The Greek Private Sector Remains Full of Untapped Potential

Abstract

Private businesses' nominal value added in Greece has fallen by 38 percent over the last ten years. Micro firms were hit particularly hard. Despite efforts to stabilize the macroeconomic environment, there are only weak signs of recovery. Future prospects are not much better, as—with the exception of labor market regulations—the conditions for investments and business activities have not been sufficiently changed through eight years of reform process. Fundamental issues— excessive red tape, bulky administrative procedures, slow courts, complicated taxes, and an inefficient knowledge transfer— remain unaddressed. Greece cannot achieve its urgently needed strong and sustainable economic growth without these reforms. When the third economic adjustment program for Greece ends in August, so will external reform pressure. It remains an open question whether the government—current or future—will feel compelled to complete and implement the pending reforms.