma

r-05

Se

p-0

5

Ma

r-06

Se

p-0

6

Ma

r-07

Se

p-0

7

Ma

r-08

Se

p-0

8

Ma

r-09

Se

p-0

9

Ma

r-10

Se

p-1

0

Ma

r-11

Se

p-1

1

Ma

r-12

Se

p-1

2

Ma

r-13

Se

p-1

3

EU Eurozone Greece Average, Greece (2001-2012)


31

Figure 2.3

Consumers’ Survey data on their household’s financial situation (July-September 2013 average)

Source: ΙΟΒΕ

Table 2.6 Economic Sentiment Short-Term Indices

Month/

Year

Economic sentiment Indicator Business confidence indicators2

Consumer

confidence

indicator1

(Greece) EU-28* Greece Industry Construction Retail trade Services

2002 97.3 102.0 101.2 114.0 93.3 82.8 -27.5 2003 95.4 100.1 97.9 115.0 102.0 85.5 -39.4 2004 103.3 104.8 99.1 81.5 104.8 94.6 -25.8 2005 100.8 98.1 92.6 63.0 96.8 93.6 -33.8 2006 108.3 104.9 101.5 91.1 110.8 103.7 -33.3 2007 111.0 108.4 102.8 92.5 120.8 106.6 -28.5 2008 93.3 97.4 91.9 95.2 102.5 97.8 -46.0 2009 79.3 79.7 72.1 65.5 80.4 70.1 -45.7 2010 101.2 79.3 76.2 45.2 59.5 62.9 -63.4 2011 100.3 77.6 76.9 34.2 58.9 61.7 -74.1 2012 90.9 80.0 77.2 43.2 57.1 54.8 -74.8

Jan–12 92.8 74.9 71.4 36.4 56.0 54.2 -80.1 Feb-12 93.9 74.9 71.6 43.4 52.7 53.4 -83.5 Mar-12 93.2 75.7 75.7 33.2 51.9 55.2 -79.3

Apr-12 93.2 77.3 81.6 40.8 52.4 56.1 -78.7 May-12 90.4 76.0 77.1 36.5 58.2 57.4 -75.8 Jun-12 90.4 74.1 74.1 40.0 58.2 53.0 -70.4 Jul-12 89.0 76.1 73.5 46.3 62.7 52.9 -64.7 Aug-12 87.0 77.0 75.8 52.0 67.4 54.9 -65.2 Sept-12 86.1 76.1 80.9 44.3 58.4 59.9 -75.6 Oct-12 86.1 75.8 80.9 58.3 51.1 52.2 -77.5 Nov-12 88.1 79.0 80.3 51.1 56.2 52.5 -74.1 Dec-12 89.3 86.9 83.6 35.6 59.4 55.8 -72.1 Jan–13 90.8 85.8 83.7 38.5 62.6 58.9 -71.9 Feb-13 92.0 86.9 84.4 55.0 60.3 62.3 -71.4 Mar-13 91.4 88.1 87.1 47.1 64.2 60.4 -71.2 Apr-13 89.7 89.2 90.3 61.5 65.4 61.9 -71.8 May-13 90.8 93.8 92.6 65.7 79.5 69.3 -63.4 Jun-13 92.6 93.5 88.8 69.5 73.9 79.2 -66.5

Jul-13 95.0 91.7 86.2 72.3 72.4 76.1 -70.9 Aug-13 98.2 89.2 88.0 75.9 72.9 76.0 -76.6 Sept-13 100.6 93.1 96.1 89.7 69.4 75.9 -72.2

* The weights of the countries and the time series of the index in EU have been revised due to the inclusion of Croatia from July 1, 2013 Sources: 1European Commission, DG ECFIN, 2 ΙΟΒΕ

High savings 1%

Low savings 9%

barely make it 63%

using savings 15%

indebted12%


32

The Business Climate Indicator in In-

dustry remained unchanged quarter-

on-quarter at 90.1, but increased signifi-

cantly year-on-year (from 76.7). Re-

garding the key activity indicators, the

short-term expectations on production

levels deteriorated significantly, with the

indicator remaining positive, but falling

to 6 on average (from 14). On the other

hand, the assessment of order-book

levels and demand was less pessimistic

(at -29 from -35). Meanwhile, the as-

sessment of the stocks of finished prod-

ucts remained unchanged, with the indi-

cator standing still at +2. Among the

remaining activity indicators, the trends

in the export variables were mixed: im-

provement was observed in the assess-

ment of current export activity, foreign

demand and orders, but the expecta-

tions on their future course deteriorated

(to 6 from 19). The negative balance of

employment expectations improved in

the third quarter, to reach -5 on average

(from -12), slightly higher year-on-year

as well (-13). The utilisation rate of the

production factors remained at relatively

low levels, yet it improved in the third

quarter to reach 67% (from 64.7%), up

also year-on-year (from 63.8%). Lastly,

the number of months of assured pro-

duction reached 3.6 on average (from

4.2 months in the preceding quarter and

3.9 months in the same quarter of the

previous year).

The Confidence Indicator in Retail Trade

marginally fell in the third quarter to 71.5

from 72.9 in the preceding quarter and

62.9 in the same period of 2012. This

result came from a slight improvement of

the exceptionally low assessment of their

current sales, which however was offset

by a deterioration of their expectations on

future sales. In particular, the assessment

of the enterprises on their current sales

increased quarter-on-quarter by 4 points

to reach -39, while the negative expecta-

tions of the enterprises on their short-

term sales deteriorated by 3 points to

reach -27 on average. About 44% of the

enterprises were expecting their sales to

fall in the coming period, while 17%

(from 20%) were expecting them to in-

crease. The negative inventories indicator

slightly improved to -3 on average (from

-8), slightly higher year-on-year (from

-6). The negative expectations on orders

to suppliers eased to -27 from -35, while

the employment expectations in the sec-

tor reached 10, increasing significantly

both quarter-on-quarter (from -14) and

year-on-year (from -38). Lastly, deflation-

ary expectations have steadily dominated

in the sector, albeit easing slightly quar-

ter-on-quarter, to represent 1/4 of the

enterprises (from 28%), compared with

3% of the enterprises that were expecting

prices to increase. Among the constituent

branches, the business sentiment im-

proved notably in Household Appliances

and marginally in Department Stores.


33

Figure 2.4

Business Confidence Indicator

Industry

Constructions

Retail Trade

Services

Source: ΙΟΒΕ

The business expectations in Construc-

tion gained ground quarter-on-quarter,

with the indicator increasing to 79.3 (from

65.6), notably up also on their past year

level (47.6). Among the constituents of

the indicator, both the intensely negative

expectations on the level of planned ac-

tivities and the employment expectations

strengthened, increasing quarter-on-

quarter by 15 and 12 points respectively

50

60

70

80

90

100

110

120

Se

p-0

0

Se

p-0

1

Se

p-0

2

Se

p-0

3

Se

p-0

4

Se

p-0

5

Se

p-0

6

Se

p-0

7

Se

p-0

8

Se

p-0

9

Se

p-1

0

Se

p-1

1

Se

p-1

2

Se

p-1

3

Industry Overall

Average (2001-2012)

20

40

60

80

100

120

140

Se

p-0

0

Se

p-0

1

Se

p-0

2

Se

p-0

3

Se

p-0

4

Se

p-0

5

Se

p-0

6

Se

p-0

7

Se

p-0

8

Se

p-0

9

Se

p-1

0

Se

p-1

1

Se

p-1

2

Se

p-1

3

Constructions overall

Average (2001-2012)

40

50

60

70

80

90

100

110

120

130

Se

p-0

0

Se

p-0

1

Se

p-0

2

Se

p-0

3

Se

p-0

4

Se

p-0

5

Se

p-0

6

Se

p-0

7

Se

p-0

8

Se

p-0

9

Se

p-1

0

Se

p-1

1

Se

p-1

2

Se

p-1

3

Retail trade overall

Average (2001-2012)

40

50

60

70

80

90

100

110

120

Se

p-0

2

Se

p-0

3

Se

p-0

4

Se

p-0

5

Se

p-0

6

Se

p-0

7

Se

p-0

8

Se

p-0

9

Se

p-1

0

Se

p-1

1

Se

p-1

2

Se

p-1

3

Services Overall

Average (2002-2012)


34

(to -50 and 2 correspondingly, from -73

and -35 in the same quarter of the previ-

ous year). In fact, the employment indica-

tor reached positive levels for the first

time in five years, with 35% of the enter-

prises expecting employment to increase

(from 26%) and 33% expecting further

job losses (from 36%). The assessment

of the enterprises of their current activity

level also gained ground, remaining how-

ever at negative levels (to -8 from -31 in

the same period of the previous year).

Along with the improvement of the activ-

ity planning indicators, the months of ac-

tivity ensured by current backlog slightly

increased to 11.1 (from 10.7), while price

expectations fell to -38 (from -27 on av-

erage in the second quarter). Lastly, 11%

(from 9%) of the enterprises were report-

ing that they were not facing any obsta-

cles to their construction activities.

Among the remaining enterprises, 34%

stated as the main obstacle insufficient

funding, 39% low demand and 28% fac-

tors such as the state of the Greek econ-

omy in general, the recession, high taxa-

tion, lack of projects, delays in payments

by the State, large discounts etc. At

branch level, the expectations improved,

albeit mildly, in Private Construction (43.5

from 40.4) and more notably in Public

Works, where the indicator reached 97.1

(from 77.6), its highest level in five years.

In Services, the business climate indica-

tor increased in the third quarter to 76.0,

from 70.1 in the preceding quarter, up

year-on-year as well (from 55.9). The in-

crease came from an improvement in the

indicators tracing current assessment, as

the expectations on near-term demand in

the sector lost ground in the third quarter

(to -9 on average, from -3 in the previous

period). In contrast, the assessment of

the enterprises of their current demand

and activity improved, with the indicator

reaching -6 and -1 respectively (from -13

and -21 in the preceding quarter and

from -29 and -34 in the previous year).

Among the remaining indicators, the em-

ployment expectations remained un-

changed, with the indicator standing once

more at -18 on average. The price expec-

tations remained strongly deflationary,

unchanged quarter-on-quarter, with 23%

of the enterprises expecting prices to fall

and the vast majority of the respondents

(76%) expecting prices to remain un-

changed. Lastly, the share of enterprises

reporting that their business activity was

being conducted without obstacles mar-

ginally increased to 14% (from 12%),

with 33% of the respondents indicating

as main obstacle insufficient demand,

40% reporting lack of working capital,

6% inadequate labour supply and further

21% indicating factors connected with the

overall economic situation and the crisis,

the global current affairs, borrowing diffi-

culties, high taxation, arrears, surge in

crime, etc. Among the constituent

branches, the sentiment improved in the

third quarter in Hotels-Restaurants –

Travel Agencies, Various Business Activi-

ties and Land Transport.


35

B) Fiscal developments

Execution of the State Budget

(January-August 2013)

The State Budget in the first eight months

of the current year had a deficit of €2.5

billion, compared with a deficit of €12.5

billion in the corresponding period of

2012. This improvement, by €10 billion,

came about half (€5.7 billion) from a re-

duction of interest payments, due to the

PSI, but also from a significant reduction

of the primary account by €4.3 billion

(from €1.4 billion deficit to €2.9 billion

surplus). It should be noted that the in-

dicative targets8 for net and primary defi-

cit for this period were €9.3 billion and

€2.6 billion respectively and hence the

results are much better than anticipated.

Expenditure

The primary expenditure of the Ordinary

Budget fell by €2.4 billion (Table 2.7).

This reduction was due mainly to the fol-

lowing changes:

a) The expenditure for salaries and pen-

sions fell by €1,159 million. This reduction

corresponds to a rate of -8.6%, which is

slightly short of the annual target rate

(-9.8%).

b) Reduction of the social security grants

by €1,960 million. This reduction was

much larger than the rate envisaged on

an annual basis in the budget and is ex-

pected to weaken as the financing needs

8 As evident from the recitals to the 2013 State Budget, p. 108.

of the social security funds increase over

the duration of the year.

c) Increase of operational and other ex-

penditure by €605 million (+13.9%

against an annual target of stabilisation).

d) Increase of transfers to local govern-

ment authorities by €101 million, or

4.5%, almost twice the annual target

rate.

Meanwhile, the Public Investment Budget

(PIB) expenditure fell slightly by €71 mil-

lion (-2.7%), with the contraction rate

weakening throughout 2013 and gradu-

ally approaching the annual target of no

annual change. Despite all this, the exe-

cution rate is lower, compared with the

year total, so we should wait and see the

performance in the last months of the

year to have a clearer picture of the ex-

tent of the Public Investment Programme

in 2013.

In general, the indications are that ex-

penditure will be reduced by more than

envisaged in the budget, despite the risk

of overrun of the grants to the social se-

curity system and the expenditure of the

National Organization for Health Care

(EOPYY).

Revenues

As evident from the provisional data of

the General Accounting Office, the State

Budget revenue during the first eight

months of the year increased by €1.8 bil-

lion year-on-year, or by 5.4%, compared

with an annual target of stabilisation

(-0.1%). Nevertheless, the improved per-


36

formance, compared with the target, is

mostly due to excess collection of PIB

revenue (€1.5 billion), reduction of tax

refunds (€1.2 billion) and collection of

€2.2 billion from ANFAs and SMPs. With-

out the above three sources, the reve-

nues would be lower by €1.9 billion year-

on-year (Table 2.8).

A safer indication is obtained from the

course of the revenue of the Ordinary

Budget before tax refunds, which fell by

€3.2 billion year-on-year, short of the

eight-month target by €700 million. All

categories of tax revenues, except taxes

from past fiscal years, declined, due to

the continuing fall of income and eco-

nomic activity, with the largest deviation

from the annual target observed in con-

sumption taxes.

These deviations came mostly from taxes

on oil products (VAT and excise duties),

while the revenues of the tobacco taxes

were close to the target and the course of

VAT (apart from the above categories),

albeit lower year-on-year, is most likely a

pleasant surprise, given that it exceeded

the eight-month target (perhaps also due

to stronger tourist flows, despite the re-

duction of the VAT coefficient on food

services). Still, the revenue shortage is

expected to be covered, partly at least,

until the end of the year, given the delay

of income tax collection in the current

year and the collection of property taxes

in the last four months of the year.

Table 2.7

State budget’s expenditure, January-August

(€ mil.)

2012 2013 Change 2013/12

Δ% Jan-Aug 2013/12

Δ% annual target

STATE BUDGET TOTAL EXPENDI-TURE 45,586 37,395 -8,191 -18.0% -7.4%

INTEREST EXPENDITURE 11,070 5,363 -5,707 -51.6% -27.2%

STATE BUDGET PRIMARY EXPENDITURE 34,516 32,032 -2,484 -7.2% -3.1%

ORDINARY BUDGET PRIMARY EXPENDITURE 31,901 29,488 -2,413 -7.6% -3.5%

SALARIES & PENSIONS 13,420 12,262 -1,159 -8.6% -9.8% Wages 8,484 7,714 -770 -9.1% -9.1% Other allowances 635 681 46 7.2% 5.3% Pensions 4,302 3,867 -434 -10.1% -12.2%

SOCIAL SECURITY, MEDICS, SOCIAL PROTECTION 11,875 9,915 -1,960 -16.5% -6.7%

Grants to social security funds 10,169 8,409 -1,760 -17.3% -13.1% Grants to OAED 344 316 -27 -7.9% -5.8% Social protection 518 277 -241

-12.7% 38.1% Grants to hospitals , etc 844 912 68 OPERATIONAL-OTHER 4,362 4,967 605 13.9% 0.0%

Grants to other entities 989 1,148 159 16.1% -0.2% Consumption expenditure 834 721 -113 -13.5% -8.4% Conditional expenditure 1,915 2,057 143 7.5% 3.0% Other expenditure * 625 1,041 416 66.5% 6.0%

EARNMARKED EXPENDITURE 2,243 2,344 101 4.5% 8.7%

PUBLIC INVESTMENT PRO-GRAMME 2,615 2,544 -71 -2.7% 0.0%

* Including EFSF costs, equipment expenditures and guarantees called

Source: General Government data Bulletin - August 2013, MinFin, September 2013


37

General Government fiscal results

(January-April)

As evident from the General Government

results for the first eight months, the net

deficit on cash basis reached €3.9 billion,

against €9.8 billion in the corresponding

period of 2012.

This improvement was almost exclusively

due to a reduction of interest payments

by €5.8 billion, while the primary balance

improved slightly, to a surplus of €1.8 bil-

lion, from €1.6 billion in the previous

year.

Table 2.8 State budget’s Revenues – Jan.-Aug.

(€ mil.)

2012 2013 Change

2013/12

Δ% Jan-Aug 2013/12

Δ% Annual target

TOTAL STATE BUDGET REVENUE 33,102 34,893 1,791 5.4% -0.1%

ORDINARY BUDGET NET REVENUE 30,639 30,913 274 0.9% -3.3%

TAX REFUNDS 2,397 1,167 -1,230 -51.3% -8.5% O.B. REVENUE BEFORE TAX RAFUNDS 33,036 32,081 -955 -2.9% -3.6%

TAX REVENUE 30,461 27,241 -3,22 -10.6% -5.2%

DIRECT TAXES 13,435 11,606 -1,829 -13.6% -4.6%

Income taxes 8,075 6,521 -1,554 -19.2% -16.9%

Property taxes 2,03 1,789 -241 -11.9% 11.2%

Direct taxes WTO 1,41 2,003 593 42.1% 82.5%

Other direct taxes 1,92 1,293 -627 -32.6% -17.6%

INDIRECT TAXES 17,026 15,634 -1,392 -8.2% -5.7%

Transaction taxes 10,725 9,809 -916 -8.5% -8.4%

Consumption taxes 5,746 5,176 -570 -9.9% -1.3%

Indirect taxes WTO 338 419 81 23.9% -3.7%

Other indirect taxes 217 231 14 6.2% -8.4%

NON TAX REVENUE 2,575 4,84 2,265 88.0% 13.6%

DRAWINGS FROM EU 34 47 13 37.7% -3.9%

NON-RECURRING REVENUE 965 3,17 2,205 228.5% 33.3%

LICENCING AND PUBLIC RIGHTS 0 65 65 473.3%

OTHER 1,576 1,558 -18 -1.2% -3.6%

PUBLIC INVESTMENT

PROGRAMME 2,463 3,98 1,517 61.6% 42.6%

Source: General Government data Bulletin - August 2013, MinFin, September


38

In national accounting terms, the primary

balance is expected to improve notably as

well. The primary surplus without cash

flow adjustment improved significantly,

from €554 million in 2012, to about €6.1

billion in 2013 (Table 2.9). The extensive

improvement took place exclusively on

the expenditure side, as revenues fell

overall by €752 million, with the largest

reduction observed in social security

funds (before state subsidies). Primary

expenditure (without the payment of ar-

rears) fell by €6.3 billion, despite an in-

crease in local government authorities by

€413 million.

Draft Budget 2014

According to the draft budget that was

submitted by the Government, Net Deficit

(based on ESA95) is expected to reach

€4.4 billion (or 2.4% of GDP) in 2013,

slightly lower than the target of €4.8 bil-

lion (2.6%) and much lower than in 2012

(€11.6 billion or 6% of GDP).

The deficit is expected to stand at about

the same level in 2014 as well (€4.3 bil-

lion or 2.4% of GDP).

Table 2.9 Primary Results –Jan-Aug

(€ mil.)

2012 REVENUE EXPENDITURE GRANTS PRIMARY BALANCE

STATE BUDGET 33,103 20,475 14,041 -1,413

ENTITIES 2,285 2,528 -1,311 1,068

L.A.O 2,19 4,106 -2,259 343

S.S.F 15,957 25,872 -10,471 556

TOTAL 53,535 52,981 0 554

ESA adjustments 0 145 -1,171 -1,026

TOTAL 53,535 53,126 -1,171 1,580

2013 REVENUE EXPENDITURE GRANTS PRIMARY BALANCE

STATE BUDGET 34,893 13,727 18,488 2,678

ENTITIES 1,932 2,857 -1,997 1,072

L.A.O 1,366 4,519 -3,694 541

S.S.F 14,592 25,586 -12,797 1,803

TOTAL 52,783 46,689 0 6,094

ESA adjustments 0 5,008 -695 4,313

TOTAL 52,783 51,697 -695 1,781

Change 2013/12 REVENUES EXPENDITURE GRANTS PRIMARY BALANCE

STATE BUDGET 1,79 -6,748 4,447 4,091

ENTITIES -353 329 -686 4

L.A.O -824 413 -1,435 198

S.S.F -1,365 -286 -2,326 1,247

TOTAL -752 -6,292 0 5,54

ESA adjustments 0 4,863 476 5,339

TOTAL -752 -1,429 476 201 Source: General Government’s data- August 2013, MinFin, September 2013


39

The primary account experiences a more

significant improvement, from a deficit of

€1.9 billion in 2012, to a surplus of €3.4

billion in 2013 and €5.3 billion in 2014.

Regarding the Medium-Term Programme,

which excludes the revenues from ANFAs

and SMPs, the primary deficit of 2012

stood at €2.6 billion (1.3% of GDP), while

a surplus of €344 million (0.2%) and €2.8

billion (1.6%) is anticipated for 2013 and

2014 respectively. Our assessment is that

both for 2013 and 2014 the forecasts are

rather conservative, as the surpluses will

be higher, provided that the already

planned policies are implemented, which

will help significantly with the restoration

of the credibility of the Greek economy.

As a result of the above, public debt is

anticipated to decline in 2014, not only as

a percentage of GDP, but for the first

time in absolute terms as well (about €2

billion). The projections of the 2014 Draft

Budget are summarised in Table 2.10.

Table 2.10 Net and Primary Balance

(€ mil.) 2012 2013 2014

ORDINARY BUDGET REVENUE 48,173 46,99 49,544

Tax refunds 3,323 3,624 2,789 Direct taxes 21,096 19,172 21,335

Indirect taxes 26,083 24,628 24,529 Non tax revenue 4015 3981 3980

ANFAs & SMPs revenue 303 2,833 2,489 PUBLIC INVESTMENT PROGRAMME 3,601 5,136 5,002

ORDINARY BUDGET EXPENDITURE 61,499 52,572 49,449

Primary expenditure 47,529 44,726 41,947 Salaries and pensions 20,511 18,543 18,41 Social security 17,134 15,935 13,271 Operational etc 6,41 6,622 5,428 Revenue return 3,474 3,526 3,718 Surplus 0 100 1,12

Supplies- Warranties- military

equipment 1,747 1,746 1,352

Interests 12,224 6,1 6,15 Public Investments Program 6,114 6,65 7

National accounts adjustments 2,83 -6,098 -4,875

State net balance -13,009 -13,194 -6,778

Entities net balance 1,87 999 997

Public utilities net balance 1,144 590 463

L.A.O net balance 647 1,319 654

S.S.F net balance -2,233 5,856 344

General government net balance -11,581 -4,430 -4,320

(% GDP) -6.0% -2.4% -2.4% Primary balance general government -1,92 3,449 5,344

(% GDP -1.0% 1.9% 2.9% GDP 193,749 182,911 183,089

Source: Draft Budget 2014, MinFin, October 2014


41

3. PERFORMANCE AND OUTLOOK

3.1 Macroeconomic developments

Recent macroeconomic develop-

ments in Greece

The GDP of the Greek economy fell

by 3.8% in the second quarter of

2013, in the aftermath of a notably

larger contraction by 5.6% in the

preceding quarter and by 6.4% in

the corresponding quarter of 2012,

according to the latest National Accounts

data of ELSTAT. The GDP contraction

eased more significantly than ini-

tially anticipated, stronger than in

any other quarter since the begin-

ning of the recession of Greece in

2008. For the first half of 2013

overall GDP was down year-on-year

by 4.7%, compared with stronger con-

traction in the same period of 2012 (-

6.6%). As analysed below, the easing of

the recession came from slower contrac-

tion of consumption expenditure by the

households and from exports (exports of

goods, in particular). The anticipated sig-

nificant boost of international tourism in

the current year, which has shown up in

the data (international arrivals, tourist

receipts) since May is one of the most

significant domestic economic develop-

ments in 2013, yet it did not prevent the

contraction of the exports of services.

Regarding the remaining key socioeco-

nomic developments that took place in

the country in the second quarter, the

structural reforms in the public sector,

with an emphasis on employment restruc-

turing (in secondary education, hospitals,

municipal police), and the state-controlled

enterprises intensified. On the privatisa-

tion front, the tender for DEPA, which

was one of the largest, in terms of budg-

eted revenue, privatisation plans for the

current year, was declared void. In con-

trast, the tenders for OPAP and DESFA

were successfully completed. The nego-

tiations for receiving the last part of the

third instalment of the second bailout

loan were completed in a short time in

early May, as the crucial issues, such as

the fiscal measures for 2013 had already

been settled.

Regarding the performance of key GDP

components in the first half of 2013, the

most significant year-on-year changes

were observed in the course of invest-

ment and public consumption. The GDP

contraction in the first half of the

current year came primarily from

significant reduction of household

consumption, which continued for a

fifth year in a row. Public consumption

declined steadily throughout the first two

quarters. Investment contracted for one

more year, albeit at a much lower rate

than in the previous year, as positive in-

ventory changes were recorded in the

first quarter. In the external sector of the

economy, the deficit declined further due

to continuous contraction of the demand

for imports, as exports did not grow, de-

spite the increase of the exports of goods


42

and the stronger international tourist

flows.

In greater detail, total domestic con-

sumption was lower year-on-year by

7.5% in the first half of 2013, while

in the corresponding period of 2012

it was falling at a similar rate

(7.4%). In contrast with the previous

year, however, when only household con-

sumption demand was falling sharply

(-9.1%) and the consumption expenditure

of the state remained practically un-

changed (-0.2%), in the current year the

key components of domestic consumption

declined at almost the same rate, by

7.5% and 7.4% respectively. Similarities

were also observed in the course of the

contraction in the two first quarters of

2013, which reached 8.7% in the first

quarter and 6.1%-6.3% in the second

quarter. As a result, the households

have reduced their consumption ex-

penses by almost a quarter (-24.2%

or €17.9 billion) since the start of

the fiscal consolidation process in

early 2010, while the reduction of

public consumption due to the fiscal

consolidation is notably weaker

(-15.6% or €2.8 billion).

The investment contraction eased

significantly in the first half, as the

contraction rate did not exceed

4.6%, from 25.2% in the same pe-

riod of 2012, reaching its mildest rate in

six years of continuous decline. On the

other hand, the growth of investment in

the first quarter of the current year

(+8.5%) due exclusively to the significant

year-on-year difference in change in in-

ventories was completely overturned in

the second quarter (-15.2%). In both

quarters of the first half of 2013, gross

fixed capital formation contracted by

about 11%, due mainly to further sharp

drop of housing construction, which is

now at about 1/3 of its 2007 level

(-64%). As a result, the fluctuations of

investment come from year-on-year dif-

ferences of changes in inventories, which

were highly positive in the first quarter

(+€1.1 billion), and moderately negative

in the second (-€269 million).

Among the basic fixed capital categories,

Housing Construction, with 35.6%

decline, has remained the category

with the deepest contraction for a

second year in a row. Since 2008,

when housing construction started

to contract, it has lost 84.8% of its

volume. The second deepest contraction

was observed in Metal Products - Machin-

ery (9.2%), which in the previous two

years had shown relative resilience to the

pressures exerted overall on fixed capital

formation, followed by Other Products

(-2.1%). Agricultural Equipment has re-

mained stable year-on-year, while in-

vestment in Transport Equipment slightly

increased (+1.0%), in the aftermath of

the extensive contraction in the first half

of 2012 (-34.2%). Other Construction,

which together with Metal Products – Ma-

chinery have the largest share of fixed

capital formation, is the only category

with notable growth (+3.8%).

The balance of the external sector of

the economy improved significantly

in the first half, for a fifth year in a


43

row. As in the previous year this

came exclusively from weakening of

the demand for imports, as exports

did not increase. The contraction of im-

ports intensified in the second quarter,

reaching 11.8% from 7.8% in the preced-

ing quarter, yet it remained slightly

weaker than in the same period of 2012

(9.8% in the first half of 2013, against

13.9% in the previous year). In contrast

with the previous year, the imports of

goods contracted stronger (-15.5% from

-7.4% in the previous year) than the im-

ports of services (-7.9% from -16.9% in

the previous year).

Despite the growth of the exports of

goods in both quarters of the first half of

2013 and the abrupt easing of the con-

traction of the exports of services in the

second quarter, total exports in the

first half of the year were down by

0.6% year-on-year, while one year be-

fore that they had marginally grown

(+0.4%). As already noted in the pre-

vious quarterly bulletin of IOBE, the

volume of exports (in constant

prices of 2005) has remained un-

changed since 2010 (€19.1-19.2 bil-

lion), while compared with the same

period of 2008, it is lower than

17.4%. Given that the exports of goods

grew by 4.0% in the first half of the cur-

rent year, the overall contraction of ex-

ports came from a fall of the exports of

services (-6.3%). Nevertheless, the con-

traction of imports resulted in a fall of the

external sector deficit in national ac-

counting terms by 43.9% year-on-

year, to reach €2.9 billion.

In production terms, domestic gross

value added contracted at a slightly

weaker rate than total domestic de-

mand in the first half of 2013, by

4.4% against 4.7%, with the contrac-

tion easing notably compared with the

previous year (-6.4%). The deference

compared with the larger contraction of

GDP is due to the much larger reduction

of taxes on products, which are added to

the added value in order to estimate GDP

(while subsidies are subtracted). The

vertical drop in housing investment

is reflected in the activity of the

Construction sector, which – as in

2012 – fell most among the key sec-

tors of the Greek economy, by

13.6%, albeit slightly weaker than a year

before (-15.6%). The second deepest

contraction of production activity was ob-

served in Information – Communications

(-12.5%), followed by Wholesale-Retail

Trade, Repair of Motor Vehicles – Motor-

cycles and Accommodation – Food Ser-

vices (-9.6%), which had fallen stronger

in the previous year (-14.9%), Financial

– Insurance Activities (-9.2% from -7.1%

in the previous year), and Professional –

Scientific – Technical - Administrative Ac-

tivities (-8.8%). The primary sector ex-

perienced contraction of 3.6%, slightly

higher than in the first half of 2012

(-2.1%). In contrast, the contraction in

Industry came to a halt, as output in-

creased by 0.3%, compared with 4.3%

contraction in the previous year. Output

consolidated in Real Estate Activities

(+0.1%) and in Art – Entertainment –

Recreation Activities (+0.3%).


44

The carryover of the high contraction rate

to the first half of 2013 affected employ-

ment, which fell year-on-year by 5.3%,

albeit at a milder rate than in early 2012

(-8.6%). The easing of the employment

contraction was more pronounced in the

second quarter, when the contraction rate

fell to 4.2%, about half the rate experi-

enced in the same quarter of 2012

(-8.7%). This development is primarily

due to employment growth in Public Ad-

ministration – Defence – Social Insurance,

Information – Telecommunications and in

Water Supply – Waste Management. De-

spite the significant growth of interna-

tional tourism since the start of the sec-

ond quarter, employment in Accommoda-

tion – Food Services fell by 3.6%, slightly

weaker than domestic employment over-

all. The weaker employment contrac-

tion in the second quarter slowed

down the year-on-year unemploy-

ment growth in the first half, with

the unemployment rate reaching

27.3%, from 23.1% in the previous

year. In addition, it led to a small

quarter-on-quarter decline of unem-

ployment, for the first time since the

second quarter of 2009, from 27.4%

in the first quarter to 27.1% in the

second.

The further weakening of consumption

demand in the second quarter, together

with the withdrawal of the planned price

increase of the electricity tariffs,

strengthened slightly the decline of the

Consumer Price Index, which had started

in March, resulting in deflation of 0.5%,

compared with 1.5% inflation in the same

quarter of 2012. In the first half of

2013 overall, CPI fell by 0.2%, com-

pared with 1.8% inflation rate in the

previous year.

In summary, the Greek economy was ex-

posed to counteracting forces in the first

half of 2013. On the one hand, interna-

tional investment interest has gradually

rekindled, despite the unfavourable global

economic environment due to various

sources of possible turmoil (e.g. USA, the

Euro area, the Middle East). In fact, cer-

tain elements of the external sector, such

as tourist services experience strong mo-

mentum. In addition, the consolidation of

public finances is, in general, on target.

On the other hand, however, the fiscal

consolidation process is still exerting

great pressure on household and public

sector demand. The privatisation pro-

gramme is being implemented with sig-

nificant delays, which forestall connected

investment that is of vital importance for

the restructuring of the Greek economy.

The extensive restructuring of the state

that started towards the end of the sec-

ond quarter, in enterprises under the con-

trol of the government and through the

mobility programme, despite their neces-

sity and the fact that they are long over-

due, perhaps is not executed in all cases

with the best possible preparation, while

inevitably it creates uncertainty in the

employees, which constitutes a source of

socio-political tensions and frictions. Nev-

ertheless, the above discussion leads to

the following conclusions: first, in contrast

with the relatively recent past, certain


45

forces that could lead the economy to

recovery in the coming quarters are ex-

erting their influences, and second, the

extensive procrastination that character-

ised the implementation of state reforms

has elapsed.

Medium-term outlook

As already noted in the previous quarterly

bulletin of IOBE, the implementation of

the structural reforms in the public sector

set in MTFS 2013-2016, most of which

were delayed from previous years, to-

gether with the negotiations with the

troika on the continuation of the fiscal

consolidation programme in 2014-2016,

will constitute the key drivers of the so-

cioeconomic developments and conditions

in Greece during the second half of 2013.

The passing of the Medium Term Fiscal

Strategy 2014-2017 and the 2014 Budget

through parliament, which will both be

drafted based on the outcome of the ne-

gotiations with the troika, will constitute

the milestones of the political processes

within the country. Regarding the impact

of purely exogenous factors, the boost of

international tourism and the easing of

the recession in the Euro area, the key

export destination for Greek products, to

very low rates (-0.5% in the second quar-

ter from -1.1% in the first) and the likely

marginal growth in this region in late

2013, are favourable for domestic produc-

tion and external demand.

In particular, the restructuring of the pub-

lic sector, which has been at the epicen-

tre of government policy already since the

end of the second quarter, will constitute

one of the key political goals not only un-

til the end of 2013, but at least in 2014 as

well. Until the end of 2014, 14,000 re-

dundancies are planned, with an overall

target for reducing employment in the

public sector by at least 150,000 people

overall in the period 2011-2015.

Besides, the implementation of the re-

forms and the fiscal measures in the com-

ing three years constitute the major is-

sues in the negotiations with the troika, in

order to approve the receipt of the next

tranche of the second bailout loan. The

negotiations might lead to a small exten-

sion of the measures that were scheduled

to be completed until the end of the year

in the review of the second Economic Ad-

justment Programme in July (mobility of

25,000 employees overall, organisation

chart with 450,000 jobs in the public sec-

tor, 4,000 redundancies). Of course, the

extensive changes that are taking place

create uncertainty in the stakeholders,

while in certain cases incomes also are

affected.

Therefore, apart from the cut of public

expenditure and the rationalisation of the

operation of public administration, which

constitute the key issues in the current

public sector reforms, the disposable in-

come and/or the consumption of house-

holds with public sector employees are

expected to contract as well as a result of

these reforms.


46

Table 3.1

Main Economic Volumes-Quarterly National Accounts (constant 2005 prices)

Quarter/Year GDP Final Consumption Investment Exports Imports

mil. €

Annual rate of change mil. €




Annual rate of change

2001 165,023 4.2% 146,095 4.1% 38,908 -3.9% 39,522 0.0% 59,274 4.2%

2002 170,700 5.2% 153,724 5.2% 39,399 1.3% 36,205 -8.4% 58,532 -1.3%

2003 180,847 2.4% 157,479 2.4% 46,687 18.5% 37,262 2.9% 60,267 3.0%

2004 188,746 3.8% 163,422 3.8% 45,578 -2.4% 43,712 17.3% 63,682 5.7%

2005 193,049 3.8% 169,662 3.8% 41,321 -9.3% 44,807 2.5% 62,741 -1.5%

2006 203,688 4.1% 176,612 4.1% 50,048 21.1% 46,739 4.3% 69,711 11.1%

2007 210,895 4.3% 184,176 4.3% 56,524 12.9% 50,066 7.1% 79,820 14.5%

Q1 2008 49,525 0.1% 47,982 3.1% 11,243 -11.4% 10,170 5.7% 19,863 2.6%

Q2 2008 53,148 0.1% 48,142 3.3% 12,864 -0.6% 12,955 4.6% 20,806 10.5%

Q3 2008 55,247 -0.1% 47,219 2.9% 11,894 -9.5% 16,902 5.2% 20,771 4.8%

Q4 2008 52,522 -0.9% 46,091 2.2% 14,671 -17.4% 10,871 -9.3% 19,095 -12.4%

2008* 210,443 -0.2% 189,436 2.9% 50,672 -10.4% 50,899 1.7% 80,535 0.9%

Q1 2009 47,439 -4.2% 45,860 -4.4% 9,258 -17.7% 8,296 -18.4% 16,017 -19.4%

Q2 2009 51,254 -3.6% 47,727 -0.9% 9,072 -29.5% 10,368 -20.0% 15,961 -23.3%

Q3 2009 53,607 -3.0% 47,941 1.5% 8,526 -28.3% 13,378 -20.9% 16,279 -21.6%

Q4 2009 51,543 -1.9% 47,396 2.8% 11,135 -24.1% 8,973 -17.5% 16,004 -16.2%

2009* 203,843 -3.1% 188,924 -0.3% 37,992 -25.0% 41,014 -19.4% 64,261 -20.2%

Q1 2010 46,972 -1.0% 46,939 2.4% 7,305 -21.1% 8,310 0.2% 15,707 -1.9%

Q2 2010 49,816 -2.8% 44,856 -6.0% 8,979 -1.0% 10,826 4.4% 14,828 -7.1%

Q3 2010 50,064 -6.6% 43,437 -9.4% 7,916 -7.2% 13,677 2.2% 14,829 -8.9%

Q4 2010 46,916 -9.0% 40,884 -13.7% 10642 -4.4% 10328 15.1% 14932 -6.7%

2010* 193,768 -4.9% 176,116 -6.8% 34,842 -8.3% 43,142 5.2% 60,297 -6.2%

Q1 2011 42,840 -8.8% 41,632 -11.3% 7,180 -1.7% 8,282 -0.3% 14,274 -9.1%

Q22011 45,889 -7.9% 41,433 -7.6% 7,576 -15.6% 10,922 0.9% 14,051 -5.2%

Q3 2011 48,072 -4.0% 41,932 -3.5% 6,229 -21.3% 14,278 4.4% 14,406 -2.9%

Q4 2011 43,201 -7.9% 38,424 -6.0% 8,138 -23.5% 9,801 -5.1% 13,141 -12.0%

2011* 180,001 -7.1% 163,421 -7.2% 29,124 -16.4% 43,282 0.3% 55,871 -7.3%

Q1 2012 39,954 -6.7% 38,512 -7.5% 4,947 -31.1% 8,626 4.1% 12,152 -14.9%

Q2 2012 42,951 -6.4% 38,406 -7.3% 6,092 -19.6% 10,594 -3.0% 12,234 -12.9%

Q3 2012 44,873 -6.7% 38,227 -8.8% 4,429 -28.9% 13,674 -4.2% 11,718 -18.7%

Q42012 40,737 -5.7% 34,947 -9.0% 8,535 4.9% 9,334 -4.8% 12,074 -8.1%

2012* 168,515 -6.4% 150,093 -8.2% 24,003 -17.6% 42,227 -2.4% 48,179 -13.8%

Q1 2013 37,704 -5.6% 35,149 -8.7% 5.368 8.5% 8,410 -2.5% 11,215 -7.7%

Q2 2013 41,318 -3.8% 35,995 -6.3% 5.163 -15.2% 10,694 0.9% 10,786 -11.8%

* provisional data Source: ELSTAT, Quarterly National Accounts, June 2013

Regarding the unspecified fiscal measures

for 2014-2016, part of the fiscal gap is

expected to be covered through extension

of already adopted measures that were

scheduled to expire within this particular

period, such as the special social solidar-

ity levy, which brings about €1.2 billion

tax revenue per annum and is scheduled

to expire in 2014, together with widening

of the tax base for already adopted taxes,

such as property taxes. Further adjust-

ment is also expected in the expenditure

of social security funds (e.g. stricter crite-

ria for the granting of benefits). As the

negotiations of the government with the

troika on the additional fiscal interven-


47

tions was not completed until the drafting

of the current quarterly bulletin of IOBE,

the draft State Budget that was made

available to the public does not envisage

further measures for 2014, while the

measures for 2015 and 2016 will be in-

cluded in the Medium Term Fiscal Strat-

egy 2014-2017.

Still, regardless of the process of finalisa-

tion of the fiscal interventions, the EU-

IMF negotiations on the sustainability of

public debt is likely to last long, due to

the significant distance to be covered re-

garding the criteria of assessing sustain-

ability and the different approaches re-

garding the interventions that are need to

secure it, but also from the fact that a

government that can take relevant deci-

sions in Germany has still not being

formed.

Nevertheless, the priority given by the

government on the implementation of

reforms in public administration that have

been necessary for several decades

should not be used as an excuse for

postponement of reforms in the regula-

tory framework and the operation of sig-

nificant for the Greek economy sectors

and professions, which could ignite the

growth of the economy, and of drafting a

plan for the development of Greece in the

medium and the long term. On the con-

trary, as the country is going through its

sixth year of non-stop contraction, at the

end of which it has lost about 23.5% of

GDP since 2008, with significant sections

of its human and physical capital remain-

ing unutilised for a number of years, hav-

ing largely lost their value, the implemen-

tation of policies that facilitate the start of

businesses in a wide range of activities

that continue to face obstacles, and in

general, the simplification of the proc-

esses for the establishment and the op-

eration of businesses, are equally impor-

tant with the consolidation and the ra-

tionalisation of the operation of the state.

The facilitation of entrepreneurship will

contribute to the achievement of the fis-

cal targets as well, by increasing tax

revenue and reducing the debt-to-GDP

ratio. For this reason, the government

ought to implement particular policy pro-

posals that have already been put to the

table or will be proposed in the future, in

studies taken up for public entities whose

mandate includes the design and/or the

monitoring of the implementation of the

regulatory framework in sectors and pro-

fessions, handling procedures related to

the start, the operation and the termina-

tion of a business, etc. Meanwhile, all

secondary regulations for the implemen-

tation of laws and bylaws on market and

activity liberalisation and on simplification

of business transactions, already passed

through parliament or signed, should be

put to practice.

The limited execution of the privatisation-

concessions programme, which has re-

sulted in delays of connected investment,

vital for the recovery of the Greek econ-

omy, also creates impediments to the lib-

eralisation of markets for products and

services. The sale of OPAP, DESFA, cer-

tain buildings that belonged to the Greek

state in Greece and abroad, and the con-

cession of land in Kassiopi, Corfu, and

IBC, were completed in the first nine


48

months of 2013. Hence, the privatisation

revenue target for 2013 is expected to be

revised substantially bellow the €2.6 bil-

lion that were envisaged in the 2013

State Budget.

Foreign direct investment also has a small

contribution to investment activity. The

wave of announcements of investment

initiatives by multinational companies in

Greece, which took place in the first quar-

ter of 2013, did not carry over to the fol-

lowing quarters. In fact, significant con-

traction of foreign direct investment was

recorded, according to the Bank of

Greece data. In the first seven months of

the current year, foreign direct invest-

ment is down 55% year-on-year, not ex-

ceeding €910 million, from €2.05 billion in

the previous year.9

Apart from the sluggish domestic de-

mand, investment is also hurt by the diffi-

cult access to sources of liquidity. Despite

the fact that the recapitalisation of the

four largest banking institutions was

completed, while the process is still un-

derway for the smaller banks, most banks

are expected to take decisions regarding

their credit policies only after the comple-

tion of the stress test in late 2013. It

should be noted that, according to the

recent evaluation report of the Greek

programme by the IMF, the banks used

the capital that was provided until late

May as part of their recapitalisation, in

order to cover their ECB exposure.10 In

9 It should be noted that inflow of foreign direct invest-ment of €2.3 billion in 2012 and €585 million in the cur-rent year came from the participation of Credit Agricole in the raising of the share capital of Agrotiki Bank. 10 Greece, Third Review Under the Extended Arrangement Under the Extended Facility, IMF, June 2013

any case, these decisions will also take

into account the final regulations regard-

ing primary residence auctions of borrow-

ers who do not fulfil their obligations, to-

gether with the requirements stemming

from harmonisation with the terms of the

banking consolidation in the EU. Never-

theless, the reduction of the average in-

terest rate for business loans above €1

million with fixed maturity and floating or

fixed interest rate for a year by 52 basis

points in July-August (from 6.01% to

5.49%), and the interest rate on house-

hold term deposits with duration of one

year at most by 41 basis points (from

2.51% to 2.10%) is one of the first indi-

cations that the financial health of the

largest banks is improving after the com-

pletion of their recapitalisation.11

The sharp problems with the operation of

the enterprises from the lack of liquidity is

slightly ameliorated by the payment of

arrears by the state to the private sec-

tors. Obligations of €4.9 billion were paid

in the period from December 2012 to

September 2013, while funding requests

from entities for further €900 million have

been approved.12 However, as already

repeatedly mentioned, the continuous

build-up of new arrears by the state at

relatively high rate, is largely extinguish-

ing the positive impact from these pay-

ments. In July, the arrears of General

Government reached €6.1 billion,13 com-

pared with €7.9 billion in the same month

of 2012.

11 Bank interest rates on deposits and loans, July and August, 2013, BoG 12 Announcement on the process of payment of arrears, Ministry of Finance, 02/10/2013 13

General Government Data, August 2012 and 2013, Ministry of Finance


49

The developments in exports and particu-

larly the exports of services, due to a

boost of international tourism, are a key

positive element of the outlook of the

Greek economy in the second half of

2013. According to the latest data, inter-

national tourist flows have remained

strong in the third quarter, with the inter-

national arrivals in the 13 largest airports

of the country up by 11% year-on-year,

exceeding 6.8 million visitors (from 6.2

million). About 11.4 million visitors

reached Greece in the first eight months

of the year though major airports, com-

pared with 10.3 million in the same pe-

riod of the previous year (+10.2%). The

growth of international tourism is re-

flected in the surplus of the travel ser-

vices account, which was up year-on-year

by 13.9% in July. Since the beginning of

the year until July, the average growth

rate reached 22.2%, as the surplus

reached €4.7 billion from €3.8 billion.

Demand revival is expected also in the

export of goods, as the recession in the

Euro area began to ease in the second

quarter, with a return to marginal growth

quite likely until the end of 2013.

Regarding the indications on the outlook

of the Greek economy in the second half

of the year, based on the latest data on

key figures and sectors of economic activ-

ity, in certain branches the contraction is

regaining strength compared with the

second quarter. Meanwhile, further

growth or weakening of the contraction is

observed mainly, but not exclusively, in

magnitudes where the impact of global

demand is significant. In greater detail,

after the relatively stable and small year-

on-year contraction of industrial produc-

tion in the second quarter (1.3%), in July

the decline strengthened to 8.1%, which

largely carried over to August (-7.2%).

The strengthening of the contraction

came mostly from a drop in Electricity

Generation (-19.6%), with Mining-

Quarrying and Manufacturing experienc-

ing relatively smaller decline (-5.2% and

-4.3% respectively). This development is

consistent with the course of the orders

in Manufacturing in the preceding period,

when they fell by more than 10% in both

May and June (-11.9% on average), in

the aftermath of 2.5% growth in April,

with the magnitude of the decline similar

between the domestic and the foreign

markets. On the other hand, the slight

growth of new orders in July by 0.8% is

considered an indication for the easing of

output contraction in the coming months,

whose extent and duration will depend on

orders remaining strong in the future.

Regarding construction activity – a mag-

nitude that largely determines fixed capi-

tal formation – the contraction seems to

be consolidating at 20%-25% in terms of

surface towards the end of the second

quarter and the beginning of the third,

which is significantly lower compared with

the vertical drop by 43% in the first quar-

ter of 2013.

Regarding the indicators that reflect the

trends on the demand side of the econ-

omy, the volume index of retail trade fell

year-on-year by 13.4% in July 2012. Its

contraction returned close to the rate ob-

served in the first quarter (-12.6%), after

some easing in the second quarter

(-8.4%). The return of the strong pres-


50

sures on retail trade in these particular

months, despite the bargains that were

offered during the sales period, is consid-

ered an indication of the exceptionally

weakened purchasing power of the

households. In the external market, the

exports of goods and services (including

petroleum products) were higher year-on-

year by 7.7% in July, according to data

from the Bank of Greece, due mainly to

growth of the exports of goods

(+13.5%), as the growth of the exports

of services was notably milder (+4.7%).

Still, the growth in both categories was

stronger than in the second quarter

(+2.8% and +0.2% respectively). To-

gether with the marginal growth of im-

ports in July (+0.4%), which came exclu-

sively from growth in the exports of

goods (+1.2%), the surplus increased by

45.5% or about €406 million. The growth

was substantial, but weaker than in the

second quarter (+125%), when imports

had fallen notably. In any case, the

nominal growth of the exports of goods

and services is strengthening gradually,

which is expected to show up in third

quarter GDP.

The weakening of household purchasing

power during the third quarter, reflected

in the volume of retail trade, has resulted

in stronger deflation in July and August.

The Consumer Price Index fell on average

in those two months by 1.0% year-on-

year, compared with 0.5% deflation in

the second quarter. In August, the defla-

tion rate exceeded 1.0% for the first

time, reaching 1.3%, which however is

partly due to the slightly higher base of

comparison of the price index in past Au-

gust, when the disinflation was temporar-

ily interrupted.

Further weakening of consumption

demand in the private sector, after a

milder contraction in the second quarter,

is anticipated to continue throughout the

second half of the year, sharpening in the

final quarter of the year. The scrapping of

the vacation benefits to public servants

and pensioners in July and August and

Christmas benefits in December will have

an impact on household consumption ex-

penditure. As already noted, the public

sector restructuring process, either at

companies under state control, or

through the mobility programme, is creat-

ing uncertainty in the employees that are

affected, while in some cases it will have

an impact on their income, limiting fur-

ther their consumption. The impact from

the completion of the structural reform in

the labour market, with the expiry of the

national labour agreement and its exten-

sion, will also be felt in the current half.

The build-up of tax payments in the final

four months of the year (income tax,

electrified surfaces property levy, immov-

able property tax) will also drag down

disposable income and hence consump-

tion capabilities of the households. The

fall of the consumption of the private sec-

tor will be moderated by the small reduc-

tion of unemployment and the considera-

bly low base of comparison in the final

quarter of 2012. Therefore, private con-

sumption is expected to fall in the

current half by more than in the sec-

ond quarter (-6.3%) and as a result

their contraction for the year overall

is expected to be around 7.2%, still


51

lower than anticipated in the previ-

ous quarterly bulletins of IOBE

(~-9.0%).

Regarding the other component of do-

mestic consumption, the on-going proc-

ess of public sector restructuring will have

a contractionary impact on public con-

sumption. Further cuts of the consump-

tion expenditure of the State Budget can-

not be ruled out, if the execution of the

Public Investment Programme (PIP)

comes closer to the revised target in the

draft 2014 State Budget (€6.6 billion).

The expenditure target of the State

Budget in the first eight months was

largely met with under-execution of PIP

by €1.3 billion. On the other hand, the

relatively low level of consumption ex-

penditure in the public sector in the third

quarter of 2012 is expected to bring a

technical weakening of their contraction

in the same period of the current year. In

light of the above, slight weakening of

the contraction of public consump-

tion is expected in the current half,

resulting in 6.0% reduction in 2013

overall.

The anticipated acceleration of the execu-

tion of PIP in the second half, which is

already reflected in the data on the exe-

cution of the State Budget in July and

August, will boost the investment ac-

tivity of the public sector, following its

sluggish performance in the first half of

2013. It is estimated that about 70% of

PIP in 2013 will be implemented during

the current half. In contrast, the contribu-

tion of the public sector to investment

through the privatisation-concessions

programme, whose execution is well be-

hind the targets set for the current year,

is expected to be weaker than initially an-

ticipated.

Regarding private investment, the sig-

nificant contraction of construction activ-

ity will continue in the second half of

2013, albeit at a weaker rate than in the

first quarter (about -43% in surface

terms), as anticipated in the previous

quarterly bulletin of IOBE, and closer to

the rate observed in the second quarter

(between -20% and -25%). The continu-

ous contraction of domestic demand in

the second half, compensated only to a

small extent by growth of orders coming

from abroad, mainly from the Euro area

that most probably is exiting the reces-

sion, will be the key inhibiting factor for

the investment decisions of the enter-

prises that are serving primarily the do-

mestic market. However, the growth of

the exports of goods that commenced at

a weak rate in the last quarter of 2012, as

long as it continues at least with the rate

from the first half of 2013 until the end of

the year, will provide a strong incentive

for investment by exporting companies in

2014.

Features of the business environment,

such as the high energy cost, compared

with neighbouring countries (e.g. Bul-

garia), and especially that of natural gas,

and the tight credit crunch, which is not

expected to ease at least until the end of

2013, will hinder the implementation of

investment. Besides, the number of com-

panies, some of which among the largest

in the Greek market, that have relocated


52

abroad either their headquarters or their

production, have interrupted their opera-

tion or even have closed down, has in-

creased since the beginning of the year.

Not even foreign direct investment is ex-

pected to provide a push to investment

activity until the end of the year, as al-

ready mentioned. Apart from the impact

from the current conditions and develop-

ments, a significant technical negative

impact on capital formation will come

from the strong increase of inventory in

the last quarter of 2012. Taking into

account the outlook of the invest-

ment activity components, the con-

traction of gross capital formation is

expected to strengthen in the cur-

rent half of the year, resulting in

overall yearly contraction by about

9.0% in 2013.

In contrast, continuation of the positive

trends from the first half and their

strengthening is anticipated in the exter-

nal sector of the economy, coming

mostly from a boost of exports, rather

than from imports contraction, as ob-

served in the first half of the year. The

notably stronger year-on-year interna-

tional tourism will lead to an increase of

the exports of services in the third quar-

ter at least, for the first time since the

first quarter of 2012, which perhaps will

keep the change of exports of services

positive for all of the second half. The ex-

ports of goods are expected to continue

to grow, benefiting from improvement of

the economic conditions in the Euro area

and the strong boost of demand from

Turkey (+28.9% in the first seven months

of the year, making it the major export

destination for Greek products with €1.8

billion) and from certain countries in

North Africa and the Middle East

(+17.3%). The growth in both export

components in the second half will

overcompensate for their small con-

traction in the first half of the year,

resulting in an overall growth of

1.5% in 2013.

Imports will continue to fall, perhaps at

largely stronger rate than in the first half,

reflecting further weakening of household

purchasing power, for the same reasons

as those mentioned in the discussion on

private consumption. The sluggish in-

vestment activity will have a larger impact

on the imports of machinery and equip-

ment, a trend that was already reflected

on the data for the first two quarters.

Therefore, imports are expected to

fall by slightly more than 10% in the

current year.

Summarising the forecasts on the trends

in key GDP components in 2013, private

sector consumption will continue to re-

ceive strong pressures, coming from in-

come cuts of public sector employees and

pensioners, restructuring of the state,

structural changes in the labour market

and a build-up of tax obligations. The fall

of unemployment in the second and the

third quarter of the year will contain their

contraction at a rate slightly weaker than

previously anticipated. The extensive re-

structuring of the public sector since the

end of the second quarter will have a

contractionary impact mostly on public

consumption, whose fall will be hindered


53

by their low level in the third quarter of

2012, resulting in a weaker reduction in

the current half than in the first six

months of 2013.

Various forces, some of which counteract-

ing, will act upon investment in the same

period. On the side of the public sector,

the apparent acceleration of PIP will in-

crease investment activity compared with

the previous half, yet a further boost from

the privatisation-concessions programme,

whose implementation is significantly

short of target for the current year, is not

anticipated. Regarding private invest-

ment, the contraction of construction ac-

tivity will remain strong, albeit slightly

weaker than in the first half of the year.

Very sluggish domestic demand, the

credit crunch until the completion of the

recapitalisation and the assessment of the

capital adequacy of the banks and high

energy costs will continue to hinder the

implementation of investment plans by

enterprises located in Greece, at least un-

til the end of the current year. The in-

crease of foreign demand for Greek prod-

ucts will restrain the fall of investment.

The international interest for direct in-

vestment is weak, compared with early

2013. Based on the joint impact of the

above factors, the fall of investment will

intensify until the end of 2013. In con-

trast, positive developments are expected

in the external sector, mainly from growth

of international tourism and recovery of

demand in the Euro area countries.

Stronger import contraction will also con-

tribute to an improvement of the external

balance. Taking into account the

above data and trends on key GDP

components, IOBE is predicting that

the contraction of the Greek econ-

omy in the current year will be

slightly stronger than 4% (about

4.1%-4.2%, Table 3.2).

As the course of employment in Greece

depends almost exclusively on the eco-

nomic recession, the weakening of the

GDP contraction beyond the second quar-

ter will ease – temporarily at least – the

intense pressures that were exerted on

the labour market until the first quarter of

2013. The maintenance of a positive, al-

beit small, recruitment rate, net of lay-

offs, in the summer months, will come

from seasonal employment, which will

come from the stronger year-on-year in-

ternational tourist flows, together with

the seasonal employment in the public

sector, whose contribution to the reduc-

tion of unemployment has been felt al-

ready since the second quarter, as evi-

dent from the official data (more details

in section 3.4). It should be noted, how-

ever, that the boost of employment that

was observed in the ELSTAT data in the

second quarter in certain sectors (Infor-

mation-Telecommunications, Supply of

Electricity – Natural Gas) is hard to inter-

pret, as no significant positive develop-

ment took place in those sectors in that

period.


54

Table 3.2

Domestic Expense & Gross Domestic Product – European Commission Forecasts (Constant prices, year=2005)

2011 2012 2013 2014

Annual rate of change

Gross Domestic Product -7.1 -6.4 -4.2 0.6

Private Consumption -7.7 -9.1 -6.9 -1.6

Public Consumption -5.2 -4.2 -4.0 -6.2

Gross Fixed Capital Formation -19.6 -19.2 -4.0 8.4

Exports of goods and servces 0.3 -2.4 3.0 4.6

Imports of goods and sevices -7.4 -13.8 -6.4 -1.9

Employment -5.6 -8.3 -3.5 0.6

Compensation of employees per capita -3.4 -4.2 -7.0 -1.5

Real unit cost of Labour -2.4 -6.4 -6.3 -1.5

Harmonized Index of consumer prices 3.1 1.0 -0.8 -0.4

Contribution to real GDP rate of change Συμβολή στη μεταβολή του πραγματικού ΑΕΠ Final Domestic Demand -10.1 -10.4 -6.1 -1.1

Net exports 2.4 3.6 2.7 1.8

Inventories -0.4 0.0 0.4 0.0

GDP percentage ποσοστό του ΑΕΠ General Government Balance -9.4 -6.3 -4.1 -3.3

Current Account Balance -11.7 -5.3 -2.8 -1.7

Gross net government debt 170.3 156.9 175.5 175.0

Percentage Unemployment (% of labour force)

16.5 22.8 25.5 24.5 Source: European Economic Forecast, Spring 2013, European Commission, May 2013

Table 3.3 Comparison of forecasts on selected Economic Indices for years 2012-2014

(Constant 2005 market prices, annual % changes and levels)

MFIN EU OECD IMF

2012 2013 2014 2012 2013 2014

2012 2013 2014 2012 2013 2014 GDP -6.4 -4.0 0.6 -6.4 -4.2 0.6 -6.4 -4.8 -1.2 -6.4 -4.2 0.6

Final Demand : : : -7.9 -5.7 -0.3 : : : : : : Private Consumption -9.1 -6.7 -1.6 -9.1 -6.9 -1.6 -9.1 -7.0 -4.5 -9.1 -6.9 -1.6 Harmonized Consumer price

Index (%) 1.0 -0.8 -0.4 1.0 -0.8 -0.4 1.0 -0.7 -1.7 1.0 : :

Gross Fixed capital formation : : : -19.2 -4.0 8.4 -19.2 -7.7 -2.5 -19.2 -4.0 8.4

Unemployment (%) 22.8* 25.5* 24.5* 22.8 25.5 24.5 24.2 27.8 28.4 24.2 27.0 26.0 General Government Balance

(% GDP) -6.0 -2.6 -2.4 -6.3 -4.1 -3.3 -10.0 -4.1 -3.5 -6.3 -4.1 -3.2

Current Account Balance (%

GDP) : : : -5.3 -2.8 -1.7 -3.4 -1.1 0.9 -3.4 -0.8 -0.3

General Government Debt (% GDP) 156.9 175.5 174.5 156.9 175.5 175 157 175.1 180.6 156.9 175.7 174.0

*On a national accounts basis Source: Medium Term Fiscal Strategy Framework 2013-2016 & 2013 Budget, Ministry of Finance, November 2012 –– Euro-pean Economic Forecast, Spring 2013, European Commission, May 2013 - OECD Economic Outlook No. 93, May 2013 – Greece, Third Review Under the Extended Arrangement Under the Extended Facility, IMF, June 2013


55

On the other hand, in the last quarter of

the year, when the influence of the above

restraining factors on unemployment

growth will fade away, unemployment is

expected to start growing again. The job

creation in the private sector in the au-

tumn is expected to be limited, as domes-

tic demand will keep falling, while the im-

plementation of foreign direct investment

remains small in scale. Reduction of em-

ployment in the public sector, beyond

seasonal employment, is also expected

from the commitment to the troika to

limit public sector employment by 4,000

jobs in the current year. The programmes

of the Manpower Employment Organiza-

tion for returning the unemployed back to

the labour market will have a stronger

impact on unemployment than in the

past. Taking into account the inter-

ruption of unemployment growth in

the second quarter and the positive

employment outlook during the

summer months, IOBE is predicting

that the average unemployment rate

in the current year will stand at

around 27.5%, from 24.2% in 2012.

As in the previous quarters of 2013, the

pressure on prices from weakening

household demand, due mainly to lower

income as a result of cuts as part of the

fiscal consolidation process and the struc-

tural changes in the labour market, will

continue in the last quarter. The scrap-

ping of the Christmas bonuses for em-

ployees of the public sector and pension-

ers will have a significant impact on de-

mand in late 2013. The build-up of tax

obligations in the last four months of the

year (income and property taxes) will

limit further disposable income. From Oc-

tober onwards, the hike of the excise

duty on heating oil for residential use will

cease to have any expansionary impact

on CPI, while the global petroleum prices

are slightly lower year-on-year in the cur-

rent year. All these factors will boost the

deflationary trends. The increase of the

prices for public transport in Athens will

slightly moderate the fall of CPI. Taking

into account the aforementioned ef-

fects, the rate of CPI change will be

negative in 2013 overall, at around -

0.6%, compared with inflation by

1.5% in 2012.

In summary, the significant moderation of

the GDP contraction of the Greek econ-

omy in the second quarter, for the first

time since the start of the recession in

2008, cannot be considered as indicating

a stable trend, yet it constitutes the first

clear indication of the capabilities of the

Greek economy to recover. Despite the

on-going strong fiscal consolidation effort,

utilising all the structural changes that

have taken place in the country in the last

3.5 years, the Greek economy shows that

it can mobilise its production capacity for

the start of a recovery trend. Despite the

fact that a large section of its human and

physical capital has been left out of the

production processes for a long period of

time and another, significant section of

both, is still undergoing a process of radi-

cal restructuring, the first significant steps

of the adjustment to a new economic

paradigm have already been achieved,

which reignites the Greek economy. The


56

continuation and the extension of the

restructuring will allow the Greek econ-

omy to escape gradually from the pro-

longed recession that has paralysed the

Greek economy and society, making the

economy more productive, innovative and

globally attractive.

In light of the above, the importance of

the implementation of the structural

changes needed by the Greek economy,

not only by the public sector, which in the

last few months is already undergoing

such a process, but also of the operation

of the markets of products and services

by the private sector, is strengthened

even further. There are powers in these

fields as well that resist vigorously the

implementation of the needed reforms.

However, the results from the preliminary

efforts in this direction that are reflected

in the weakening of the recession and the

interruption of unemployment growth,

should become a source of inspiration

and decisiveness for those in charge, in

order to proceed to the implementation of

the reforms that have still not been com-

pleted / have not yet started. Otherwise,

there is a high risk of losing permanently

all that was achieved thus far.

3.2 Developments and outlook in

key sectors of the economy

This section presents the quarterly indices

of activity complied by the Hellenic Statis-

tical Authority (ELSTAT), which track the

course of production in Industry and the

turnover of businesses in the sectors of

Construction, Trade and Services. In addi-

tion, it presents the corresponding sector

indices compiled by IOBE on the basis of

the business surveys it has been conduct-

ing in Greece since 1981.

Industry

The contraction of industrial production

slowed down in the first half of 2013, with

the index falling by 3.2%, compared with

4.9% in the same period of 2012. How-

ever in July, the contraction accelerated

sharply again to 8.1%, its highest rate in

2013.

Industrial production contracted in the

Euro area as well in the first seven

months, at a slightly stronger rate, by

2.5%, compared with 2.2% in the same

period of the previous year.

At sector level in the Greek industry,

output contracted by 11% in Electricity,

compared with a much milder decline by

1.8% in the previous year. In Mining-

Quarrying the contraction reached 9.0%,

compared with stable output in the same

period of 2012 (+0.2%). Milder contrac-

tion was recorded in Water Supply

(-2.0%), which, however, was growing by

1.5% in the previous year, while Manu-

facturing is the only key sector with stable

output year-on-year (-0.2%), following its

6.7% contraction in 2012.

In greater detail, contraction was re-

corded in all subsectors of Mining-

Quarrying, while in two of them the

decline was stronger than in the previ-

ous year. The largest decline was ob-

served in Mining of Coal and Lignite (-

12.2%, against an increase by 8.2% in

the first seven months of 2012) and in

Extraction of Crude Oil and Natural Gas


57

(-6.9% from -5.5% in the previous

year). The contraction of output eased

significantly in Other Mining and Quarry-

ing, as it did not exceed 2.1% (from -

16.2% in the previous year) and in Min-

ing of Metal Ores (-1.4% from -4.6% in

2012).

In Manufacturing, the recession eased

year-on-year in most branches, as in 19

out of the 24 subsectors the contraction

rate was lower than in the first seven

months of 2012.

In greater detail, notably weaker contrac-

tion year-on-year in the first seven

months of 2013 was observed in Foot-

wear – Leather (marginal reduction by

0.2%, against -38.5% in the previous

year), Other Transport Equipment

(-11.8% from -41.4% in the previous

year), Non-metallic minerals (-1.2% from

-22.4%) and Textiles (-9.8% from

-24.4%). The manufacturing of Wood-

Cork contracted sharply in the current

year as well, by 19.9%, albeit at a lower

rate than in 2012 (-34.4%). The contrac-

tion rate in Printing – Reproduction of re-

corded media halved in the current year

(to -12.5% from -25.7%), while in Other

Manufacturing it eased to 5.5%, from

16.2%. The manufacturing of Plastic

Products was down by only 0.9% year-

on-year, compared with 11.2% decline in

the previous year, while the contraction

did not exceed 1.7% in Clothing (from

-11.8%) and 0.8% in Beverages (from

-8.3%).

In contrast, the contraction intensified in

the first seven month of 2013 in Repair

and installation of machinery and equip-

ment (-14.9% form -10.0% in the previ-

ous year), Metal Products (-13.6% from

-10.7%) and Basic Metals (-6.5% from -

6.3% in 2012).

Figure 3.1 Production Index in Manufacturing, Greece and Euro Area-17,

% change w.r.t. the same quarter of the previous year (2005=100)

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

a' q

ua

rter

'05

b' q

ua

rter

'05

c' q

ua

rter

'05

d' q

ua

rter

'05

a' q

ua

rter

'06

b' q

ua

rter

'06

c' q

ua

rter

'06

d' q

ua

rter

'06

a' q

ua

rter

'07

b' q

ua

rter

'07

c' q

ua

rter

'07

d' q

ua

rter

'07

a' q

ua

rter

'08

b' q

ua

rter

'08

c' q

ua

rter

'08

d' q

ua

rter

'08

a' q

ua

rter

'09

b' q

ua

rter

'09

c' q

ua

rter

'09

d' q

ua

rter

'09

a' q

ua

rter

'10

b' q

ua

rter

'10

c' q

ua

rter

'10

d' q

ua

rter

'10

a' q

ua

rter

'11

b' q

ua

rter

'11

c' q

ua

rter

'11

d' q

ua

rter

'11

a' q

ua

rter

'12

b' q

ua

rter

'12

c' q

ua

rter

'12

d' q

ua

rter

'12

a' q

ua

rter

'13

b' q

ua

rter

'13

Au

g. '1

3

Eurozone-17 Greece


58

Source: ELSTAT /Eurostat

In five manufacturing subsectors output

increased year-on-year: Coke - Refined

Petroleum Products (+13.2%, down from

+17.0% in 2012), Other Machinery –

Equipment (+5.3%, compared with

strong contraction by 29.8% in the previ-

ous year), Basic Pharmaceutical Products

– Pharmaceutical Preparations (+10.6%

from -6.4%), Paper (+2.7% from

-12.7%) and Chemical Products, which

increased marginally by 1.5%, compared

with 13.2% contraction in the previous

year.

In general, the sectors producing durable

consumer goods contracted anew by

15.1% (from a stronger contraction by

19.7% in the previous year), reflecting

the significant reduction of household

disposable income. Similar contraction

was observed in capital goods as well

(-15.0% and -14.9% in 2012). In con-

trast, the decline eased notably in non-

durable consumables, to 0.4% from 7.2%

in the previous year.

Construction

Output contraction in Construction is no-

tably weaker year-on-year in the first half

of the current year. The production index

in Construction decreased by 5.2%, com-

pared with a vertical drop by 26.9% in

the same period of 2012.

Similar trends were observed in the in-

dex’s constituent indicators. The produc-

tion index of Building Construction fell by

16.7%, compared with a sharp decline by

30.7% in the previous year. The produc-

tion index of Civil Engineering moved

similarly as well, falling by only 2.5%

compared with 17.6% in the first six

months of 2012.

In the Euro area the indicator fell by

4.9% in the fist half of the year, slightly

less than in 2012 (-6.3%).

In Greece, the number of building permits

fell year-on-year by 40.0% in the first half

of 2013 (7,940 new permits, compared

with 13,231 in the previous year). Mean-

while, both the Building Volume and the

Surface of New-Built Property indicators

contracted, by 37.3% and 40.0% respec-

tively. The fact that the number of per-

mits contracted in the first half of the

year in all regions without an exception is

indicative of the persistent widespread

recession. In particular, the largest reduc-

tion was recorded in Epirus (-57.4%), fol-

lowed by the Ionian Islands (-47.4%),

West Macedonia (-46.2%), East Mace-

donia – Thrace (-45.8%) and South Ae-

gean (-45.2%). Relatively weaker, albeit

still strong, contraction was observed in

Peloponnese (-34.5%) and Attica (-

35.2%). Lastly, according to the latest

data published by the Bank of Greece, the

residential property appraisals-

transactions with MFI intermediation con-

tinued to contract strongly, by 26.6%,

albeit weaker compared with the previous

year, when their contraction reached

52.2%.


59

Figure 3.2

Construction Production Index (&Business Level Index in Greece)

Sources: ELSTAT – Eurostat

Meanwhile, the transaction value fell fur-

ther by 35.7%, in the aftermath of signifi-

cant contraction exceeding 49.7% in the

first half of 2012. The interest rates of

mortgage loans with duration of more

than 5 years also declined to reach

3.13% in August, down by 0.6% since

June.

Retail Trade

The Volume Index in Retail Trade contin-

ued to decline in the first seven months

of 2013 overall, reflecting the contraction

of the disposable income of the house-

holds and hence their purchasing power

in the current year as well. On the other

hand, the contraction eased somewhat.

In particular, the index fell by 11.0% in

the first seven months of 2013, compared

with 11.8% in the previous year. The

year-on-year contraction was weaker in

the second quarter (-8.4%) than in the

first (-11.4%). However, it strengthened

anew in July to 14.0%.

Slight weakening of the strong 2012 con-

traction was observed in most of the ma-

jor constituent branches of Retail Trade,

which implies that it does not reflect for-

tuitous circumstances. The trends in Re-

tail Trade point to a weaker year-on-year

contraction of the households’ purchasing

power in the current year.

The largest reduction in the first seven

months of 2013 was observed in Pharma-

ceuticals – Cosmetics (-14.6%, compared

with 10.5% contraction one year before),

followed by Supermarkets (-11.9%, com-

pared with a weaker contraction by 6.3%

in the previous year), Furniture-

Household Appliances (-11.4% from -

15.2%). Next in the ranking come Auto-

motive Fuels & Lubricants with -9.7%

contraction (against a stronger contrac-

-60%

-40%

-20%

0%

20%

40%

60%

-80

-60

-40

-20

0

20

40

60

80Q

1. 2

00

6

Q2

20

06

Q3

. 2

00

6

Q4

. 2

00

6

Q1

. 2

00

7

Q2

. 2

00

7

Q3

. 2

00

7

Q4

. 2

00

7

Q1

. 2

00

8

Q2

. 2

00

8

Q3

. 2

00

8

Q4

. 2

00

8

Q1

. 2

00

9

Q2

. 2

00

9

Q3

. 2

00

9

Q4

. 2

00

9

Q1

. 2

01

0

Q2

. 2

01

0

Q3

. 2

01

0

Q4

. 2

01

0

Q1

. 2

01

1

Q2

. 2

01

1

Q3

. 2

01

1

Q4

. 2

01

1

Q1

. 2

01

2

Q2

. 2

01

2

Q3

. 2

01

2

Q4

. 2

01

2

Q1

. 2

01

3

Q2

. 2

01

3

Q3

. 2

01

3

Working level (left scale) Production Index (left scale)

Production Index Eurozone-17 (right scale)


60

tion by 14.5% in 2012) and Department

Stores, where turnover fell by 9.6% year-

on-year (-7.3% in 2012). Milder year-on-

year contraction was observed in Cloth-

ing-Footwear, where turnover declined by

7.4% (-22.5% in 2012), Food-Beverages-

Tobacco (-4.3% from -16.3%) and Books

– Stationery (-1.9% from -16.1%).

Slight weakening of the year-on-year con-

traction in Retail Trade in the first half of

the year, followed by deterioration in July,

has been reflected since the beginning of

the current year in the leading indica-

tors from the Business Surveys com-

piled by IOBE. The business sentiment

indicator improved significantly in the first

five months of the year. Since then and

until September, however, it has been

slightly deteriorating, which is an indica-

tion of renewed deterioration of the vol-

ume contraction in the second half. The

trend inversion is consistent with the de-

cline of volume in July. Still for the first

nine months overall, the expectations in

retail trade are clearly less pessimistic

year-on-year. In greater detail, the busi-

ness sentiment indicator in retail trade

increased by 19.6% (compared with

2.2% reduction in the same period of

2012). Among the constituent categories,

the business sentiment was significantly

less pessimistic in Textiles-Clothing-

Footwear, where the indicator increased

by 24.4% year-on-year, and in Depart-

ment Stores (+19.8% against -13.5%).

In contrast, pessimism strengthened

anew in Food-Beverages-Tobacco, where

the indicator deteriorated further by al-

most 13% (compared with much weaker

deterioration in 2012, by 2.0%).

Figure 3.3

Volume Index in Retail Trade (2005=100) and Business Expectations Index in Retail Trade (1996-2006=100)

Source: ΙΟΒΕ

40

50

60

70

80

90

100

110

120

130

40

50

60

70

80

90

100

110

120

130

Q1

. '0

5

Q2

. '0

5

Q3

. '0

5

Q4

. '0

5

Q1

. '0

6

Q2

. '0

6

Q3

. '0

6

Q4

. '0

6

Q1

. '0

7

Q2

. '0

7

Q3

. '0

7

Q4

. '0

7

Q1

. '0

8

Q2

'08

Q3

. '0

8

Q4

. '0

8

Q1

. '0

9

Q2

. '0

9

Q3

. '0

9

Q4

. '0

9

Q1

. '1

0

Q2

. '1

0

Q3

. '1

0

Q4

. '1

0

Q1

. '1

1

Q2

. '1

1

Q3

. '1

1

Q4

. '1

1

Q1

. '1

2

Q2

. '1

2

Q3

. '1

2

Q4

. '1

2

Q1

. '1

3

Q2

. '1

3

Q3

.'1

3

Volume Index in Retail trade (left scale) Business Expectations Index (right scale)


61

Table 3.4

Annual Changes in the Index of Retail Trade Volume

Store categories of retail trade

Volume Index (2005=100)

Jan.-July 2011

Jan.-July 2012

Jan.-July 2013

P.Ch. Jan-July '12/'11

P.Ch. Jan-July '13/'12

Overall Index 85.03 75.03 66.79 -11.8% -11.0%

Overall Index (excluding car fuels and lubricants) 84.74 75.16 66.79

-11.3% -11.1%

Store Subcategories

Large Food stores 97.74 91.54 80.64 -6.3% -11.9%

Multi Stores 97.61 90.49 81.79 30.4% -9.6%

Car fuels and lubricants 69.37 59.30 53.56 -23.9% -9.7%

Food-Drink-Tobacco 77.89 65.14 62.37 -34.8% -4.3%

Medicare-Cosmetics 99.86 89.34 76.27 20.3% -14.6%

Clothing-Footwear 74.29 57.90 53.61 -15.2% -14.5%

Furniture- Electric household appliances-Household goods 73.89 62.67 55.56 -16.1% -12.1%

Books- Stationery- Other gift items 75.30 63.21 62.03 -16.1% -1.9%

Source: ΙΟΒΕ

Table 3.5

Business Expectation Indexes in Retail Trade (1996-2006=100)

Jan.-Sep. 2011

Jan.-Sep. 2012

Jan.-Sep. 2013

P.Ch. Jan-Sep '13/'12

P.Ch. Jan-Sep '12/'11

Food-Drinks-Tobacco 78.3 76.7 66.8 -12.9% -2.0%

Textile-Clothing-Footwear 58.2 57.9 72 24.4% -0.5%

Household equipment 47 59.6 63 5.7% 26.8%

Vehicles-Spare parts 60.2 58.6 79 34.8% -2.7%

Multi stores 57.9 50.1 60 19.8% -13.5%

Retail trade total 58.9 57.6 68.9 19.6% -2.2%

Source: ΙΟΒΕ

Regarding the official sales data on motor

vehicles, the strong contraction experi-

enced in recent years is weakening, as

the sale of passenger cars in the first nine

months of 2013 fell by only 3.1% year-

on-year, compared with a 42.5% drop in

the same period of 2012 and a similar

35.7% contraction in 2011. Meanwhile,

despite the contraction recorded on aver-

age for the period from January to Sep-

tember, in five of the nine months of the

current year the sales actually increased

year-on-year.

Wholesale Trade

The weak demand in Retail Trade is

dragging down the turnover in Wholesale

as well. Nevertheless, as in Retail Trade,

the contraction is weakening. Indicatively,

in the first six months of 2013, the Turn-

over Index for Wholesale Trade was

down by 11.8% year-on-year, compared


year. During the second quarter of 2013,

the contraction did not exceed 9.4%,

compared with 15.4% in the same period

of the previous year, with the index

reaching 82 units.


62

Figure 3.4

Turnover Index in Wholesale Trade (2005=100)

Source: ELSTAT

Services

The service sector, which played a major

role in the fast growth of the Greek econ-

omy from 1994 to 2007, continued to suf-

fer from the economic recession in the

second quarter of 2013. Nevertheless, the

output contraction steadied at levels close

to those observed in the previous quarter

in quite a few of the subsectors.

During the first six months of 2013, the

turnover declined in most of the constitu-

ent subsectors, with 11 out of the 14

subsectors experiencing significant year-

on-year contraction. The largest contrac-

tion in this period was observed in Other

Professional, Scientific and Technical

Activities (branch 74), where turnover in

the first half of the year fell by double the

rate from the previous year (-36.4% from

-14.3%). The contraction in the construc-

tion sector, despite the significant in-

crease in the Production Index in Civil

Engineering in the second quarter, led to

a significant contraction in Architectural

and Engineering Activities (branch

71), where turnover fell by 20.9% year-

on-year, compared with a much smaller

decrease in the previous year (-4.3%).

Demand continued to weaken in Infor-

mation Service Activities (branch 63),

where turnover was 20.2% down year-

on-year, compared with a weaker con-

traction of 7.2% in the same period of

the previous year. Contraction by 19.2%

was observed in Advertising and Mar-

ket Research (branch 73), at a similar

rate year-on-year, and as a result the in-

dex reached its lowest level in history at

34.2.

A B C D A B C D A B C D A B C D A B C D A B C D A B

2007 2008 2009 2010 2011 2012 2013

Index 117 130 118 131 125 147 135 136 114 125 125 131 120 118 107 121 104 107 96 96 86 90 88 90 74 82

65

75

85

95

105

115

125

135

145

155


63

Figure 3.5

Turnover indicator in Postal and express delivery services (sector 53)

Source: ELSTAT

Figure 3.6 Turnover index in telecommunication services (sector 61)

Source: ELSTAT

Equally strong contraction was recorded

in Office Administrative, Office Sup-

port and Other Business Support Ac-

tivities (branch 82), where turnover de-

clined by 18.7% year-on-year, compared


year. The pressure exerted on household

disposable income and the weakening of

economic activity is partly reflected in the

turnover of Telecommunications

(branch 61), which shrank by 15.2%,

compared with marginal decline by 1.5%

in the same period of the previous year.

On the other hand, the demand for

Computer Programming, Consul-

tancy and Related Activities (branch

62) continued to decline at a similar rate

with that observed in the first six months

of 2012 (-13.7%, compared with

-13.0%).

A B C D A B C D A B C D A B C D A B C D A B C D A B C D A B

2006 2007 2008 2009 2010 2011 2012 2013

Index 122 130 115 135 123 124 121 131 123 129 125 140 124 129 116 133 120 122 105 118 109 112 108 116 91 97 90 98 85 91

65

70

75

80

85

90

95

100

105

110

115

120

125

130

135

140

145


2006 2007 2008 2009 2010 2011 2012 2013

Index 105109107117101109113108105109111103 98 96 98 97 91 88 90 75 79 78 81 76 76 76 76 70 64 67

55

60

65

70

75

80

85

90

95

100

105

110

115

120

125


64

Table 3.6

Turnover indicator in Services (Annual Change-2005=100)

Jan.-Jun. 2011

Jan.-Jun. 2012

Jan.-Jun. 2013

P.Ch% '12/'11

P.Ch% '13/'12

Car trade 42.0 27.7 26.0 -34.0% -6.1%

Overland transports & via pipelines 80.8 82.7 75.0 2.4% -9.3%

Sea transports 69.2 59.4 54.3 -14.2% -8.6%

Air transports 88.7 82.0 86.2 -7.6% 5.1%

Transportation supportive services & warehouse services

62.6 58.0 54.3 -7.3% -6.4%

Travel agents 59.2 36.2 35.2 -38.9% -2.8%

Postal and express delivery services 110.3 94.2 88.0 -14.6% -6.6%

Publishing servises 59.5 44.8 38.3 -24.8% -14.4%

Telecommunications 78.5 75.9 65.5 -3.3% -13.7%

Informatics 66.8 58.8 49.3 -12.1% -16.1%

Data processing 175.5 170.1 134.2 -3.1% -21.1%

Legal, accounting, consulting

services 102.6 97.2 109.4 -5.3% 12.6%

Architecting, engineering 63.8 57.1 48.3 -10.6% -15.3%

Advertising, market research, polls 51.3 43.5 33.8 -15.2% -22.2%

Administrative office works 67.0 64.1 53.0 -4.4% -17.3%

Tourist services 72.2 56.4 55.3 -21.9% -2.0% Source: ELSTAT

Figure 3.7

Turnover Indicator in legal, accounting , consulting services (sectors 69+70.2)

Source: ELSTAT

Turnover in Cleaning Activities (branch

81.2) declined further by 11.2%, on top

of the 16.0% contraction observed in the

first six months of 2012. Weaker year-on-

year contraction was recorded in Postal

and Courier Activities (branch 53),

where turnover declined by 7.3% (com-

pared with double the rate of contraction,

by 14.6%, in the previous year).

In contrast, turnover increased in some

branches in the first six months of 2013,

in the aftermath of a prolonged contrac-


2006 2007 2008 2009 2010 2011 2012 2013

Index 80 84 86 178 90 104 98 186 99 122106202 89 135 84 156 95 109 84 142 83 123 79 145 78 117 96 158 81 138

0

40

80

120

160

200

240


65

tion. In particular, Legal-Accounting-

Management Consultancy Activities

(branches 69 & 70.2) returned, temporar-

ily at least, to a growth path, as their

turnover increased by 11.1%, overcom-

pensating for the contraction by 3.7% in

the previous year. Meanwhile, the un-

precedented unemployment rate in

Greece has triggered turnover growth in

Employment Activities (branch 78),

which contributes to the matching of de-

mand and supply in the labour market,

with turnover increasing by 6.2%, more

than the contraction by 4.2% experienced

in the previous year.

Figure 3.8

Turnover Indicator in adverising, market research and opinion polling services (sector 73)

Source: ELSTAT

Figure 3.9

Turnover index in informatics (sector 62)

Source: ELSTAT

A B C D A B C D A Β C D A B C D A B C D A B C D A B C D A B

2006 2007 2008 2009 2010 2011 2012 2013

Index 73 113 71 131 82 114 80 131 86 129 83 118 70 94 65 110 65 82 43 69 48 55 45 57 37 50 35 48 28 40

0

20

40

60

80

100

120

140


2006 2007 2008 2009 2010 2011 2012 2013

Index 94 108 85 159103119 89 164107139 96 177 90 111114137 85 78 58 87 62 71 62 83 56 62 46 74 44 55

0

30

60

90

120

150

180

210


66

As anticipated already since the start of the

year, Accommodation and Food Services

(branches 55 & 56) began to recover with

the stronger inflow of international tourism

during the summer vacation. As a result,

the turnover index in the second quarter

reached 80.0, increasing by 5.0% year-on-

year. Overall in the first half of 2013, turn-

over in Tourism fell by only 2.0%, com-

pared with a contraction exceeding 22.0%

in the previous year. In light of this and

taking into account the growth of interna-

tional arrivals in major airports in July and

August (+11.0% on average), turnover is

most likely to increase significantly in the

third quarter, which will bring about small

growth in the sector for 2013 overall, for

the first time since 2008.

The expectations in Services, as re-

flected in the Business Surveys of

IOBE, are clearly less pessimistic than

in the previous year, reflecting the trend

of stabilisation - eradication of the contrac-

tion observed in many subsectors, and

even recovery in few of them. In particular,

the business sentiment in Services overall

improved significantly in the first nine

months of 2013 (+24.8%), compared with

a reduction by 12.4% in the previous year.

The pessimism has weakened notably

in Banks (+39.3% from +0.4% in the

previous year), IT services (+37.0%

from -9.9% in 2012) and Travel

Agencies (+35.0% from -11.6%). In

Hotels-Restaurants the improvement

of the expectations is milder, as it

improved in the previous year as well

(+16.3% from +10.8%).

3.3 Export Performance of the Greek

Economy

The exports of Greek goods (includ-

ing fuel) in the first seven months of

2013 approached €16 billion, in-

creasing year-on-year by 6.1%,

compared with slightly faster growth

in the previous year (+8.5%). It

should be noted, however, that the

growth in the first seven months of 2013

was mostly due to exports of fuel, as the

value of Greek exports excluding fuel fell

by 2.4%. Meanwhile, imports contracted

year-on-year by 5.4%, with their value

reaching €26.8 billion. As a result, the

trade deficit fell by €2.5 billion.

The value of Greek exports of goods

reached 59% of the value of imports of

goods, almost twice the ratio observed

only three years ago. In July in particular,

exports increased by 7% year-on-year, to

reach €2.4 billion (from €2.2 billion). The

value of imports increased as well, albeit

at a milder rate, by 2.6%. As a result, the

trade deficit of the country declined by

3.4% in July to reach €1.54 billion.

In greater detail, the exports of Agricul-

ture Products increased by 9.9%, with

their value approaching €2.9 billion (from

€2.6 billion). Even stronger growth was

observed in Fuels (+21.9%), the value of

which exceeded €6.4 billion (from €5.3

billion). As a result, the share of these

two product categories overall reached

3/5 of Greek exports. The exports of

Vegetable and Animal Oils and Fats in-

creased sharply (+128%), with their

value exceeding €450 million, yet their

share remaining low.


67

Table 3.7

Sectoral Indices of Business Expectations in Services (1996-2006=100)

Jan. -

Sep.

2011

Jan. -

Sep.

2012

Jan. -

Sep.

2013

P.Ch. '12-'11

P.Ch. '13-'12

Hotels - restaurants 63.0 69.8 81.2 10.8% 16.3%

Travel agencies and tour operators 75.0 66.3 89.5 -11.6% 35.0%

Other business services 51.3 47.4 59.9 -7.6% 26.4%

Financial organizations 51.0 51.2 71.3 0.4% 39.3%

Informatics 48.6 43.8 60 -9.9% 37.0%

Services total 63 55.2 68.9 -12.4% 24.8%

Source: ΙΟΒΕ

Significant growth was also observed in

the exports of Food-Live Animals, the

main category of exportable agriculture

products, with their value increasing by

3.1% (+€62.3 million) year-on-year. In

contrast, the exports of Beverages-

Tobacco declined by 13.6%, with their

value reaching €397 million in the first

seven months of the current year, from

€342 million in the same period of 2012.

The exports of Industrial Products

reached €5.8 billion, down year-on-year

by 5.5%, yet their share in the Greek ex-

ports of goods remained relatively high

(36%). The contraction largely came from

the decline of exports of Vehicles –

Transport Equipment (-12.1% or €163

million), whose share fell to 1/5 of total

industrial products, and of exports of ‘In-

dustrial goods classified by raw material’,

whose value stood at €2.2 billion, down

by 6.7% year-on-year. The export per-

formance of Various Industrial Products

and Products and Transactions Not Classi-

fied Elsewhere weakened as well, by

3.3% and 10.1% respectively, with their

value approaching €908 million and €336

million respectively.

Regarding destination, the exports of

Greek products to the remaining Euro-

pean Union countries followed an upward

trend (+4.2%) to reach €7 billion, while

the exports to the remaining Eurozone

member-states increased, by €445 million

(+10.3%). In contrast, the exports to Cy-

prus contracted significantly (-22.8%),

with their value not exceeding €625 mil-

lion from €810 million in the same period

of 2012. Nevertheless, Cyprus kept the 5th

place among Greece’s major trading part-

ners. The exports to Germany, which has

steadily remained one of the three largest

trading partner of Greece, marginally in-

creased (+1.8% or €18.6 million), to

reach €1.1 billion. In Italy, the second

largest trading partner of Greece, the ex-

ports increased notably year-on-year, by

26.7%, to reach €1.5 billion. In addition,

the exports grew significantly to Spain as

well, by 18%, with their value reaching

€346 million, and to Austria (+25%, to

€123 million).

The largest boost to the international

trade of Greece came from an export des-

tination outside the Euro area. The ex-

ports to Turkey, which remained the ma-

jor trading partner of Greece, increased in

the first seven months of 2013 by 28.9%

(+€413 million), to exceed €1.8 billion.

The exports to the United Kingdom in-

creased by 5.7%, with the total export


68

value standing at €5.8 million, while the

value of exports to the US market fell by

4% (to €580 million).

The exports to the Balkan countries con-

tracted by 5%, with their share in total

exports falling by 1.5 percentage points.

The decline came mostly from a signifi-

cant fall of exports to Bulgaria (-6.8%),

which absorbs the largest share of Greek

exports in the region, with their value

reaching €782 million. A significant drop

was also recorded in the exports to Bos-

nia-Herzegovina and FYROM (-9.6% and

-8.2% respectively), whose overall value

reached €468 million, representing 2/9 of

the exports to the countries in the region.

The largest contraction of exports to the

countries in the region was recorded in

the exports to Albania and Serbia

(-18.2% and -17.2% respectively), with

their value reaching €201 million and

€119 million correspondingly. In contrast,

the exports to Croatia increased signifi-

cantly year-on-year in the first seven

months of 2013 in Kosovo (+35%), yet

their value did not exceed €49 million,

while, the value of exports remained un-

changed in Romania (€341 million). Croa-

tia was revealed as an emerging export

destination, with growth of 72.1% and

overall value of €36 million.

Table 3.8

Exports per 1-digit product classification in current prices* (mil. €)

January-July

Value (mil. €) P.Ch(%) Structure (%)

2013 2012 ’13/’12 2013 2012

Agricultural Products 2,891.3 2,629.9 9.9% 18.1% 17.5%

Food and living animals 2,098.2 2,035.9 3.1% 13.2% 13.5%

Beverages and tobacco 342.5 396.6 -13.6% 2.1% 2.6%

Animal or natural oils and fats 450.5 197.4 128.3% 2.8% 1.3%

Raw materials 534.3 660.1 -19.0% 3.4% 4.4%

Crude materials inedible, except fuel 534.3 660.1 -19.0% 3.4% 4.4%

Fuel 6,412.9 5,261.6 21.9% 40.2% 35.0%

Minerals, fuel, lubricants 6,412.9 5,261.6 21.9% 40.2% 35.0%

Industrial products 5,772.3 6,107.0 -5.5% 36.2% 40.6%

Chemicals and related products 1,452.7 1,433.4 1.3% 9.1% 9.5%

Manufactured goods classified by raw materials 2,224.7 2,384.1 -6.7% 14.0% 15.9%

Machinery and transport equipment 1,186.6 1,350.0 -12.1% 7.4% 9.0%

Miscalleneous manufactured products 908.5 939.6 -3.3% 5.7% 6.3%

Others 335.8 373.6 -10.1% 2.1% 2.5%

Commodities and transactions not classified by category 335.8 373.6 -10.1% 2.1% 2.5%

Total exports 15,946.6 15,032.1 6.1% 100.0% 100.0% * Provisional Data Sources: PEA-ERC-ELSTAT


69

In non-US North America, exports in-

creased in Mexico (+20.6%), with their

value reaching €70 million, while the ex-

ports to Canada declined by 3.5% (to €51

million).

The exports of Greek products to North

Africa and the Middle East were growing,

with their value reaching €2.4 billion in

the first seven months of 2013, up by

17.3% year-on-year. Libya emerged as

the major trading partner of Greece in the

area, with the value of exports there

reaching €477 million, up by 15.6%.

Meanwhile, the exports to Egypt, a long-

standing major trading partner of Greece,

more than doubled (+105%), with their

value approaching €386 million. The ex-

ports to Algeria also received a strong

boost (+32.3% to €270 million), while the

exports to Morocco exceeded €152 mil-

lion, almost five times up year-on-year.

The exports to Saudi Arabia increased as

well (+32.8%), with their value exceeding

€244 million, while in contrast the exports

to Israel and Lebanon declined (-7.3%

and -6% respectively), to reach €218 mil-

lion and €315 million correspondingly.

The exports to the countries of the Com-

monwealth of Independent States de-

clined by 9.4% (-€40.8 million to €394

million), which came from a fall of the

exports to Russia (-11.4% or -€32 million)

and Ukraine (-35.7% or -€27 million),

with their total value approaching €293

million. In contrast, the exports of Greek

products to Georgia increased by 53%, to

reach €60 million.

The penetration of Greek products in the

Latin American countries received a sig-

nificant boost (+77%, to €93 million),

with demand shooting up in Brazil, where

the value of exports was up by more than

four times year-on-year, to reach €74 mil-

lion. On the other hand, the exports to

South and East Asia, which includes some

of the fastest growing developing econo-

mies in the world, declined to reach €371

million, lower year-on-year by 33.7%.

This negative development was partly off-

set by the growth by 16.6% of exports to

China, which reached €240 million. Nev-

ertheless, the significant boost of pene-

tration in the emerging markets of South

and East Asia that was observed in the

previous year (+30% excluding fuel in

the first half of 2012) has faded away in

the current year.

In summary, the Greek exports of prod-

ucts kept growing in 2013, at least in the

first seven months of the year, at a rate

slightly weaker than in 2012.

The significant increase of exports to Tur-

key will contribute to this as well. Under

the influence of the above forces, the

exports of goods, including fuels, are

expected to reach €29.1 billion in

the current year, from €27.6 billion

in 2012, growing by 5.4%. In con-

trast, the value of exports excluding

fuels is expected to fall to €16.6 bil-

lion in 2013, from €17 billion in the

previous year, contracting by 2.5%.


70

Table 3.9

Exports per destination, January-July 2013 and 2012

Value (mil. €) Structure

2013* 2012*

P.C.

(%)

’13/’12 2013 2012

OECD (29 countries) 7,929.8 7,065.7 12.2% 49.7% 47.0%

EU-27 7,042.1 6,760.6 4.2% 44.2% 45.0%

Eurozone-15 4,753.8 4,308.2 10.3% 29.8% 28.7%

N.America 699.9 714.1 -2.0% 4.4% 4.8%

Other Developed countries 100.8 101.5 -0.7% 0.6% 0.7%

Rest OECD (excl. S.Korea) 1,937.8 1,528.2 26.8% 12.2% 10.2%

Balkans 2,089.5 2,203.5 -5.2% 13.1% 14.7%

Commonwealth of Independent

States(CIS) 394.2 435.0 -9.4% 2.5% 2.9%

N.Africa and Middle East 2,375.0 2,024.0 17.3% 14.9% 13.5%

African countries (excl. S.Africa) 72.3 127.7 -43.4% 0.5% 0.8%

SE Asia 371.2 560.2 -33.7% 2.3% 3.7%

Latin America 93.0 52.6 76.8% 0.6% 0.3%

Rest Countries 1,893.2 1,677.7 12.8% 11.9% 11.2%

Total 15,946.6 15,032.1 6.1% 100.0% 100.0% * Provisional Data Source: ELSTAT-ERC

Figure 3.10 Countries with the biggest share on Greek exports (mil. €), January- July 2013 and 2012

Source: PEA Data Processing: ΙΟΒΕ

€ 244,12

€ 244,87

€ 255,19

€ 269,37

€ 315,71

€ 340,96

€ 346,43

€ 385,53

€ 407,17

€ 420,79

€ 476,56

€ 508,34

€ 579,94

€ 624,74

€ 781,50

€ 1.051,59

€ 1.527,28

€ 1.841,06

0 200 400 600 800 1.000 1.200 1.400 1.600 1.800 2.000

Russia

Saudi Arabia

Holland

Algeria

Lebanon

Romania

Spain

Egypt

France

FYROM

Libya

United Kingdom

USA

Cyprus

Bulgaria

Germany

Italy

Turkey

January-July 2012 January- July 2013


71

3.4 Employment - Unemployment

According to data from ELSTAT’s Labour

Force Survey, the unemployment rate

reached 27.1% in the second quar-

ter of 2013, 0.3 percentage points lower

quarter-on-quarter, yet 3.5 percentage

points higher year-on-year. Nevertheless,

the unemployment rate declined

quarter-on-quarter for the first time

since the second quarter of 2009.

The number of unemployed reached

about 1,350,400 people, from about

1,168,800 in the second quarter of 2012,

yet slightly down quarter-on-quarter

(from about 1,355,200). Overall in the

first half of 2013, unemployment reached

27.2%, increasing by 4.2 percentage

points year-on-year.

Despite the unprecedented in the last

four years fall of unemployment in Greece

in the second quarter, the unemployment

rate in Greece remained the largest in the

Euro area for a third consecutive quarter.

In the Euro area, unemployment in-

creased on average to 11.9%, from

11.1% one year before. Spain was next in

the ranking with 26.3%, followed at a

distance by Portugal with 16.7%. The

lowest unemployment rate in the Euro

area in the second quarter was recorded

in Austria (4.5%), Germany (5.3%) and

Luxembourg (5.5%), while in Ireland and

Cyprus, countries that have also joined

the support mechanism, unemployment

reached 13.9% and 15.4% respectively.

The year-on-year growth of unemploy-

ment came mainly from a reduction of

employment by 4.2% or about 160,900

jobs (from about 3,793,100 to about

3,632,200), with the labour force increas-

ing by 20,700 people (+0.4%). It should

be noted that employment is at its lowest

for this specific quarter since at least

1998.

Regarding the characteristics of the la-

bour force, unemployment was higher

among women than men, reaching

31.1% in the second quarter, from 27.3%

in the same period of 2012. Unemploy-

ment among men reached 24.1% in

the same period, against 20.8% in the

previous year.

Regarding age, unemployment is much

more acute among the young. In the sec-

ond quarter about 60% of those aged 15-

24 that were willing to work could not

find a job, up year-on-year by five per-

centage points (from 53.9%). In the age

group of 25-29 years old, the unemploy-

ment rate reached 44.4%, from 36.8% in

the second quarter of 2012. The impact

of the prolonged recession in the past few

years on employment is also felt – to a

lesser extent than among the young – by

those belonging to the productive age of

30-44, where the unemployment rate

reached 25.5% in the second quarter of

2013, from 22.3% in the corresponding

period of 2012. The unemployment rate

was relatively lower among those aged

45-64, compared with the previous cate-

gories (18.9%, from 16% in the second

quarter of 2012). The fact that about

70% of all unemployed in the country in

the second quarter of 2013 and 2012

were aged 30 or more (68% and 67%

respectively), compared with 56.3% in

2008, when unemployment was at its his-


72

toric low, is indicative of the trends in the

age composition of unemployment.

The persistent weakness of the Greek

economy to create new jobs is reflected

mainly in the growing number of unem-

ployed that are out of job for more than a

year. The rate of long-term unem-

ployment reached 66.8% in the second

quarter of 2013, higher by 7.8 percentage

points year-on-year (from 59% or about

689,300 people). In contrast, the rate of

newly unemployed fell from 23.3% in the

second quarter of 2012 to 23.0% in the

second quarter of 2013.

Unemployment is particularly acute

among individuals with average or lower

educational attainment level. The

highest unemployment in the second

quarter of 2013 was recorded amongst

individuals that have not attended school

at all (43.5% from 35.8% in early 2012)

and among those who have not com-

pleted primary education, where the

growth of unemployment was fastest

(39.6% from 25.7% in the previous

year). Next came individuals that have

completed lower secondary education

(ISCED 2, 32.5% from 25.7%) and

graduates of technical / professional edu-

cation (ISCED 5B, 29.3% from 26% in

the corresponding quarter of 2012). More

than 1/3 of the unemployed in the coun-

try have completed upper secondary edu-

cation (ISCED 3), with the unemployment

in this category reaching 29.3% in the

second quarter of 2013 (from 26% in the

same period of 2012). Notably lower un-

employment than the country average

was recorded among university graduates

(ISCED 5A – 17.7% from 16.2%) and

holders of postgraduate and doctorate

degrees (ISCED 6 – 14.2% from 12.9%).

At regional level, the unemployment rate

exceeded 20% in all regions except the

Ionian Islands (16.6%) and the South

Aegean (19.3%). The highest unemploy-

ment rate in the second quarter was ob-

served in West Macedonia (32.9% from

30% in the corresponding quarter of

2012) and in Central Macedonia (30.1%

from 25.1%). The region of Western

Greece followed next, where the unem-

ployment rate increased from 24.6% in

the second quarter of 2012 to 28.5% in

the current year. In Attica the unemploy-

ment rate stood at 28.1% (from 23.8%),

while in Epirus, where unemployment

grew fastest in percentage points terms

among the Greek regions, it reached

27.7%, 5.6 percentage points up year-on-

year. The unemployment rate was close

to the country average in East Macedonia

– Thrace (26.9% from 24% in the corre-

sponding quarter of 2012). In contrast,

the unemployment rate in Central Greece

fell year-on-year from 28.4% to 26.7%.

Unemployment lower than the country

average was observed - apart from the

Ionian Islands and South Aegean that

were mentioned previously - in Thessaly

(25.6% from 21.9% in the previous

year), Crete (23.7% from 22.6%), Pelo-

ponnese (22.2% from 19.9%) and North

Aegean, where unemployment remained

relatively stable (21.6% in the second

quarter of 2013, from 21.7% in the previ-

ous year).


73

The largest percentage growth of the

number of unemployed was observed in

North Aegean, where it increased by 30%

(from about 20,300 in the second quarter

of 2012 to about 26,400 in the current

year). The second largest percentage

growth took place in Epirus, by 25.2%

(from 34,100 to 42,700), followed by

Central Macedonia with 21% (from about

207,300 to 250,900) and Western Greece

with 18% (from 77,900 to 91,900). Crete

experienced the lowest growth of unem-

ployment, by 7% or 4,300, while in North

Aegean the number of unemployed re-

mained unchanged (18,100 people).

Lastly, in Central Greece, which enjoys a

significant concentration of manufacturing

activity, as it hosts the industrial zone of

Oinofyta, Boeotia, the number of unem-

ployed declined by about 2,900 people or

4.3%.

Regarding the main economic sectors,

the largest percentage drop of employ-

ment, just as in the previous years, was

observed in the secondary sector, which

is indicative of the continuous deindustri-

alisation of the Greek economy and the

“shift” of employment to the other two

main sectors and mainly to Services. Em-

ployment in the secondary sector shrank

further by 9%, in the aftermath of a 15%

contraction in the same quarter of 2012.

In particular, the number of employed fell

by 56,900 to reach 629,600, from

572,700. In the tertiary sector, the most

populous sector of the Greek economy,

taking up 70% of Greek employment, the

employment continued to contract in the

second quarter of 2013, by 3.9% against

8.1% in the corresponding period of

2012, with the number of employed fal-

ling to 2,565,400 from 2,669,600. Lastly,

only in the primary sector employment

showed signs of year-on-year stabilisation

for a second quarter in a row, with em-

ployment staying close to 494,000 peo-

ple.

It is notable that some of the branches

of economy activity that were hit most

by the fiscal consolidation process and

the prolonged recession experienced

growth of employment. These branches

include Public Administration – De-

fence – Compulsory Social Insurance

(+3% or +9,700 employees)14, Informa-

tion and Communication (+9.1% or

+6,600), and Water Supply, Sewer-

age, Waste Management and Reme-

diation Activities (+17.2% or +6,600

employees). It is likely that seasonal jobs

in the public sector were created in the

current year, but not in the previous year

due to the elections held then. On the

other hand, the wave of retirement in the

public sector is reducing its employment.

Among the remaining branches, employ-

ment increased in Mining-Quarrying

(7.8% or about 800 jobs) and Electric-

ity, Gas, Steam and Air Conditioning

Supply (+5.8% or about 1,500 jobs). On

the other hand, the significant boost of

international tourist flows since May and

the improvement of tourist receipts did

not have a positive impact on employ-

14 It should be noted that based on the “Registry of Greek Public Administration Employees” employment fell in the second quarter of 2013 by 4,413 people (1,370 in April, 1,545 in May and 1,498 in June). Nevertheless, this par-ticular database does not include employees in the legal entities under state control in the wider public sector.


74

ment in Accommodation and Food

Services, which contracted by 3.6% (or

about 9,800 employees) year-on-year.

Among the remaining branches, the larg-

est employment contraction was recorded

in Construction, where employment de-

clined by 19.3% or 41,100 employees, in

the aftermath of a 18.6% fall in the sec-

ond quarter of 2012 (-48,700 employees).

Employment also declined by 15.8% or

11,400 employees in Administrative

and Support Service Activities, (com-

pared with a 11.5% reduction in the

same quarter of 2012) and by 10% in

Professional, Scientific and Technical

Activities, in contrast with the second

quarter of 2012 when it was increasing by

3.8%.

Weaker employment contraction was ob-

served in Arts, Entertainment and

Recreation (-0,5% or -200 employees),

Transport and Storage (-1.2% or

2,200 employees), Human Health and

Social Work Activities (3.3% or 7,700

employees) and Wholesale and Retail

Trade and Repair of Motor Vehicles

and Motorcycles (3.4% or 23,200 em-

ployees). Lastly, in Manufacturing, an-

other significant sector of the economy,

employment contraction weakened to 6%

(-21,500 employees) compared with

13.8% (-57,500 employees) decline in the

second quarter of 2012.

Figure 3.11

Labour force (% proportion as to population of 15 years old and over) and unemployed (% proportion as to labour force)

Sources: ELSTAT-Labour Force Survey, Eurostat

6

8

10

12

14

16

18

20

22

24

26

28

30

42

44

46

48

50

52

54

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

% %

Percentage of working population in the total population_GR(left scale)

Percentage of unemployment in the total labour force_GR(right scale)

Percentage of unemployment in the total labour force_EA7(right scale)


75

Table 3.10 Population of 15 years old and over by employment status (in thousands)

Quarter/Year Grand Total

Labour Force

% of

population Employed

% of labour

force

Unemployed

% of labour

force

1998 8,647.1 52.0 3,962.5 88.2 532.1 11.8

1999 8,734.5 52.7 4,040.7 87.8 558.9 12.2

2000 8,813.4 52.1 4,025.7 87.7 565.0 12.3

2001 8,883.5 51.7 4,076.2 88.8 515.4 11.2

2002 8,944.0 51.4 4,076.5 88.6 524.0 11.4

2003 8,996.7 52.4 4,224.5 89.6 487.7 10.4

2004 9,044.8 53.0 4,249.1 88.7 543.8 11.3

2005 9,094.5 53.1 4,325.0 89.6 502.4 10.4

2006 9,136.0 53.3 4,400.0 90.3 473.1 9.7

2007 9,195.4 53.4 4,461.2 90.9 445.7 9.1

2008 9,222.7 53.3 4,511.6 91.7 406.5 8.3

2009 9,252.7 53.5 4,485.8 90.7 462.3 9.3

2010 9,292.2 53.9 4,425.6 88.3 586.8 11.7

Q1 2011 9,329.4 53.5 4,194.4 84.1 792.6 15.9

Q2 2011 9,337.6 53.2 4,156.3 83.7 810.8 16.3

Q3 2011 9,346.0 53.0 4,079.3 82.3 878.3 17.7

Q4 2011 9,354.5 53.0 3,932.8 79.3 1,025.9 20.7

2011 9,341.9 53.2 4,090.7 82.4 876.9 17.7

Q1 2012 9,362.3 53.0 3,837.9 77.4 1,120.1 22.6

Q2 2012 9,369.7 53.0 3,793.1 76.4 1,168.8 23.6

Q3 2012 9,377.2 53.0 3,739.0 75.2 1,230.9 24.8

Q4 2012 9,384.9 53.0 3,681.9 74.0 1,295.5 26.0

2012 9,373.5 53.0 3,763.0 75.8 1,203.8 24.3

Q1 2013 9,391.8 52.7 3,595.9 72.6 1,355.2 27.4

Q2 2013 9,397.8 53.0 3,632.2 72.9 1,350.4 27.1 Source: ELSTAT, Labour Force Survey

Labour cost decreased significantly in

both the public and the private sector in

the second quarter of 2013, by 9.4% and

12% respectively (Figure 3.12), in the

aftermath of 4.2% and 14.8% contraction

in the same quarter of 2012. The reduc-

tion of labour cost in the private sector in

the current year reflects the impact from

the structural changes in the labour mar-

ket that formed part of the second Eco-

nomic Adjustment Programme (reduction

of the minimum wage, lifting of benefits,

suspension of automatic salary matura-

tion, etc.). In the public sector, similar

reduction came from wage cuts and from

the abolishment of Easter benefits.

In general, since early 2010, when labour

cost started to fall, the cumulative reduc-

tion has reached 24.1% in the private

sector and 27.6% in the public sector.

The slightly stronger reduction in the pub-

lic sector has come in part from the grad-

ual elimination of the 13th and 14th salary

(Christmas, Easter and summer vacation

benefits) and not only from wage cuts.


76

Medium-term Outlook

The course of unemployment in Greece in

the past few years is tightly linked with

the economic recession. The significant

contraction of GDP in the current year as

well, albeit weaker than in the previous

three years, has continued to exert pres-

sure on the labour market. Nevertheless,

the weakening of the recession in the cur-

rent year has started to have a positive

impact on the labour market, as the year-

on-year growth of unemployment has

slowed down, while quarter-on-quarter

unemployment actually declined in the

second quarter, as already analysed.

The slight reduction of unemployment is

expected to carry over to the third quar-

ter, as stronger international tourist flows

will boost employment, at least in the

tourist regions. Employment is also ex-

pected to receive a boost from seasonal

employment in the public sector. How-

ever, unemployment is expected to in-

crease once more in the final quarter, as

the influence of the above beneficiary fac-

tors will fade away. Job creation in the

private sector in the autumn is expected

to be limited, as domestic demand has

weakened significantly during the current

year as well, while the inflow of foreign

direct investment has remained weak.

Employment in the public sector is also

expected to decline, on top of the expiry

of seasonal contracts, from the commit-

ment of the Greek state to reduce em-

ployment by 4,000 jobs in 2013. The pro-

grammes of the Manpower Employment

Organization that will be put in place later

in 2013 are expected to curb unemploy-

ment growth stronger than in the past.

Taking into account the interruption

of unemployment growth in the sec-

ond quarter, its causes and the posi-

tive outlook for employment during

the summer months, the previous

estimate on the unemployment rate

for 2013 (28.3%) is revised down to

about 27.5%.

Figure 3.12

Labour cost in the public and private sector in Greece (2006 Q2-2013 Q2)

Sources: Eurostat, ELSTAT

(*) Provisional data

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

20

06

Q2

20

06

Q4

20

07

Q2

20

07

Q4

20

08

Q2

20

08

Q4

20

09

Q2

20

09

Q4

20

10

Q2

20

10

Q4

20

11

Q2

20

11

Q4

20

12

Q2

20

12

Q4

*20

13

Q2

Private Sector Public Sector


77

The expectations on the short-term em-

ployment prospects in the economy’s sec-

tors improved, from the low levels

observed in the second quarter of

2013, as evident in the data from the

Business Surveys conducted by IOBE. In

particular:

The short-term employment expec-

tations improved quarter-on-quarter

in all sectors except for Services,

which remained unchanged. The

largest gains were recorded in Retail

Trade and Construction, where the

indicators reached positive levels.

Year-on-year, the expectations improved

in all sectors as well, but to a lesser de-

gree in Industry and Services, where the

indicator remained negative. In greater

detail:

In Industry the negative balance of

employment expectations gained

ground in the third quarter to reach -5

(from -12 in the preceding quarter). This

performance was also less adverse, com-

pared with the corresponding period of

the previous year, when the indicator

stood at -13.

The share of enterprises in manufacturing

that were expecting an increase of em-

ployment in the coming months fell to 7%

(from 10% in Q2), yet the percentage of

enterprises expecting further job losses in

their sector in the short term fell sharper

to 12% (from 22%). The large majority of

the respondents (82% from 67%) were

expecting no change in employment in

the short term.

In Construction, the employment

expectations improved notably quar-

ter-on-quarter in the third quarter of

2013. In particular, the indicator in-

creased by 12 points, reaching +2, sig-

nificantly higher year-on-year as well

(from -37 on average). This increase can

be largely explained with the anticipated

restart of the large road projects in the

country. The percentage of enterprises

expecting fewer jobs in the sector fell

slightly to 33% (from 36%), while the

share of those expecting employment

growth slightly increased to 35% (from

26% in same quarter of 2012). The

growth of the indicator came from Public

Works, where employment expectations

improved by 16 points quarter-on-quarter

to reach +17. The indicator in Private

Building Activity has remained almost un-

changed (-34).

In Services, the negative employ-

ment expectations remained un-

changed quarter-on-quarter in the

third quarter of 2013, but improved

year-on-year. The indicator stood at -18

(from -29 in the third quarter of 2012).

Among the enterprises in the sector, 28%

were anticipating a further drop in em-

ployment in the coming months (from

26%), while the share of enterprises ex-

pecting employment growth increased to

10% (from 8% in the previous year).

Among the constituent branches, the em-

ployment expectations weakened in Ho-

tels – Restaurants – Travel Agencies, Fi-

nancial Intermediaries, IT Services and

Land Transport, improving in contrast in

Various Business Activities.


78

Figure 3.13

Price Expectations (% difference between positive – negative answers)

Source: ΙΟΒΕ

The employment expectations in

Retail Trade improved notably

quarter-on-quarter in the third

quarter. The indicator increased by 24

points to reach +10, up by 48 points

year-on-year. About 11% (from 23%) of

the enterprises in the sector were an-

ticipating employment contraction, while

the percentage of enterprises expecting

an increase in the near term grew to

20% (from 9%). The share of enter-

prises expecting employment to remain

unchanged remained fixed at 68%.

Among the constituent branches, the

employment expectations improved sig-

nificantly in Food – Beverages – To-

bacco, Textiles - Clothing - Footwear

and Department Stores, and to a lesser

degree in Vehicles – Spare Parts, while

in contrast in Household Appliances the

indicator fell slightly in the examined

period.

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

Sep-0

7

Mar-

08

Sep-0

8

Mar-

09

Sep-0

9

Mar-

10

Sep-1

0

Mar-

11

Sep-1

1

Mar-

12

Sep-1

2

Mar-

13

Sep-1

3

Industry

-80

-60

-40

-20

0

20

40

60

Sep-0

7

Mar-

08

Sep-0

8

Mar-

09

Sep-0

9

Mar-

10

Sep-1

0

Mar-

11

Sep-1

1

Mar-

12

Sep-1

2

Mar-

13

Sep-1

3

Construction

-100

-80

-60

-40

-20

0

20

40

60

Sep-0

7

Mar-

08

Sep-0

8

Mar-

09

Sep-0

9

Mar-

10

Sep-1

0

Mar-

11

Sep-1

1

Mar-

12

Sep-1

2

Mar-

13

Sep-1

3

Retail trade

-50

-40

-30

-20

-10

0

10

20

30

40

Sep-0

7

Mar-

08

Sep-0

8

Mar-

09

Sep-0

9

Mar-

10

Sep-1

0

Mar-

11

Sep-1

1

Mar-

12

Sep-1

2

Mar-

13

Sep-1

3

Services


79

3.5 Consumer Prices

Recent Developments

Deflation carried over to the third quarter

of 2013 in Greece. In August, the year-

on-year fall of CPI exceeded for the first

time 1.0%, to reach 1.3%, compared

with 1.7% inflation in the same month of

2012. However, in the following month

deflation eased to 1.1%, which is largely

due to the base effect from the relatively

high level of the index in September

2012. The sharp deflationary pressures

on prices came mainly from the large

drop of disposable income and thus con-

sumer demand as a result of fiscal meas-

ures (pension cuts and public sector

wage cuts), extensive adoption of struc-

tural reforms in the labour market and

persistence of unprecedentedly high un-

employment, despite its small reduction

in the second quarter. As a result, the

rate of change of CPI in Greece in the

first nine months of the current year

reached -0.5%, from +1.6% in the same

period of 2012, reflecting fall of prices on

average for the first time in 45 years.

The fall of CPI came mainly from defla-

tion in the prices of services, as the

prices of goods continued to increase,

albeit at a slow pace.

In particular, the prices of services fell by

2% in the first eight months of the cur-

rent year, compared with 1% growth in

the same period of 2012, while the infla-

tion of the prices of goods slowed down

significantly, as it did not exceed 0.8%,

compared with 2.2% price increase in the

same period of the previous year.

Figure 3.14

Contribution of the change of Fuel prices to inflation (annual % change)

Source: ELSTAT Data Processing: ΙΟΒΕ

Slightly weaker inflation was recorded in

Fuels and Energy, reflecting a hike of the

excise duties of heating oil and an in-

crease of electricity tariffs, with the corre-

sponding indices growing by 7.8% and

8.7% respectively in the first eight

months of the year, compared with

10.7% and 11.3% in the previous year.

In contrast, stronger inflation was ob-

served in Fruits - Vegetables, where the

index increased by 4.5%, almost 2 per-

centage points higher than in the first

eight months of 2012.

The fall of prices in most key categories

of goods and services is reflected in the

course of the core price index, which was

strongly negative in the summer months

from June to August (-1.9%), while since

the beginning of the year until August it

has fallen by 1.5%, compared with a

small increase by 0.6% in 2012.

-3

-2

-1

0

1

2

3

4

5

6

De

c-0

9

Fe

b-1

0

Ap

r-1

0

Ju

n-1

0

Au

g-1

0

Oct-

10

De

c-1

0

Fe

b-1

1

Ap

r-1

1

Ju

n-1

1

Au

g-1

1

Oct-

11

De

c-1

1

Fe

b-1

2

Ap

r-1

2

Ju

n-1

2

Au

g-1

2

Oct-

12

De

c-1

2

Fe

b-1

3

Ap

r-1

3

Ju

n-1

3

Au

g-1

3

%

Fuels Other


80

Figure 3.15

Headline Inflation and main components (annual % change)


Strong deflationary pressures dominated

in Telecommunications, with the corre-

sponding indicator falling in the first eight

months of the year by 4.8%, compared

with 1.3% deflation in the previous year.

The same trend was observed in Educa-

tion and Durable Goods, where the defla-

tion rate approached 4%, 3 percentage

points higher year-on-year. Slightly

weaker deflationary trends were observed

in Health Services (-3.8%), Other Goods

(-3.3%) and Recreation (-2.9%), while

for the first time prices fell in Hotels-

Restaurants as well, with the index falling

by 1.6%, compared with 2.6% inflation in

the previous year.

In contrast, Housing prices continued to

increase in the first eight months of 2013,

accelerating year-on-year (7.7% from

6.6%). The same trend was observed in

Tobacco - Alcoholic Beverages, where

inflation strengthened to 3.3% from 1.7%

in the corresponding period of 2012.

Relatively weaker were the inflationary

trends in Clothing-Footwear, where the

average inflation rate reached 1.1% in

the first eight months of the year, com-

pared with a marginal increase by 0.4%

in the previous year. Lastly, inflation

weakened in Food and Non-alcoholic

Beverages, reaching 0.4% from 2% in the

previous year, in effect indicating price

stability.

The rate of change of the harmonised

index (HICP) in Greece reached -1.0% in

August, its lowest rate in history, while

for the first eight months overall the in-

dex recorded a small decline, by 0.3%,

compared with 1.2% inflation in 2012.

Figure 3.16

Core and Headline Inflation

(annual % change)


As a result of this development, Greece

was the only country in the Euro area with

deflation. The average inflation in the Euro

area reached 1.6%, from 2.6% in the pre-

vious year. Lower than the EA-17 average

inflation rate was observed in Cyprus

(0.9%), Portugal (0.6%) and Ireland

(0.7%). In contrast, the highest inflation

rate in the EU was observed in Romania

-2

-1

0

1

2

3

4

5

6

7

De

c-0

9

Fe

b-1

0

Ap

r-1

0

Ju

n-1

0

Au

g-1

0

Oct-

10

De

c-1

0

Fe

b-1

1

Ap

r-1

1

Ju

n-1

1

Au

g-1

1

Oct-

11

De

c-1

1

Fe

b-1

2

Ap

r-1

2

Ju

n-1

2

Au

g-1

2

Oct-

12

De

c-1

2

Fe

b-1

3

Ap

r-1

3

Ju

n-1

3

Au

g-1

3

%

Goods Services

-3

-2

-1

0

1

2

3

4

5

6

Jan

-10

Ma

r-1

0

Ma

y-1

0

Jul-

10

Se

p-1

0

No

v-1

0

Jan

-11

Ma

r-1

1

Ma

y-1

1

Jul-

11

Se

p-1

1

No

v-1

1

Jan

-12

Ma

r-1

2

Ma

y-1

2

Jul-

12

Se

p-1

2

No

v-1

2

Jan

-13

Ma

r-1

3

Ma

y-1

3

Jul-

13

Se

p-1

3

%

Core CPI


81

(4.2%) and Estonia (3.8%), exceeding

notably the EU-27 average (1.7%).

Figure 3.17 Harmonized Index of Consumer Prices –

Greece & Euro Area-17 (annual % change)


The deflationary trend in services and the

mild increase of the prices of goods came

in part from the significant year-on-year

decline of the cost of production. In par-

ticular, the cost of production indicator in

Greece declined by 0.7% in the first eight

months of the current year, compared

with an increase by 6% in the corre-

sponding period of 2012. In addition, in

the first seven months of 2013 the gen-

eral index of the domestic market fell by

0.5% year-on-year, compared with an

increase by 0.7% in the Euro area, with

Austria and Poland reporting the strong-

est reduction (-0.7% and -0.9%, respec-

tively). In contrast, the strongest growth

of the producer price index was observed

in Estonia (10.2%), followed by Romania

with 5.4%.

At branch level, the largest growth was

observed in Electricity - Natural Gas,

where the index increased by 6.8% year-

on-year, while slightly lower inflation was

observed in Minerals, where the index

grew by about 6%, significantly higher,

however, than in the previous year

(1.6%).

The producer price index declined in the

first eight months of the current year in

Base Metals (-4%, compared with 4.4%

growth in 2012) and in Electrical Equip-

ment (-4.4% from -4.5% in the previous

year). Much larger deviation of the rate of

change was observed in Coke-Refinery

Products (-6.8% in the first eight months,

from +13.5% in the previous year) and

Energy except Electricity (-1.7% from

+12.8% in the previous year).

The price of imported raw materials also

received deflationary pressures, with the

index falling by 2.7% in the first seven

months of the current year, from 5.6%

inflation in 2012. The index declined in

the Euro area as well (-1.4%), benefitting

significantly the production process in the

region, with the strongest reduction ob-

served in France (-3.9% from +3.4%). In

contrast, the strongest growth of the

prices of imported raw materials was re-

corded in Spain, doubling year-on-year

(+5.2% from +2.6%).

Medium-term Outlook

The pressures on prices from low in-

comes and the resulting sluggish de-

mand will continue in the last quarter of

2013. In fact, as the payment of tax ob-

ligations has piled up in this period (in-

come and property taxes), disposable

income is expected to fall further. Given

that the price index remained relatively

-2

-1

0

1

2

3

4

5

6

7

Ja

n-1

0

Ma

r-1

0

Ma

y-1

0

Ju

l-1

0

Se

p-1

0

No

v-1

0

Ja

n-1

1

Ma

r-1

1

Ma

y-1

1

Ju

l-1

1

Se

p-1

1

No

v-1

1

Ja

n-1

2

Ma

r-1

2

Ma

y-1

2

Ju

l-1

2

Se

p-1

2

No

v-1

2

Ja

n-1

3

Ma

r-1

3

Ma

y-1

3

Ju

l-1

3

Se

p-1

3

%

Greece Eurozone-17


82

unchanged in Hotels - Cafes - Restau-

rants in the three summer months (from

June to August) and fell in September

(-3.1%), despite the stronger interna-

tional tourist flows and due to the re-

duction of VAT on food services, no in-

flationary pressures are expected from

that specific segment of the market. In

addition, the hike of the excise duty on

heating oil for residential use that

pushed up inflation in the winter months

will not have an influence on prices from

October onwards. Meanwhile, the global

petroleum prices are slightly lower year-

on-year (to $108 from $113 a barrel of

Brent). The above factors will boost the

deflationary pressures, recorded in

Greece since March.

Slight weakening of deflation may come

from a likely increase of the prices of

public transport tickets in Athens in late

2013. Taking into account the influ-

ence of the above factors, the rate

of change of CPI will be negative in

2013, standing at around -0.6%, in

the aftermath of 1.5% inflation in

2012.

In the Euro area, inflation is expected to

slow down in the current year to 1.7%,

from 2.5% in 2012. The marginal con-

traction in the Euro area and the growth

of unemployment to unprecedented lev-

els will exert deflationary pressures on

prices, leading to disinflation.

Important information on the course of

prices in the coming period is also pro-

vided by IOBE’s monthly business sur-

veys, whose results serve as leading

indicators of price developments on the

supply side.

Deflationary expectations dominated in

the third quarter, as in almost every

quarter in the past three and a half

years, in all sectors. The deflationary

expectations slightly strengthened

quarter-on-quarter in Industry and

eased in Private Construction and

to a lesser extent in Retail Trade,

remaining unchanged in Services.

Year-on-year, the deflationary expecta-

tions intensified in Industry and weak-

ened in Private Construction and Ser-

vices, remaining unchanged in Retail

Trade. In greater detail:

In Industry, the deflationary ex-

pectations strengthened quarter-

on-quarter in the third quarter, as

the indicator fell by 4 points to -10,

lower also year-on-year (from -7).

Among the enterprises in the sector, 12-

13% were expecting prices to decline,

with 84% of the enterprises expecting

prices to remain stable and 3% (from

6%) to increase over the near term.

In Retail Trade, the deflationary

expectations eased slightly in the

third quarter, with the negative bal-

ance of expectations reaching -22 on

average (from -25 in the previous quar-

ter), remaining at about the same level

year-on-year. About 1/4 of the enter-

prises in the sector (from 28%) were

expecting prices to fall in the last quar-

ter of 2013, with only 3% holding infla-

tionary expectations and 73% expecting

prices to remain stable (from 70%).

Among the constituent branches of Re-


83

tail Trade, the deflationary expectations

eased significantly in Textiles–Clothing-

Footwear and Household Appliances and

to a lesser degree in Food-Beverages-

Tobacco. In contrast the deflationary

expectations strengthened in Depart-

ment Stores, while in Vehicles - Spare

Parts they remained unchanged.

The price expectations indicator re-

mained unchanged quarter-on-

quarter in Services in the period un-

der examination, at -23 on average,

however it was higher by 5 points year-

on-year. About 23% of the sector’s en-

terprises held expectations that prices

would fall in the near term, while only 1%

of the enterprises were anticipating prices

to increase. Regarding the constituent

branches, the negative balance of price

expectations weakened faster in Hotels –

Restaurants – Travel Agencies, Financial

Intermediaries and IT Services, remaining

unchanged at negative level in Land

Transport and Various Business Activities.

Lastly, the sharply negative balance

of price expectations in Private Con-

struction from the preceding quarter

improved in the period under ex-

amination, to reach -30 on average

(from -45), up also year-on-year (from -

39). In the third quarter, 30% of the en-

terprises in the sector (from 46%) were

expecting prices to fall further in the near

term, while not a single enterprise (from

1%) was expecting prices to increase and

about seven in ten enterprises (from

52%) were expecting prices to remain

stable in the near-term.

3.6 Balance of Payments

Current Account

The current account deficit almost

disappeared in the first seven months of

2013, falling by 97%, with improvement

observed in all its constituent elements.

The sharp drop, however, came to a large

extent from an extraordinary event in the

balance of current transfers. In particular,

the payment of the first tranche of the

revenues from the Securities Market Pro-

gramme (SMP) of the European Central

Bank increased significantly the surplus of

current transfers.

Contraction of the deficit of the current

account came also from improvement of

the trade balance, the service balance

and the income account.

As a result, the current account deficit

reached €155.3 million in the first seven

months of 2013, from €6.4 billion in the

same period of 2012. In the last two

years, the current account deficit has con-

tracted by €13.4 billion. Without the im-

pact from the SMP, the current account

deficit would have reached €1.6 billion,

still significantly lower than in 2012 (by

75%).


84

Figure 3.18

Price Expectations (% difference between positive – negative answers)

Source: IOBE

In particular, the trade deficit con-

tracted by 23.6% (€3.0 billion)15 in the

first seven months of 2013, in the after-

math of a contraction by 23.7% in the

same period of 2012. As both the growth

of exports and the fall of imports consoli-

dated, the deficit reached about 1/3 of its

2008 level. Regarding the pure trade ele-

ment of the account, i.e. the trade ac-

count of goods excluding fuels and

ships, the deficit fell by 12.4% (€677 mil-

lion), as the exports of goods strength-

ened by 4.2% (€329 million), compared

15 The amounts in brackets express year-on-year change, unless otherwise indicated.

with 6.4% growth in 2012. The imports of

goods fell by 2.6% (€348 million), com-

pared with a strong contraction by €2.1

billion in the previous year. The fuel ac-

count deficit contracted significantly as

well, by 33.4% (€2.2 billion), coming both

from a boost of fuel exports by 18.8%

(€754 million) and a fall of imports by

13.7% (€1.4 billion). As a result, the fuel

exports-imports ratio that stood on aver-

age at 1/4 from 2002 to 2009, increased

to 1/3 from 2010 to 2012, to reach 1/2 in

2013 (first seven months of each year).

-20

-10

0

10

20

30

40 Industry

-80

-60

-40

-20

0

20

40

Private construction

-40

-30

-20

-10

0

10

20

30

40

Retail trade

-50

-40

-30

-20

-10

0

10

20

30

Services


85

The services surplus increased in the

first seven months of the year by 10.3%

(€774 million), having increased by 6.5%

in 2012. The surplus growth came from a

large reduction of payments by €1.1 bil-

lion, as receipts fell as well, by €363 mil-

lion. In greater detail, tourist receipts in-

creased by 15.5% (€762 million), while

receipts from transport fell by 13.5%

(€1.1 billion) and from other services by

2%. Regarding payments, the payments

for tourist services declined by 7.3% (€82

million), while the payments for transport

services contracted by 15.4% (€585 mil-

lion) and the payments for other services

fell by 17.9% (€471 million).

The income account deficit fell signifi-

cantly, by 4.1% (€106 million), to reach

€2.5 billion. The contraction was mostly

due to a fall in the outgoing payments for

wages, salaries, interest and dividends by

2.6% (€116 million), due to a reduction

of the sovereign bonds held by non-

residents as a result of the PSI pro-

gramme, while receipts remained almost

unchanged.

The surplus of current transfers16 im-

proved rapidly in the first seven months

of 2013, to reach €3.8 billion, from €1.4

billion, with both total receipts increasing

by 54.5% (€2.1 billion) and total pay-

ments falling by 10.9% (€261 million).

Most of the improvement came from the

receipt of the first tranche of the SMP

programme by the ECB, amounting to

16 Gross current receipts from the EU mainly include re-ceipts from the European Agricultural Guidance and Guarantee Fund (EAGGF) and the European Social Fund (ESF), while current payments to EU mainly include con-tributions of Greece to the Community Budget.

€1.5 billion. General Government receipts

increased to €5.1 billion, while immigra-

tion transfers increased to €813.3 million.

Capital Account

The surplus of capital transfers reached

€2.8 billion, up by 129.6% year-on-year.

Receipts17 increased to €3.0 billion, while

payments increased to €220 million.

The Current and Capital Account

overall changed from a deficit in the pre-

vious year to a surplus in 2013, due to

growth of capital inflows and a reduction

of import dependence. As a result, the

surplus reached €2.6 billion, compared

with €5.1 billion deficit in the first seven

months of 2012. The aggregate of the

two accounts to some extent reflects the

economy’s external borrowing require-

ments, hence a positive balance implies a

significant boost of the ability of the

country to finance itself, through a reduc-

tion of its deficits and gradual reduction

of its dependence from the international

markets.

Financial Account

The financial account had a net outflow

of €3.5 billion in the first seven months of

the year, from €5.8 billion net inflow in

2012.

The net inflow of direct investment fell

to €1.7 billion, as investment of non-

residents to Greece fell to €909 million,

from €2.0 billion in the same period of

2012, while the holdings by residents of

foreign assets formed net inflow of €833

17 The capital transfer receipts refer to incoming pay-ments from structural and cohesion funds.


86

million, from €235 million in the previous

year, as Greek enterprises were liquidat-

ing some of their investments abroad

(disinvestment). According to the Bank of

Greece, the most significant transactions

that took place in July concerned the in-

flow of €640 million from the sale of

COSMOTE's two subsidiaries in Bulgaria,

Cosmo Bulgaria Mobile EAD (Globul) and

Germanos Telecom Bulgaria.

Portfolio investment had a net outflow

of €11.3 billion, compared with €72.1 bil-

lion net outflow in 2012. Receivables

reached €3.2 billion, as the holdings of

resident institutions in bonds and treasury

bills issued abroad fell by €3.3 billion, and

of derivatives by €362 million. Meanwhile,

payables recorded a net outflow of €8.1

billion, due to the reduction of the hold-

ings by non-residents of bonds and treas-

ury bills issued in Greece by €8.7 billion

and of derivatives by €55 million.

In other investment, the net inflow de-

clined significantly in the first seven

months of 2013, to reach €6.2 billion,

from €75.7 billion in 2012, while the gross

borrowing of General Government

reached €31.1 billion. Lastly, the country’s

reserve assets stood at €4.6 billion in

the first seven months of 2013, from €5.5

billion in 2012.

Assessment

The elimination of the twin (fiscal and

current account) deficits is a necessary

condition for fiscal consolidation, that has

triggered the recession of the past few

years, to enter its final phase and for the

Greek economy to switch to a new

growth paradigm in the coming years.

This objective comes from the need of

the Greek economy to have the least pos-

sible international dependence to fund its

budget and its imports. Regarding fiscal

consolidation, huge steps have been

made in the past few years, while the re-

cent estimates of the Ministry of Finance

for a primary surplus in 2013 show that

the basic goal has been achieved.

Meanwhile, the process of correction of

the large deficits in the Current Account

has essentially come to its end, as evident

from the data on the first seven months

of the current year.


87

Figure 3.19

Imports-Exports of Goods, 2001-2013 (January - July)

Source:Bank of Greece – Data Processing ΙΟΒΕ

Figure 3.20

Current Account Balance 2001-2013 (January-July)


Analysing the purely outward Current Ac-

count data, such as the exports of goods

(without fuels and ships) and travel re-

ceipts (tourism), a safe conclusion on the

course of export activity and import de-

pendence can be drawn. According to the

data shown in Figure 3.21, the exports of

goods and the receipts from travel ser-

vices have varied since 2008 between €11

and €14 billion, with a continuous growth

after 2010, while in contrast imports have

undergone a significant correction. The


88

imports of goods and the payments for

travel services reached €13.8 billion in the

first seven months of the year to reach

about half of their 2008 level (€26.4 bil-

lion). Overall between 2008 and 2013,

exports (without fuel and ships) essen-

tially did not experience a positive

change, as the growth during the fiscal

consolidation period of 2011-2013, when

the enterprises were trying to compen-

sate for the sharp fall of domestic de-

mand through exports, offset the strong

reduction of exports in 2009 and 2010,

due to the large price increase of key

commodities in 2008 and the global fi-

nancial crisis. In contrast, imports have

fallen at 12% on average each year dur-

ing the same period, as the sharp deterio-

ration of the economic climate and the

reduction of disposable income limited

the demand for foreign goods. As a result

of the above trends, the account of trade

of goods and travel services was almost

balanced in 2013 (-€123 million), com-

pared with a €12.3 billion deficit in 2008.

The correction of the "dependence" from

foreign markets for goods and services,

even though largely coming from imports

contraction, is considered capable of con-

stituting the needed starting point for the

realignment of Greece in the global allo-

cation of labour map. Nevertheless, as

repeatedly stated in IOBE studies, in a

constantly changing, at ever faster pace,

global environment, permanent and sta-

ble results in the external sector can only

be achieved through strengthening of ex-

port performance, as the fall of imports

alone cannot drive growth.

Figure 3.21.

Balance of goods (without fuel and ships)-travel services 2001-2013 (January-July)



89

Figure 3.22

Imports-Exports (excl. fuels) 2001-2013 (January-July)



90

Table 3.11

Provisional Balance of External Payments in mil. €

January-July July

2011 2012 2013 2011 2012 2013

I CURRENT ACCOUNT BALANCE (Ι.Α +Ι .Β+ Ι.C + Ι.D) -13,566.1 -6,402.6 -155.8 -840.2 507.9 2,726.8

Ι.A GOODS ( I.Α.1 - I.Α.2) -16,770.0 -12,801.4 -9,784.6 -2,561.1 -1,725.1 -1,517.7

Oil Balance -6,675.2 -6,604.4 -4,399.3 -1,084.2 -942.7 -779.0 Trade Balance excluding oil -10,094.9 -6,197.1 -5,385.3 -1,476.9 -782.4 -738.7 Ships Balance -2,075.4 -748.5 -614.0 -395.9 -90.7 -63.5 Trade Balance excluding oil and ships -8,019.5 -5,448.6 -4,771.3 -1,081.0 -691.7 -675.2 I.A.1 Exports 11,345.5 12,256.3 13,175.5 1,878.6 1,857.6 2,109.1 Oil 3,505.4 4,016.2 4,770.6 690.5 615.8 794.3 Ships 550.8 482.1 317.8 84.5 95.1 33.5 Other goods 7,289.2 7,758.0 8,087.1 1,103.5 1,146.6 1,281.4 I.A.2 Imports 28,115.5 25,057.7 22,960.1 4,439.7 3,582.7 3,626.8 Oil 10,180.6 10,620.6 9,169.9 1,774.8 1,558.5 1,573.3 Ships 2,626.2 1,230.5 931.7 480.4 185.8 97.0 Other goods 15,308.7 13,206.6 12,858.4 2,184.5 1,838.4 1,956.5

Ι.Β SERVICES ( I.Β.1 - I.Β.2) 7,082.5 7,542.2 8,315.9 2,544.2 2,558.9 2,816.3

I.B.1 Receipts 15,505.5 15,077.1 14,713.7 3,772.6 3,581.7 3,811.8 Travel 5,295.5 4,921.6 5,683.3 2,207.8 2,100.8 2,359.2 Transportation 8,083.2 8,006.5 6,925.4 1,205.6 1,170.4 1,098.7 Other services 2,126.8 2,149.0 2,105.0 359.1 310.6 354.0 I.B.2 Payments 8,423.0 7,534.9 6,397.8 1,228.4 1,022.8 995.5

Travel 1,294.1 1,116.6 1,034.6 230.2 199.6 193.4 Transportation 4,380.9 3,789.9 3,205.4 617.1 525.7 468.4

Other services 2,748.1 2,628.4 2,157.9 381.0 297.5 333.7

Ι.C INCOME (I.C.1 - I.C.2) -4,903.7 -2,581.6 -2,476.1 -853.9 -225.6 -434.7

I.C.1 Receipts 1,871.6 1,889.3 1,879.3 290.3 302.8 260.8 Compensation of employees 111.1 112.2 123.4 16.9 16.9 19.0 Investment income 1,760.4 1,777.2 1,755.9 273.4 285.9 241.9 I.C.2 Payments 6,775.3 4,470.9 4,355.4 1,144.2 528.4 695.5

Compensation of employees 255.4 278.7 274.5 38.3 36.9 45.8 Investment income 6,519.9 4,192.2 4,081.0 1,105.9 491.5 649.7

Ι.D CURRENT TRANSFERS (I.D.1 - I.D.2) 1,025.1 1,438.2 3,789.0 30.6 -100.3 1,862.9

I.D.1 Receipts 3,426.6 3,835.3 5,925.1 339.4 254.1 2,145.3 General Government (mainly transfers from EU) 2,724.2 3,205.2 5,111.8 236.4 163.1 2,044.9 Other sectors 702.5 630.1 813.3 102.9 90.9 100.5 I.D.2 Payments 2,401.6 2,397.2 2,136.1 308.8 354.4 282.4

General Government (mainly transfers from EU) 1,550.4 1,723.9 1,713.0 209.9 268.6 214.0 Other sectors 851.1 673.3 423.1 98.9 85.8 68.4

II CAPITAL TRANSFERS (ΙΙ.1 - ΙΙ.2) 564.3 1,218.9 2,798.9 254.1 151.3 1,690.6

ΙΙ.1 Receipts 699.4 1,358.5 3,019.1 271.7 172.3 1,723.1 General Government (mainly transfers from EU) 645.2 1,313.4 2,969.6 258.5 164.6 1,716.1 Other sectors 54.2 45.1 49.5 13.2 7.7 6.9

ΙΙ.2 Payments 135.1 139.5 220.3 17.6 20.9 32.5 General Government (mainly transfers from EU) 8.1 6.9 2.5 1.2 0.5 0.5 Other sectors 127.0 132.6 217.7 16.4 20.4 32.0

III CURRENT ACCOUNT AND CAPITAL TRANSFERS (Ι + ΙΙ) -13,001.8 -5,183.7 2,643.0 -586.1 659.2 4,417.4

IV FINANCIAL ACCOUNT (ΙV.Α + ΙV.Β + ΙV.C + ΙV.D) 13,435.0 5,851.4 -3,471.3 1,121.4 -961.4 -4,148.7

IV.A DIRECT INVESTMENT* -1,570.1 2,286.4 1,743.3 -79.8 2,204.0 692.5

Abroad -1,157.7 235.4 833.4 -387.7 -1.9 685.7 Home -412.4 2,050.9 909.9 307.9 2,205.8 6.9

IV.B PORTFOLIO INVESTMENT* -9,403.0 -72,094.9 -11,345.7 305.0 -516.9 -1,504.7

Assets 5,395.4 -40,350.2 -3,274.1 241.7 -721.9 -737.2 Liabilities -14,798.4 -31,744.7 -8,071.6 63.3 205.0 -767.6

ΙV.C OTHER INVESTMENT* 24,431.1 75,689.8 6,183.1 915.2 -2,618.4 -3,354.5

Assets -3,492.4 11,494.0 15,461.2 -3,166.4 909.0 -1,589.4 Liabilities 27,923.5 64,195.8 -9,278.1 4,081.6 -3,527.4 -1,765.1 ( Loans of general government)) 32,156.9 75,153.8 31,114.4 11,852.6 -141.8 4,112.4

ΙV.D CHANGE IN RESERVE ASSETS** -23.0 -30.0 -52.0 -19.0 -30.0 18.0

V BALANCE ITEMS (I + II + IV + V = 0) -433.2 -667.6 828.3 -535.3 302.2 -268.7

RESERVE ASSETS (STOCK) (end period)*** 4,609 5,422 5,026

Source: Bank of Greece * ( + ) net inflow ( - ) net outflow, * * ( + ) increase ( - ) decrease * * * Reserve assets , as defined by the ECB, only include monetary gold, the reserve position at the IMF, Special Drawing Rights and the Bank of Greece’s claims in foreign currency on residents of countries outside the euro area. Conversely, reserve assets do not in-clude claims in euro on residents of countries outside the euro area, claims in foreign currency and in euro on residents of euro area countries, and the Bank of Greece’s participation in the capital and the reserve assets of the ECB.

.


91

4. THE ECONOMIC IMPACT FROM CARBON LEAKAGE INDUCED BY INDI-

RECT EMISSION COSTS18

4.1 Introduction – Study scope

Since 1 January 2013 the electricity generation companies in most EU member-states are

obliged to purchase all of their CO2 emission rights. This expenditure constitutes an addi-

tional cost, pushing up electricity prices (indirect emission cost).

The hike of electricity tariffs has a significant negative impact on the competitiveness of

sectors and companies, for which: a) electricity is a significant component of the production

cost; b) there is an intense global competition from third-country enterprises that are not

burdened with indirect emission costs.

These enterprises are exposed to the risk of “carbon leakage”, i.e. they face a higher prob-

ability that they cannot recover from the deterioration of their competitiveness, and as a

result they might reduce significantly their output, move their activities to countries that are

not burdened with these measures or even close down completely. Meanwhile, with carbon

leakage the global emissions of greenhouse gasses are higher, compared to a “no carbon

leakage” scenario.

Acknowledging this risk, the European Commission envisaged in Directive 2009/29/EC spe-

cial temporary measures for certain enterprises, such as financial support to compensate

for the hike in electricity prices from incorporating the emission costs. These measures are

of voluntary nature and their implementation is left to the discretion of each member-state,

depending on the urgency of the need to protect its industrial base.

Until today, Greece has not drafted such a plan, despite the fact that energy costs for the

domestic enterprises have increased notably (while the “carbon footprint” of electricity

generation has remained significant), greatly undermining their competitiveness.

The scope of this study is to quantify the impact on the Greek economy overall from pass-

ing the additional cost of carbon emission rights to electricity prices. The analysis is focused

on branches that have been recognised by the Community acquis as exposed to the risk of

“carbon leakage” induced by indirect emission costs and hence are experiencing serious

deterioration of their competitiveness.

4.2 The risk of carbon leakage due to indirect emission costs

The risk of carbon leakage due to indirect emission costs is considered significant for enter-

prises that belong to specific branches of economic activities. In particular, a sector or a

18

Prepublication of the key findings of a study of IOBE that was completed in September 2013, by George Maniatis and Sve-toslav Danchev.


92

subsector is considered to be exposed to a significant risk of carbon leakage induced by

indirect emission costs when both:19

- The indirect additional costs induced by the implementation of the Emission Trading

Scheme (ETS) Directive would lead to a substantial increase in production costs,

calculated as a proportion of the gross value added, amounting to at least 5%.

- The intensity of trade (imports and exports) with third countries (i.e. outside the

EU) is above 10%.

Table 4.1

Industries that are exposed to a significant risk of carbon leakaged induced by indirect emission

costs

Order

number

Nace

1.1

Nace

2 Description

1 2742 2442 Aluminum production

2 1430 891 Mining of chemical and fertiliser minerals

3 2413 2013 Manufacture of other inorganic basic chemicals

4 1810 1411 Manufacture of leather clothes

5 2710 2410 Manufacture of basic iron and steel and of ferro-alloys

6 2112 1712 Manufacture of paper and paperboard

7 2415 2015 Manufacture of fertilisers and nitrogen compounds

8 2744 2444 Copper production

9 2414 2014 Manufacture of other organic basic chemicals

10 1711 1310 Preparation and spinning of textile fibres

11 2470 2060 Manufacture of man-made fibres

12 1310 710 Mining of iron ores

13 2416* 2016 Manufacture of plastics in primary forms

14 2743 2443 Lead, zinc and tin production

15 2111 1711 Manufacture of pulp *Particular sub-domains are specified Source: EU Comission, C(2012) 3230

Based on the above criteria, the Commission determined 15 branches of economic activity

that were preliminary considered exposed to significant risk of carbon leakage induced by

indirect emission costs and for which a compensation system, compatible with the EU state

aid rules, can be implemented (Table 4.1).20 The list of eligible branches is final and can be

amended only as part of the mid-term review of the relevant EC Guidelines [C(2012)

158/04].

It should be noted that recently the United Kingdom and Germany, taking advantage of the

opportunity provided by the regulatory framework, implemented compensatory measures

for the indirect emission costs, with the approval of the European Commission. Based on

the experience of these countries, it is evident that the process of granting an approval, a 19 C(2012) 158/04 Annex II 20 The aid intensity must not exceed 85% of the eligible costs incurred in 2013 to 2015, 80% in 2016 to 2018 and 75% in 2019 and 2020.


93

requirement in order to implement the compensatory mechanism, is lengthy, as the con-

sent of the Commission was granted 6-7 months after the initial submission of the request.

The fact that member-states as the above, which in the current phase of their cycle are not

suffering as much as other EU countries, implement compensatory mechanisms for the in-

direct emission costs, raises an issue on ensuring equal treatment of energy-intensive in-

dustries even within the European Union.

4.3 The sectors exposed to a significant risk of carbon leakage induced by in-

direct emission costs and their significance for the Greek economy

The sectors that are categorised as exposed to a significant risk of carbon leakage induced

by indirect emission costs contributed directly about 5.9% of the gross value added (€639

million) and about 4.1% of the employment (about 12,000 jobs) of domestic manufactur-

ing. In addition, they have a very substantial contribution to the balance of trade, as in

2012 their exports approached €1.5 billion, which represented 5.4% of total Greek exports

and 14.3% of the exports of industrial goods (except petroleum products).

Figure 4.1

Total impact of carbon leakage by indirect emission costs in domestic value added and employment

Source: ΙΟΒΕ

Taking into account the multiplier effects, stemming from the interconnection of the exam-

ined subsectors with the remaining sectors of the economy (indirect impact), together with

the wider impact from employees spending their labour income, generated directly or indi-

rectly, as a result of the economic activity of these subsectors (induced impact), the total

impact in the economy in terms of value added was estimated to exceed €3.4 billion, while

in employment terms it reached 70,000 jobs (Figure 4.1). Given the above direct impact,

this implies that about 66 jobs overall in the economy are linked to every 10 jobs in the

subsectors exposed to this type of carbon leakage risk (employment multiplier 6.6), while

0

500

1000

1500

2000

2500

3000

3500

4000

Direct Indirect Induced Total

mill

ion

s €

Impact on Value Added

0

10000

20000

30000

40000

50000

60000

70000

80000

Direct Indirect Induced Total

Impact on Employment


94

every unit of value added in these subsectors corresponds to 5.5 units of value added

overall in the economy.

4.4 The impact of carbon leakage induced by indirect emission costs on the

economy

The increase of electricity prices due to indirect emission costs increases the production

cost of subsectors exposed to the risk of carbon leakage. As these enterprises face intense

global competition, they are not in the position to absorb the additional cost. As a result,

the increased production cost pushes up the prices of the products that they offer. The in-

creased prices lower the competitiveness of domestic production and hence exports. The

fall of demand, in turn, has a direct impact on the exposed subsectors, which in addition

has wider multiplicative effects that spread across the economy. In order to quantify these

economic effects, we used an input-output model of the Greek economy.

In order to estimate the impact we built 3 scenaria, which differ with respect to the ETS

carbon price (5, 15 and 25 €/tCO2). The higher the carbon price, the larger the expenditure

on electricity that is passed on to final prices, leading to a reduction of domestic demand

and exports.

With the price of carbon emission rights at 5 €/tCO2 the negative impact on product de-

mand in the exposed sectors is estimated at €70 million. The direct and indirect loss of

turnover, also leads to a fall of labour income in the corresponding sectors. Hence, taking

into account the induced impact, the total loss of value added in the economy due to car-

bon leakage from indirect emission costs is estimated at €95 million.

In employment terms, the total losses in the Scenario 5€/tCO2 are estimated at 1,921 jobs.

Out of these, about 15% (or 292 jobs) represent the direct impact on the exposed subsec-

tors.

The losses increase with the rise of the carbon price. In the Scenario 25 €/tCO2 the loss of

value added is estimated at €474 million (Table 4.2). In employment terms, about 9,600

jobs are lost, while the tax revenue for the state budget is estimated to be lower by €75

million.

These estimates do not take explicitly into account the likelihood of bankruptcy of enter-

prises due to higher energy costs. Yet, the risk of bankruptcy is very substantial after six

years of a deep economic crisis. About 20% of the turnover in the examined subsectors is

generated by enterprises that are in a distress zone, as estimated based on their Altman z’-

score. The closure of these enterprises is linked to the loss of almost 20,000 jobs overall in

the economy, when we also take into account the indirect impact on connected enterprises

and the induced impact from the fall of consumption expenditure by the employees.


95

Table 4.2

Impact on the economy induced by increases in price of carbon emission rights

Fundamentals Scenario 5€/tCO2

Scenario 15€/tCO2

Scenario 25€/tCO2

Gross production value -218 -654 -1,091

Added value -95 -284 -474

GDP -100 -300 -501

Work income -29 -88 -146

Taxes and contributions -15 -45 -75

Indirect cost of CO2 privileges 16 47 78

Net exports -17 -52 -87

Employment -1,921 -5,764 -9,607

Source: ΙΟΒΕ

4.5 Conclusions – Policy implications

The lifting of the grandfathering of greenhouse gas emission rights in electricity generation

from 2013 has an indirect, yet substantial, impact on the competitiveness of the electricity-

intensive industries. While an effort is made to tackle the impact from the loss of competi-

tiveness of the enterprises that participate in the Emission Trading Scheme (ETS) at the

European Union level, the treatment of the risk of carbon leakage from indirect emission

costs is left to the discretion of the member-states.

The economic impact from increased indirect emission costs to subsectors of Greek indus-

try is substantial. Even with the currently low carbon price (close to 5 €/tCO2), about €95

million value added, €15 million tax revenues and more than 1,900 jobs are being lost due

to indirect carbon leakage.

These losses increase when carbon price is on the rise. In the Scenario 25 €/tCO2 the loss

of value added is estimated at €474 million. In employment terms, about 9,600 jobs are

lost, while the forgone tax revenues are estimated at €75 million.

To a large extent these negative effects can be ameliorated with a mechanism that com-

pensates for the indirect emission costs in sectors exposed to the risk of carbon leakage.

Such mechanisms have already been put in place in other European countries, such as in

Germany, UK and Norway.

The cost of this mechanism is largely offset by tapping the forgone tax revenue from car-

bon leakage. The difference between the indirect emission costs and the foregone tax

revenue does not exceed €2.5 million, even in the high carbon price scenario (25 €/tCO2).

Taking into account the significant losses that could occur in case of mass bankruptcy of

enterprises that are already in a significant financial distress, the net outcome of a mecha-

nism that compensates the indirect emission costs can be positive even in fiscal terms.


96

The compensatory mechanism need not be financed in cash, levying a burden on the li-

quidity of the state treasury. The compensation could take place through free allocation of

emission rights. Additional advantage from the compensation through emission rights

comes from the direct link of the mechanism with the fluctuating ETS carbon price. The

size of the compensation should be set at the level envisaged in the EU guidelines per in-

stallation, which minimises the losses to the economy, without lifting the incentive to adjust

the production techniques in order to achieve maximum reduction of greenhouse gas emis-

sions.

At a relatively small cost and/or positive overall fiscal impact, the State has the power to

protect many jobs in strategic sectors of the Greek economy. Given the critical state of

many enterprises in the sectors exposed to the risk of carbon leakage, the authorities

should move fast in order to design a compensatory mechanism for the indirect emission

cost. The defence of existing industrial installations should be included in the immediate

strategic priorities of Greece, at an equal footing with the effort to find new investments in

our country.


97

5. APPENDIX: KEY ECONOMIC INDICATORS


99

Table 1: Real GDP growth rate Annual data (%)

2006 2007 2008 2009 2010 2011 2012 2013 2014

Austria 3.7 3.7 1.4 -3.8 1.8 2.8 0.9 0.6(f) 1.8(f) Belgium 2.7 2.9 1.0 -2.8 2.3 1.8 -0.1 0(f) 1.2(f) Bulgaria 6.5 6.4 6.2 -5.5 0.4 1.8 0.8 0.9(f) 1.7(f) Croatia 4.9 5.1 2.1 -6.9 -2.3 0(p) -2(p) -1.0(f) 0.2(f) Cyprus 4.1 5.1 3.6 -1.9 1.3 0.5 -2.4 -8.7(f) -3.9(f) Czech Republic 7.0 5.7 3.1 -4.5 2.5 1.8 -1.0 -0.4(f) 1.6(f) Denmark 3.4 1.6 -0.8 -5.7 1.6 1.1 -0.4 0.7(f) 1.7(f) EU-28 3.4 3.2 0.4 -4.5 2 1.6 -0.4 -0.1(f) 1.4(f) Estonia 10.1 7.5 -4.2 -14.1 2.6 9.6 3.9 3.0(f) 4.0(f) Eurozone-17 3.2 3.0 0.4 -4.4 2.0 1.5 -0.6 -0.4(f) 1.2(f) Finland 4.4 5.3 0.3 -8.5 3.4 2.7 -0.8 0.3(f) 1.0(f) France 2.5 2.3 -0.1 -3.1 1.7 2.0 0 -0.1(f) 1.1(f) Germany 3.7 3.3 1.1 -5.1 4.0 3.3 0.7 0.4(f) 1.8(f) Greece 5.5 3.5 -0.2 -3.1 -4.9 -7.1 -6.4 -4.2(f) 0.6(f) Holland 3.4 3.9 1.8 -3.7 1.5 0.9 -1.2 -0.8(f) 0.9(f) Hungary 3.9 0.1 0.9 -6.8 1.1 1.6 -1.7 0.2(f) 1.4(f) Ireland 5.5 5.0 -2.2 -6.4 -1.1 2.2 0.2 1.1(f) 2.2(f) Italy 2.2 1.7 -1.2 -5.5 1.7 0.4 -2.4 -1.3(f) 0.7(f) Latvia 11.0 10 -2.8 -17.7 -1.3 5.3 11.4 3.8(f) 4.1(f) Lithuania 7.8 9.8 2.9 -14.8 1.6 6.0 3.7(e) 3.1(f) 3.6(f) Luxemburg 4.9 6.6 -0.7 -5.6 3.1 1.9 -0.2 0.8(f) 1.6(f) Malta 2.6 4.1 3.9 -2.8 4.0 1.6 0.8 1.4(f) 1.8(f) Polland 6.2 6.8 5.1 1.6 3.9 4.5 1.9 1.1(f) 2.2(f) Portugal 1.4 2.4 0 -2.9 1.9 -1.3 -3.2 -2.3(f) 0.6(f) Romania 7.9 6.3 7.3 -6.6 -1.1 2.2 0.7 1.6(f) 2.2(f) Slovakia 8.3 10.5 5.8 -4.9 4.4 3.2 2.0 1.0(f) 2.8(f) Slovenia 5.8 7.0 3.4 -7.9 1.3 0.7 -2.5 -2.0(f) -0.1(f) Spain 4.1 3.5 0.9 -3.8 -0.2 0.1 -1.6 -1.5(f) 0.9(f) Sweden 4.3 3.3 -0.6 -5.0 6.6 2.9 1.0 1.5(f) 2.5(f) United Kingdom 2.8 3.4 -0.8 -5.2 1.7 1.1 0.1 0.6(f) 1.7(f)

b=break in t ime ser ies . p=provis ional . f=forecast

Table 2: General government debt(% GDP) Annual data (%)

2004 2005 2006 2007 2008 2009 2010 2011 2012

Austria 64.7 64.2 62.3 60.2 63.8 69.2 72.3 72.8 74.1 Belgium 94 92 88 84 89.2 95.7 95.6 97.8 99.8 Bulgaria 37 27.5 21.6 17.2 13.7 14.6 16.2 16.3 18.5 Croatia : : : : : : : : : Cyprus 70.9 69.4 64.7 58.8 48.9 58.5 61.3 71.1 85.8 Czech Republic 28.9 28.4 28.3 27.9 28.7 34.2 37.9 41 45.9 Denmark 45.1 37.8 32.1 27.1 33.4 40.7 42.7 46.4 45.6 EU-27 61.9 62.9 61.7 59 62.2 74.6 80.2 83.1 86.9 Estonia 5 4.6 4.4 3.7 4.5 7.1 6.7 6.1 9.9 Eurozone-17 69.6 70.3 68.7 66.4 70.2 80 85.6 88 92.7 Finland 44.4 41.7 39.6 35.2 33.9 43.5 48.7 49.2 53.6 France 65 66.7 64 64.2 68.2 79.2 82.4 85.8 90.2 Germany 66.2 68.5 68 65.2 66.8 74.5 82.4 79.9 81.2 Greece 98.9 101.2 107.5 107.2 112.9 129.7 148.3 170.3 156.9 Holland 52.4 51.8 47.4 45.3 58.5 60.8 63.4 65.8 71.3 Hungary 59.5 61.7 65.9 67 73 79.8 81.8 81.4 79.2

Ireland 29.5 27.3 24.6 25 44.2 64.4 91.2 104.1 117.4 Italy 103.7 105.7 106.3 103.3 106.1 116.4 119.3 120.8 127 Latvia 15 12.5 10.7 9 19.8 36.9 44.4 41.9 40.7 Lithuania 19.3 18.3 17.9 16.8 15.5 29.3 37.9 38.5 40.6 Luxemburg 6.3 6.1 6.7 6.7 14.4 15.3 19.2 18.3 20.8 Malta 69.8 68 62.5 60.7 60.9 66.5 66.8 69.5 71.3 Polland 45.7 47.1 47.7 45 47.1 50.9 54.8 56.2 55.6 Portugal 61.9 67.7 69.4 68.4 71.7 83.7 94 108.4 123.8 Romania 18.7 15.8 12.4 12.8 13.4 23.6 30.5 34.7 37.8 Slovakia 41.5 34.2 30.5 29.6 27.9 35.6 41 43.3 52.1 Slovenia 27.3 26.7 26.4 23.1 22 35.1 38.7 46.9 54.3 Spain 46.3 43.2 39.7 36.3 40.2 54 61.7 70.4 85.9 Sweden 50.3 50.4 45.3 40.2 38.8 42.6 39.4 38.6 38.3 United Kingdom 40.5 41.8 42.8 43.7 51.9 67.1 78.4 84.3 88.8


100

Table 3: General government balance (% GDP) Annual data (%)

2004 2005 2006 2007 2008 2009 2010 2011 2012

Austria -4.4 -1.7 -1.5 -0.9 -0.9 -4.1 -4.5 -2.5 -2.5 Belgium -0.1 -2.5 0.4 -0.1 -1 -5.6 -3.8 -3.7 -3.9 Bulgaria 1.9 1 1.9 1.2 1.7 -4.3 -3.1 -2 -0.8 Croatia -4.3 -4 -3 -2.5 -1.4 -4.1 : : : Cyprus -4.1 -2.4 -1.2 3.5 0.9 -6.1 -5.3 -6.3 -6.3 Czech Republic -2.8 -3.2 -2.4 -0.7 -2.2 -5.8 -4.8 -3.3 -4.4 Denmark 2.1 5.2 5.2 4.8 3.2 -2.7 -2.5 -1.8 -4 EU-27 -2.9 -2.5 -1.5 -0.9 -2.4 -6.9 -6.5 -4.4 -4 Estonia 1.6 1.6 2.5 2.4 -2.9 -2 0.2 1.2 -0.3 Eurozone-17 -2.9 -2.5 -1.3 -0.7 -2.1 -6.4 -6.2 -4.2 -3.7 Finland 2.5 2.9 4.2 5.3 4.4 -2.5 -2.5 -0.8 -1.9 France -3.6 -2.9 -2.3 -2.7 -3.3 -7.5 -7.1 -5.3 -4.8 Germany -3.8 -3.3 -1.6 0.2 -0.1 -3.1 -4.1 -0.8 0.2 Greece -7.5 -5.2 -5.7 -6.5 -9.8 -15.6 -10.7 -9.5 -10 Holland -1.7 -0.3 0.5 0.2 0.5 -5.6 -5.1 -4.5 -4.1 Hungary -6.5 -7.9 -9.4 -5.1 -3.7 -4.6 -4.3 4.3 -1.9

Ireland 1.4 1.7 2.9 0.1 -7.4 -13.9 -30.8 -13.4 -7.6 Italy -3.5 -4.4 -3.4 -1.6 -2.7 -5.5 -4.5 -3.8 -3 Latvia -1 -0.4 -0.5 -0.4 -4.2 -9.8 -8.1 -3.6 -1.2 Lithuania -1.5 -0.5 -0.4 -1 -3.3 -9.4 -7.2 -5.5 -3.2 Luxemburg -1.1 0 1.4 3.7 3.2 -0.8 -0.9 -0.2 -0.8 Malta -4.6 -2.9 -2.7 -2.3 -4.6 -3.7 -3.6 -2.8 -3.3 Polland -5.4 -4.1 -3.6 -1.9 -3.7 -7.4 -7.9 -5 -3.9 Portugal -4 -6.5 -4.6 -3.1 -3.6 -10.2 -9.8 -4.4 -6.4 Romania -1.2 -1.2 -2.2 -2.9 -5.7 -9 -6.8 -5.6 -2.9 Slovakia -2.4 -2.8 -3.2 -1.8 -2.1 -8 -7.7 -5.1 -4.3 Slovenia -2.3 -1.5 -1.4 0 -1.9 -6.2 -5.9 -6.4 -4 Spain -0.1 1.3 2.4 1.9 -4.5 -11.2 -9.7 -9.4 -10.6 Sweden 0.6 2.2 2.3 3.6 2.2 -0.7 0.3 0.2 -0.5 United Kingdom -3.5 -3.4 -2.7 -2.8 -5.1 -11.5 -10.2 -7.8 -6.3

Table 4: Population percentage at risk of poverty thresholds (*) Annual data (%)

2004 2005 2006 2007 2008 2009 2010 2011 2012

Austria 17.5 16.8 17.8 16.7 18.6 17 16.6 16.9 : Belgium 21.6 22.6 21.5 21.6 20.8 20.2 20.8 21 : Bulgaria : : 61.3 60.7 44.8(b) 46.2 49.2 49.1 : Croatia : : : : : : 31.3 32.7 : Cyprus : 25.3 25.4 25.2 23.3(b) 23.5 24.6 24.6 : Czech Republic : 19.6 18 15.8 15.3 14 14.4 15.3 15.4 Denmark 16.5 17.2 16.7 16.8 16.3 17.6 18.3 18.9 : E.U-27 : 25.6(e) 25.2(e) 24.4 23.6 23.1 23.5 24.2 : Estonia 26.3 25.9 22 22 21.8 23.4 21.7 23.1 23.4 Eurozone-17 : : : : : : : : : Finland 17.2 17.2 17.1 17.4 17.4 16.9 16.9 17.9 17.2 France 19.8 18.9 18.8 19 18.6(b) 18.5 19.2 19.3 : Germany : 18.4 20.2 20.6 20.1 20 19.7 19.9 : Greece 30.9 29.4 29.3 28.3 28.1 27.6 27.7 31 : Holland : 16.7 16 15.7 14.9 15.1 15.1 15.7 : Hungary : 32.1 31.4 29.4 28.2 29.6 29.9 31 32.4 Ireland 24.8 25 23.3 23.1 23.7 25.7 27.3 29.4 : Italy 26.4 25 25.9 26 25.3 24.7 24.5 28.2 : Latvia : 45.8 41.4 36 33.8(b) 37.4 38.1 40.4(b) 36.6 Lithuania : 41 35.9 28.7 27.6 29.5 33.4 33.1 32.5 Luxemburg 16.1 17.3 16.5 15.9 15.5 17.8 17.1 16.8 : Malta : 20.2 19.1 19.4 19.6 20.2 20.3 21.4 22.2 Polland : 45.3 39.5 34.4 30.5(b) 27.8 27.8 27.2 26.7 Portugal 27.5 26.1 25 25 26 24.9 25.3 24.4 : Romania : : : 45.9 44.2 43.1 41.4 40.3 : Slovakia : 32 26.7 21.3 20.6 19.6 20.6 20.6 : Slovenia : 18.5 17.1 17.1 18.5 17.1 18.3 19.3 19.6 Spain 24.4 23.4 23.3 23.1 22.9 23.4 25.5 27 : Sweden 16.9 14.4 16.3 13.9 14.9 15.9 15 16.1 : United Kingdom : 24.8 23.7 22.6 23.2 22 23.2 22.7 :

b=break in t ime ser ies . e=est imated (*)%population percentage with disposable income below 60% of median equival ised i n-come


101

Table 5: Inflation Annual data(%) January-August (%) Change (%)

2009 2010 2011 2012 2011 2012 2013 2012/11 2013/12

Austria 0.4 1.7 3.6 2.6 3.4 2.4 2.3 -1.0 -0.1 Belgium 0.0 2.3 3.5 2.6 3.5 2.7 1.2 -0.8 -1.5 Bulgaria 2.5 3.0 3.4 2.4 3.8 2.1 1.1 -1.7 -0.9 Croatia 2.2 1.1 2.2 3.3 2.5 3.5 1.6 1.0 -2.0 Cyprus 0.2 2.6 3.5 3.1 3.5 3.5 0.9 0.0 -2.6 Czech Republic 0.6 1.2 2.1 3.5 1.9 3.8 1.5 1.9 -2.2 Denmark 1.1 2.2 2.7 2.4 2.7 2.4 0.6 -0.3 -1.8 E.U-28 1.0 2.1 3.1 2.6 3.0 2.7 1.7 -0.3 -1.0 Estonia 0.2 2.7 5.1 4.2 5.3 4.4 3.8 -0.9 -0.6 Eurozone-17 0.3 1.6 2.7 2.5 2.6 2.6 1.6 0.0 -1.0 Finland 1.6 1.7 3.3 3.2 3.4 3.0 2.4 -0.4 -0.6 France 0.1 1.7 2.3 2.2 2.1 2.4 1.1 0.3 -1.3 Germany 0.2 1.2 2.5 2.1 2.4 2.2 1.7 -0.2 -0.5 Greece 1.4 4.7 3.1 1.0 3.4 1.3 -0.3 -2.0 -1.7 Holland 1.0 0.9 2.5 2.8 2.3 2.7 3.1 0.4 0.4

Hungary 4.0 4.7 3.9 5.7 3.9 5.6 2.1 1.7 -3.5 Ireland -1.7 -1.6 1.2 1.9 1.0 1.9 0.7 0.9 -1.2 Italy 0.8 1.6 2.9 3.3 2.2 2.8 3.1 0.6 0.3 Latvia 3.4 -1.2 4.2 2.3 4.3 2.6 0.2 -1.6 -2.4 Lithuania 4.2 1.2 4.1 3.2 4.1 3.2 1.5 -0.9 -1.7 Luxemburg 0.0 2.8 3.7 2.9 3.7 2.9 1.9 -0.8 -1.0 Malta 1.9 2.0 2.4 3.3 2.7 3.3 1.2 0.6 -2.1 Polland 4.0 2.7 3.9 3.7 3.8 4.0 0.9 0.2 -3.1 Portugal -0.9 1.4 3.6 2.8 3.5 3.0 0.6 -0.4 -2.4 Romania 5.6 6.1 5.9 3.4 7.1 2.7 4.2 -4.4 1.6 Slovakia 0.9 0.7 4.1 3.7 3.8 3.8 1.9 0.0 -1.9 Slovenia 0.9 2.1 2.1 2.8 1.9 2.6 2.3 0.7 -0.3 Spain -0.3 1.8 3.3 2.4 3.4 2.0 2.2 -1.4 0.1 Sweden 1.9 1.9 1.4 0.9 1.5 0.9 0.5 -0.6 -0.4 United Kingdom 2.2 3.3 4.5 2.8 4.3 3.0 2.7 -1.3 -0.2

Table 6: GDP per capita (in PPS, EU-27=100) Annual data (%)

2004 2005 2006 2007 2008 2009 2010 2011 2012

Austria 128 126(b) 126 124 125 126 128 129 131 Belgium 122 120(b) 118 116 116 118 120 119 119 Bulgaria 35 37(b) 38 40 44 44 44 46 47 Croatia 56 57(b) 58 61 63 62 59 61 61 Cyprus 91 93(b) 93 95 100 100 97 95 91 Czech Republic 78 79(b) 80 83 81 83 80 80 79 Denmark 126 124(b) 124 123 125 124 128 126 125 E.U-28 100 100(b) 100 100 100 100 100 100 100 Estonia 58 62(b) 66 70 69 63 63 67 69 Eurozone-17 110 109(b) 109 109 109 109 109 108 108 Finland 117 115(b) 114 118 119 115 114 115 115 France 110 110(b) 108 108 107 109 109 109 108 Germany 116 116(b) 116 116 116 115 119 121 122 Greece 94(p) 91(bp) 92(p) 90(p) 93(p) 94(p) 87(p) 79(p) 75(p) Holland 130 131(b) 131 133 135 132 132 131 129 Hungary 63 63(b) 63 62 64 65 65 66 66 Ireland 143 145(b) 146 146 131 128 127 129 130 Italy 107 106(b) 105 104 105 104 101 100 99 Latvia 47 50(b) 53 58 59 54 54 59 62 Lithuania 52 55(b) 58 62 65 58 61 66 70 Luxemburg 253 255(b) 271 275 264 256 268 272 272 Malta 80 81(b) 79 78 81 85 86 86 86 Polland 51 51(b) 52 55 57 61 63 65 66 Portugal 78 80(b) 79 79 78 80 81 78 75 Romania 34 35(b) 38 42 47 47 47 47 49 Slovakia 57 60(b) 63 68 73 73 73 73 75 Slovenia 87 88(b) 88 89 91 87 84 84 82 Spain 101 102(b) 105 105 104 103 100 99 97 Sweden 127 122(b) 123 125 124 120 124 127 129 United Kingdom 124 123(b) 121 117 113 111 112 109 110



102

Table 7: Real labour productivity per person employed (EU-27=100) Annual data (%)

2004 2005 2006 2007 2008 2009 2010 2011 2012

Austria 120.8 118.3(b) 118.9 116.9 116.3 116.1 115.7 115.8 115.2 Belgium 132.4 130.3(b) 129 127.5 126.8 127.7 128.4 127.2 127.2 Bulgaria 34.7 35.8(b) 36.4 37.4 39.7 39.7 40.6 42.7 44.3 Croatia 73.4 74.5(b) 73.5 75.6 78.2 76.1 75.2 77.4 80.2 Cyprus 82.3 82.8(b) 84 85.3 90.9 92.2 91 90.9 92.8 Czech Republic 72.9 72.9(b) 73.9 76.2 74(b) 75.8 73.5 73.8 72.3 Denmark 109.1 107.1(b) 106.8 104.6 105.7 106.8 113.1 111.5 111.4 E.U-27 100 100(b) 100 100 100 100 100 100 100 E.U-28 99.8 99.8(b) 99.8 99.8 99.8 99.8 99.8 99.9 99.9 Estonia 57.6 60.7(b) 62.3 66.6 65.6 66 68.5 69 68.7 Eurozone-17 108.6 108.6(b) 108.5 108.7 108.8 108.9 108.4 108.4 107.9 Finland 113.5 111.1(b) 110.5 113.5 113.2 110 108.8 108.3 107.6 France 115.3 116.3(b) 115.2 115.4 115.2 117.2 116.3 116.4 115.1 Germany 107.5 108.4(b) 108.6 108.2 107.7 104.1 106 107.2 106.2 Greece 101.1 95.8(b) 97 95.3 97.5 98.1 92.4 89.2 91.7 Holland 112.7 114.4(b) 114.2 114.3 115.3 112.6 111.7 110.9 108.9 Hungary 66.9 67.6(b) 67.7 66.5 70.6 72.3 70.4 70.4 69.8 Ireland 136.6 135.4(b) 135.4 136.2 126.9 132.8 137.6 142.7 142.6 Italy 113.1 111.9(b) 110.9 111.4 112.8 112.5 110 108.8 107 Latvia 45.8 47.8(b) 48.8 51.3 51.5 52.8 53.7 62.3(b) 64(f) Lithuania 53.8 54.9(b) 56.7 59.5 61.9 57.9 67.5 71.1 72.1 Luxemburg 170.3 170(b) 179.2 179.7 168.2 159.3 164.7 165.4 162 Malta 94.3 94.5(b) 93 92.2 94.3 97 98.1 95.7 92.8 Polland 61.7 61.5(b) 60.9 62 62.1 65.3 67.2 68.8 72(b) Portugal 69.8 72.8(b) 73 73.9 73.4 76 76.9 75.5 75.1 Romania 34.6 36.1(b) 39.7 43.3 49.1 49.4 48.5 49.3 50.1 Slovakia 65.7 68.7(b) 71.6 76.3 79.7 79.9 81.2 79.9 80.7 Slovenia 81.5 83.1(b) 83.2 83 83.6 80 79 80.4 78.8 Spain 102.2 101.3(b) 102.6 103 104.1 109.3 107.1 106.6 109 Sweden 115.4 111.9(b) 112.9 114.7 114.1 112 114.4 114.9 115.6 United Kingdom 115.3 114.9(b) 114.3 111.7 108.8 106.9 107.2 105.4 105


Table 8: Employment rate on persons aged 20-64 (*) Annual data (%) 2nd quarter(%) Change (%)

2009 2010 2011 2012 2011 2012 2013 Nov-13 Dec-13

Austria 74.7 74.9 75.2 75.6 75.5 75.9 75.9 0.4 0.0 Belgium 67.1 67.6 67.3 67.2 68.0 67.2 67.5 -0.8 0.3 Bulgaria 68.8 65.4 63.9 63.0 62.6 62.6 63.6 0.0 1.0 Croatia 61.7 58.7 57.0 55.4 56.8 56.3 54.7 -0.4 -1.6 Cyprus 75.7 75.4 73.4 70.2 74.5 70.7 67.3 -3.8 -3.4 Czech Republic 70.9 70.4 70.9 71.5 71.0 71.5 72.7 0.5 1.2 Denmark 77.5 75.8 75.7 75.4 75.8 75.5 76.0 -0.3 0.5 E.U-28 69.0 68.6 68.6 68.4 68.7 68.6 68.4 -0.2 -0.2 Estonia 69.9 66.7 70.4 72.1 69.6 72.2 74.1 2.6 1.9 Eurozone-17 68.8 68.4 68.5 69.4 68.8 68.3 67.8 -0.5 -0.5 Finland 73.5 73.0 73.8 74.0 74.4 74.6 74.4 0.2 -0.2 France 69.4 69.2 69.2 69.3 69.5 69.5 69.7 0.0 0.2 Germany 74.2 74.9 76.3 76.7 76.4 76.8 77.2 0.4 0.5 Greece 65.8 64.0 59.9 55.3 60.9 55.7 53.5 -5.2 -2.2 Holland 78.8 76.8 77.0 77.2 76.8 77.2 76.6 0.4 -0.7 Hungary 60.5 60.4 60.7 62.1 60.7 62.1 63.1 1.4 1.0 Ireland 67.1 65.0 63.8 63.7 64.2 63.7 65.3 -0.4 1.5 Italy 61.7 61.1 61.2 61.0 61.5 61.3 59.8 -0.2 -1.5 Latvia 67.1 65.0 66.3 68.2 66.1 67.3 69.4 1.2 2.1 Lithuania 67.2 64.4 67.2 68.7 67.0 68.8 69.9 1.8 1.1 Luxemburg 70.4 70.7 70.1 71.4 69.3 71.5 70.7 2.2 -0.7 Malta 58.8 60.1 61.5 63.1 61.4 62.6 64.5 1.1 1.9 Polland 64.9 64.6 64.8 64.7 64.6 64.8 64.6 0.2 -0.1 Portugal 71.2 70.5 69.1 66.5 69.8 67.2 65.3 -2.5 -2.0 Romania 63.5 63.3 62.8 63.8 63.1 64.3 64.4 1.2 0.1 Slovakia 66.4 64.6 65.1 65.1 65.1 65.2 65.0 0.1 -0.2 Slovenia 71.9 70.3 68.4 68.3 68.6 68.1 67.1 -0.5 -1.0 Spain 63.7 62.5 61.6 59.3 62.3 59.6 58.2 -2.6 -1.4 Sweden 78.3 78.7 80.0 79.4 79.7 79.8 80.0 0.1 0.2 United Kingdom 73.9 73.6 73.6 74.2 73.6 74.0 74.6 0.4 0.6

(*)% of employed aged 20 -64 to the total number of this populat ion


103

Table 9: Employment rate in persons aged 55-64 ( *) Annual data (%) 2nd quarter(%) Change (%)

2009 2010 2011 2012 2011 2012 2013 Nov-13 Dec-13

Austria 41.1 42.4 41.5 43.1 42.1 43.6 45.3 1.5 1.7 Belgium 35.3 37.3 38.7 39.5 40.1 40.3 41.6 0.2 1.3 Bulgaria 46.1 43.5 43.9 45.7 44.9 46.0 47.4 1.1 1.4 Croatia 38.5 37.6 37.1 36.7 36.6 36.7 36.1 0.1 -0.6 Cyprus 56.0 56.8 54.8 50.7 56.3 50.7 49.3 -5.6 -1.3 Czech Republic 46.8 46.5 47.6 49.3 48.2 49.1 51.4 1.0 2.3 Denmark 58.2 58.4 59.5 60.8 59.2 60.9 61.4 1.7 0.5 E.U-28 46.0 46.3 47.4 48.8 47.4 48.7 50.0 1.4 1.2 Estonia 60.4 53.8 57.2 60.6 56.4 61.3 65.4 4.8 4.1 Eurozone-17 45.1 45.8 47.1 50.9 47.1 48.6 49.9 1.5 1.3 Finland 55.5 56.2 57.0 58.2 57.5 58.3 58.9 0.7 0.7 France 39.0 39.8 41.5 44.5 41.5 44.1 45.8 2.6 1.7 Germany 56.1 57.7 59.9 61.5 59.9 61.1 63.1 1.2 2.0 Greece 42.2 42.3 39.4 36.4 40.7 36.4 35.9 -4.2 -0.5 Holland 55.1 53.7 56.1 58.6 55.6 58.4 59.8 2.8 1.4 Hungary 32.8 34.4 35.8 36.9 35.5 37.2 38.4 1.7 1.2 Ireland 51.3 50.2 50.0 49.3 50.7 49.5 50.8 -1.2 1.3 Italy 35.7 36.6 37.9 40.4 37.4 40.4 42.1 3.0 1.7 Latvia 53.2 48.2 50.5 52.8 50.4 52.3 55.2 1.9 2.9 Lithuania 51.6 48.6 50.5 51.8 49.4 51.9 52.6 2.5 0.7 Luxemburg 38.2 39.6 39.3 41.0 37.7 40.1 44.8 2.5 4.6 Malta 27.8 30.2 31.7 33.6 32.5 32.7 35.7 0.2 3.0 Polland 32.3 34.0 36.9 38.7 36.6 38.3 39.9 1.7 1.6 Portugal 49.7 49.2 47.9 46.5 47.7 46.8 46.8 -0.9 0.1 Romania 42.6 41.1 40.0 41.4 40.5 42.4 41.9 2.0 -0.5 Slovakia 39.5 40.5 41.4 43.1 41.2 43.3 44.0 2.1 0.6 Slovenia 35.6 35.0 31.2 32.9 30.6 32.8 34.2 2.2 1.4 Spain 44.1 43.6 44.5 43.9 44.9 44.3 43.2 -0.6 -1.1 Sweden 70.0 70.5 72.3 73.0 72.2 73.0 73.3 0.8 0.3 United Kingdom 57.5 57.1 56.7 58.1 56.8 58.0 59.6 1.2 1.6

(*)% of employed aged 55 -64 to the total number of this populat ion

Table 10: Total Employment growth (ages 15 years or over)

Annual data (%) 2nd quarter (%)

2007 2008 2009 2010 2011 2012 2011/10 2012/11 2013/12

Austria 1.8 2 -0.7 0.8 1.7 1.0 1.5 1.2 -0.4 Belgium 1.7 1.8 -0.2 0.7 1.4 0.3 2.3 -0.4 0.5 Bulgaria 3.2 2.6 -2.6 -4.7 -4.2 -1.1 -4.1 -1.1 0.9 Croatia : : : : : -3.1 -3.5 -1.0 -4.2 Cyprus 3.2 2.1 -0.5 0.1 0.5 -2.4 1.9 -3.0 -4.2 Czech Republic 2.1 2.3 -1.2 -1.7 0.2 -0.3 -0.1 0.2 1.3 Denmark 2.8 1.7 -2.4 -2.3 -0.4 -0.5 0.0 -0.7 0.1 E.U-28 1.8 1 -1.8 -0.5 0.3 -0.5 0.3 -0.3 -0.3 Estonia 0.7 0.2 -9.9 -4.8 7 2.5 7.8 3.6 3.3 Eurozone-17 1.8 0.8 -1.8 -0.5 0.2 -0.3 0.6 -0.8 -0.8 Finland 2.2 2.6 -2.6 -0.1 1.1 0.4 1.3 0.3 -0.7

France 1.4 0.5 -1.3 -0.1 0.5 0.1 0.4 0.0 -0.2 Germany 1.7 1.2 0.1 0.6 1.4 0.8 2.7 0.8 1.3 Greece 1.6 0.8 -0.2 -1.9 -6.7 -8.0 -6.1 -8.7 -4.2 Holland 2.5 1.5 -0.7 -0.4 0.7 0.7 -0.3 0.9 -0.6 Hungary 0 -1.4 -2.8 0.3 0.3 1.7 0.8 1.8 1.4 Ireland 3.6 -1.1 -8.1 -4.2 -2.1 -0.6 -1.7 -1.3 1.8 Italy 1.3 0.3 -1.6 -0.7 0.3 -0.3 0.4 -0.2 -2.5 Latvia 3.6 0.9 -13.2 -4.8 -8.1 2.8 -8.3 1.0 2.6 Lithuania 2.8 -0.7 -6.8 -5.1 2 1.8 -4.7 1.7 0.8 Luxemburg : : : : : 5.0 1.1 6.2 1.0 Malta 3.2 2.6 -0.3 2.4 2.5 2.4 2.6 2.1 3.0 Polland 4.5 3.9 0.4 0.5 1 -3.3 0.7 0.2 -0.5 Portugal 0 0.5 -2.6 -1.5 -1.5 -4.2 -2.0 -4.2 -3.9 Romania : : -2 -1.4 0.4 1.4 -2.9 1.7 -0.2 Slovakia 2.1 3.2 -2 -1.5 1.8 -1.0 0.3 0.7 -0.3 Slovenia 3.3 2.6 -1.8 -2.2 -1.6 -1.3 -3.1 -1.9 -1.8 Spain 3 -0.1 -6.5 -2.5 -1.5 -4.5 -0.9 -4.8 -3.6 Sweden 2.3 0.9 -2.4 1.2 2.2 0.7 2.5 0.7 0.8 United Kingdom 0.7 0.3 -1.7 -0.7 0.5 1.2 0.8 0.9 1.1


104

Table 11: Unemployment rate (total) Annual data (%) 2nd quarter(%) Change (%)

2009 2010 2011 2012 2011 2012 2013 2012/11 2013/12

Austria 4.8 4.4 4.2 4.3 4.1 4.4 4.7 0.3 0.3 Belgium 7.9 8.3 7.2 7.6 7.2 7.7 8.5 0.5 0.8 Bulgaria 6.8 10.2 11.2 12.3 11.3 12.2 12.9 0.9 0.7 Croatia 9.1 11.8 13.5 15.9 13.6 15 16.9 1.4 1.9 Cyprus 5.3 6.2 7.9 11.9 7.4 11.5 15.9 4.1 4.4 Czech Republic 6.7 7.3 6.7 7 6.9 6.9 7 0 0.1 Denmark 6.0 7.5 7.6 7.5 7.4 7.9 6.8 0.5 -1.1 E.U-28 8.9 9.6 9.6 10.5 9.5 10.4 10.9 0.9 0.5 Estonia 13.8 16.9 12.5 10.2 13.1 10.1 8.1 -3 -2 Eurozone-17 9.6 10.1 10.1 11.4 9.9 11.3 12.1 1.4 0.8 Finland 8.2 8.4 7.8 7.7 7.8 7.7 8.1 -0.1 0.4 France 9.1 9.3 9.2 10.3 9.5 10.1 10.8 0.6 0.7 Germany 7.8 7.1 5.9 5.5 6 5.5 5.3 -0.5 -0.2 Greece 9.5 12.6 17.7 24.3 16.7 23.9 27.5 7.2 3.6 Holland 3.4 4.5 4.4 5.3 4.2 5.2 6.7 1 1.5 Hungary 10.0 11.2 10.9 10.9 11 11 10.4 0 -0.6 Ireland 11.9 13.7 14.7 14.7 14.5 14.9 13.8 0.4 -1.1 Italy 7.8 8.4 8.4 10.7 8 10.6 12.1 2.6 1.5 Latvia 17.1 18.7 16.2 14.9 16.9 15.6 11.4 -1.3 -4.2 Lithuania 13.7 17.8 15.4 13.3 15.9 13.6 11.9 -2.3 -1.7 Luxemburg 5.1 4.4 4.9 5.1 4.8 5.1 5.7 0.3 0.6 Malta 6.9 6.9 6.5 6.4 6.8 6.6 6.5 -0.2 -0.1 Polland 8.2 9.6 9.7 10.1 9.5 10 10.5 0.5 0.5 Portugal 9.6 11.0 12.9 15.9 12.6 15.6 17 3 1.4 Romania 6.9 7.3 7.4 7 7.4 7.1 7.4 -0.3 0.3 Slovakia 12.0 14.4 13.5 14 13.5 13.8 14.2 0.3 0.4 Slovenia 5.9 7.3 8.2 8.9 8 8.5 10.6 0.5 2.1 Spain 18.0 20.1 21.7 25 21 24.7 26.4 3.7 1.7 Sweden 8.4 8.4 7.5 8 7.8 7.9 8 0.1 0.1 United Kingdom 7.6 7.8 8.0 7.9 7.9 7.9 7.7 0 -0.2

Table 12: Men's unemployment rate Annual data (%) 2nd quarter(%) Change (%)

2009 2010 2011 2012 2011 2012 2013 2012/11 2013/12

Austria 5.0 4.6 4.0 4.4 4.1 4.5 4.7 0.4 0.2 Belgium 7.8 8.1 7.1 7.7 7 7.4 8.7 0.4 1.3 Bulgaria 7.0 10.9 12.3 13.5 12.2 13.6 14 1.4 0.4 Croatia 8.0 11.4 13.8 16.2 13.7 15.3 17.9 1.6 2.6 Cyprus 14.8 16.9 17.8 12.6 7.6 12.3 16.2 4.7 3.9 Czech Republic 8.7 8.5 7.6 6 5.9 5.9 6 0 0.1 Denmark 6.6 8.4 7.7 7.5 7.7 7.9 6.3 0.2 -1.6 E.U-28 16.9 19.5 13.1 10.4 9.4 10.4 10.9 1 0.5 Estonia 8.9 9.1 8.4 11 13.5 11.2 8.1 -2.3 -3.1 Eurozone-17 9.4 10.0 9.9 11.2 9.7 11.1 11.9 1.4 0.8 Finland 8.6 8.6 8.7 8.3 8.4 8.3 8.8 -0.1 0.5 France 5.2 6.0 8.1 10.1 9 9.9 10.7 0.9 0.8 Germany 5.9 6.4 5.8 5.7 6.3 5.7 5.6 -0.6 -0.1 Greece 9.0 9.6 9.5 21.4 14 21.1 24.6 7.1 3.5 Holland 6.6 6.8 6.1 5.3 4.3 5.2 7.1 0.9 1.9 Hungary 3.4 4.4 4.5 11.2 11 11.4 10.3 0.4 -1.1 Ireland 8.1 7.5 6.2 17.7 17.6 18 15.8 0.4 -2.2 Italy 10.3 11.6 11.0 9.9 7 9.8 11.4 2.8 1.6 Latvia 6.8 7.6 7.6 16 19.8 17.1 12 -2.7 -5.1 Lithuania 20.3 21.7 18.6 15.1 18.7 15.6 13.3 -3.1 -2.3 Luxemburg 17.1 21.2 17.8 4.5 3.7 4.5 5 0.8 0.5 Malta 4.4 3.8 3.8 5.9 6.7 6.3 6.5 -0.4 0.2 Polland 7.8 9.3 9.0 9.4 9 9.3 9.9 0.3 0.6 Portugal 9.0 10.0 12.7 16 12.3 15.6 16.9 3.3 1.3 Romania 7.7 7.9 7.9 7.6 7.9 7.8 8.1 -0.1 0.3 Slovakia 11.4 14.2 13.5 13.5 13.7 13.4 13.8 -0.3 0.4 Slovenia 5.9 7.5 8.2 8.4 8.1 7.9 10.1 -0.2 2.2 Spain 6.9 9.9 15.0 24.7 20.6 24.6 25.6 4 1 Sweden 17.7 19.7 21.2 8.2 7.8 8 8.3 0.2 0.3 United Kingdom 8.9 9.0 8.8 8.3 8.5 8.4 8.3 -0.1 -0.1


105

Table 13: Women's unemployment rate Annual data (%) 2nd quarter(%) Change (%)

2009 2010 2011 2012 2011 2012 2013 2012/11 2013/12

Austria 4.6 4.2 4.3 4.3 4.2 4.2 4.7 0 0.5 Belgium 8.1 8.5 7.2 7.4 7.3 7.9 8.2 0.6 0.3 Bulgaria 6.6 9.5 10.0 10.8 10.1 10.7 11.7 0.6 1 Croatia 10.3 12.3 13.2 15.6 13.6 14.6 15.8 1 1.2 Cyprus 5.5 6.4 7.7 11.1 7.2 10.5 15.5 3.3 5 Czech Republic 7.7 8.5 7.9 8.2 8.1 8.1 8.3 0 0.2 Denmark 5.3 6.5 7.5 7.5 7.1 7.9 7.3 0.8 -0.6 E.U-28 8.9 9.6 9.7 10.6 9.6 10.5 11 0.9 0.5 Estonia 10.6 14.3 11.8 9.3 12.7 9 8.1 -3.7 -0.9 Eurozone-17 9.8 10.3 10.5 11.6 10.2 11.4 12.2 1.2 0.8 Finland 7.6 7.6 7.1 7.1 7.2 7 7.3 -0.2 0.3 France 9.4 9.7 9.7 10.5 10 10.4 10.9 0.4 0.5 Germany 7.3 6.6 5.6 5.2 5.7 5.2 4.9 -0.5 -0.3 Greece 13.2 16.2 21.4 28.1 20.4 27.6 31.4 7.2 3.8 Holland 3.5 4.5 4.4 5.2 4 5.1 6.1 1.1 1 Hungary 9.7 10.7 10.9 10.6 10.9 10.5 10.5 -0.4 0 Ireland 8.0 9.7 10.8 11 10.6 10.9 11.3 0.3 0.4 Italy 9.3 9.7 9.6 11.9 9.3 11.7 13 2.4 1.3 Latvia 13.9 15.7 13.8 13.9 14.2 14.3 10.8 0.1 -3.5 Lithuania 10.4 14.5 13.0 11.5 13.1 11.7 10.5 -1.4 -1.2 Luxemburg 6.1 5.1 6.3 5.8 6.2 5.8 6.6 -0.4 0.8 Malta 7.6 7.1 7.1 7.3 7.1 7.1 6.4 0 -0.7 Polland 8.7 10.0 10.5 10.9 10.2 10.9 11.4 0.7 0.5 Portugal 10.3 12.1 13.2 15.8 12.9 15.5 17.1 2.6 1.6 Romania 5.8 6.5 6.8 6.4 6.9 6.4 6.6 -0.5 0.2 Slovakia 12.8 14.6 13.6 14.5 13.2 14.3 14.6 1.1 0.3 Slovenia 5.8 7.1 8.2 9.4 7.8 9.1 11.3 1.3 2.2 Spain 18.4 20.5 22.2 25.4 21.4 24.9 27.2 3.5 2.3 Sweden 8.0 8.3 7.5 7.7 7.8 7.7 7.7 -0.1 0 United Kingdom 6.4 6.8 7.3 7.4 7.2 7.4 7.1 0.2 -0.3

Table 14: Long term unemployment rate (*) Annual data (%) 1st quarter(%) Change (%)

2009 2010 2011 2012 2011 2012 2013 2012/11 2013/12

Austria 33.1 39.9 42.9 24.8 25.6 23.4 21 -2.2 -2.4 Belgium 35.6 42.5 45.2 44.7 48.3 44.5 45.5 -3.8 1 Bulgaria 44.2 48.8 48.4 55.2 52.2 53.8 54.9 1.6 1.1 Croatia 56.1 56.9 63.9 64.6 62.2 63.2 61.7 1 -1.5 Cyprus 26.7 45.1 54.5 30.1 17.2 24.5 34.7 7.3 10.2 Czech Republic 13.2 17.8 18.6 43.4 40 43.1 43.3 3.1 0.2 Denmark 9.5 20.2 24.4 28 22.9 27.3 24.7 4.4 -2.6 E.U-27 45.5 47.4 48.0 44.6 42.2 42.8 : 0.6 : Estonia 40.8 45.0 49.6 54.1 56.6 58.7 46.4 2.1 -12.3 Eurozone-17 27.4 45.3 56.8 44 41.6 42.1 : 0.5 : Finland 24.5 32.6 33.4 21.4 21.2 22.4 20.6 1.2 -1.8 France 43.1 46.4 56.1 40.3 40.5 39.7 : -0.8 : Germany 30.1 41.0 40.6 45.5 47.3 45 42.7 -2.3 -2.3 Greece 29.2 49.3 59.3 59.3 44.8 54.7 64 9.9 9.3 Holland 24.2 27.5 33.5 34 32.1 34 33.3 1.9 -0.7 Hungary 21.3 25.2 25.9 45 48.1 42.6 42.9 -5.5 0.3 Ireland 35.2 40.2 41.5 61.7 58.1 64 62.4 5.9 -1.6 Italy 10.3 20.3 20.8 53 50 48.9 55.2 -1.1 6.3 Latvia 23.2 41.4 51.9 51.9 57.4 51.9 53.8 -5.5 1.9 Lithuania 23.2 29.3 28.6 49 51 50.4 45.3 -0.6 -5.1 Luxemburg 41.6 49.3 47.9 30.3 22.5 33.1 34.8 10.6 1.7 Malta 43.5 46.3 46.2 47.4 49.8 49.6 48.5 -0.2 -1.1 Polland 30.3 31.1 37.2 40.3 34.3 38.9 39.8 4.6 0.9 Portugal 44.2 52.3 48.1 48.7 48.4 45.3 52.8 -3.1 7.5 Romania 31.6 34.9 41.9 45.3 39.8 42.9 44.7 3.1 1.8 Slovakia 30.1 43.3 44.2 67.3 68.7 66.5 67.8 -2.2 1.3 Slovenia 54.0 64.0 67.8 47.9 44.3 44.5 46.9 0.2 2.4 Spain 44.4 48.4 51.9 44.5 40.5 42.1 47.1 1.6 5 Sweden 16.7 24.0 22.2 18.9 20.4 19.5 18.7 -0.9 -0.8 United Kingdom 23.7 36.6 41.6 34.8 34.9 34 36.2 -0.9 2.2

(*)% of unemployed for 12 months or higher to the total number of unemployed persons


106

Table 15: Youth unemployment rate (15 to 24 years) Annual data (%) 2nd quarter(%) Change (%)

2009 2010 2011 2012 2011 2012 2013 2012/11 2013/12

Austria 10.0 8.8 8.3 8.7 8.4 8.6 8.6 0.2 0 Belgium 21.9 22.4 18.7 19.8 19.5 20.2 23.3 0.7 3.1 Bulgaria 16.2 23.2 26.6 28.1 25.3 28.3 28.7 3 0.4 Croatia 25.1 32.6 36.1 43 36.2 39.6 52 3.4 12.4 Cyprus 13.8 16.7 22.4 27.8 20.9 26.5 38.6 5.6 12.1 Czech Republic 16.6 18.3 18.0 19.5 18.9 19.9 18.7 1 -1.2 Denmark 11.8 14.0 14.2 14.1 14 14.5 12 0.5 -2.5 E.U-27 19.9 20.9 21.3 23 21.1 22.7 2 1.7 0.6 Estonia 27.5 32.9 22.3 20.9 21.1 22.6 15.8 1.5 -6.8 Eurozone-17 19.8 20.6 20.7 22.3 20.3 22.2 22.8 1.9 0.6 Finland 21.5 21.4 20.1 19 20.2 18.6 20 -1.6 1.4 France 23.2 22.8 22.0 24.6 23 23.9 25.5 0.9 1.6 Germany 11.2 9.9 8.6 8.1 8.8 8 7.7 -0.8 -0.3 Greece 25.8 32.9 44.4 55.3 43.4 54.2 60.8 10.8 6.6 Holland 6.6 8.7 7.6 9.5 7 9.3 10.8 2.3 1.5 Hungary 26.5 26.6 26.1 28.1 25.5 28.1 27.7 2.6 -0.4 Ireland 24.3 27.8 29.1 30.4 28.4 31.2 28 2.8 -3.2 Italy 25.4 27.8 29.1 35.3 27.7 35 38.9 7.3 3.9 Latvia 33.6 34.5 31.0 28.4 32.6 29.5 19.7 -3.1 -9.8 Lithuania 29.2 35.1 32.9 26.4 34.2 26.4 22.4 -7.8 -4 Luxemburg 17.2 14.2 16.8 18 15.5 18.3 18.5 2.8 0.2 Malta 14.4 13.0 13.7 14.2 13.7 14.7 13.7 1 -1 Polland 20.6 23.7 25.8 26.5 25.3 25.9 26.7 0.6 0.8 Portugal 20.0 22.4 30.1 37.7 28.7 37.7 39.4 9 1.7 Romania 20.8 22.1 23.7 22.7 23.4 23.1 23.2 -0.3 0.1 Slovakia 27.3 33.6 33.2 34 33.7 33.5 33.7 -0.2 0.2 Slovenia 13.6 14.7 15.7 20.6 14.4 18.8 25 4.4 6.2 Spain 37.8 41.6 46.4 53.2 45.4 52.5 55.6 7.1 3.1 Sweden 25.0 25.2 22.9 23.7 22.9 23.3 23.8 0.4 0.5 United Kingdom 19.1 19.6 21.1 21 20.4 21 21.2 0.6 0.2

the greek economy 3/13

Documents