Greece needs to hook up with the highly developed industrial countries in order to participate in the global chain of value added, explains Klaus Schrader, deputy head of the Economic Policy Center. First and foremost, Greece has to strongly improve its export performance as in a relatively small open economy exports are the main drivers of growth. Other small countries like Ireland, Slovenia and Hungary are exporting goods and services up to 100 percent of their GNP – while Greece only manages to reach some 30 percent. Furthermore, Greek exports mainly consist of products which are relatively resource and labour intensive thus being exposed to price competition from emerging and developing markets. Many Greek exports, for instance, are based on oil and oil related products although Greece has to import the oil needed for inputs beforehand. National products like fruit, vegetables or fish are ranking high among Greek exports – yet fail to produce large profits. This is partly due to being unrefined, partly due to intense competition from big producers in Asia and Eastern Europe. In addition to all these flaws, high tech products “Made in Greece” are virtually non-existent.
At least tourism has been flourishing noticeably in recent years and has provided for some increase in service employment. Although service jobs in tourism are mainly based on low qualifications and go along with a relatively low level of income. “Greece has to become a highly developed industrial country. Even some Asian and Eastern European countries meanwhile have surpassed Greece in terms of technological knowhow”, according to Schrader. For Greece, to build up an internationally competitive investment good production with high value added, which then would develop its own demand for highly qualified and well paid staff, the support of private investors will be indispensable. The public sector however has to shrink considerably.
In order to move Greece out of its debt disaster for good, a second and final debt reduction will be unavoidable, explains Schrader. It should, however, be granted on restrictive terms only. Especially, no fresh money from European partner countries should be involved. Notwithstanding, the short and medium term scope for manoeuvring fiscal policy will not be tangibly altered by debt reduction as very long term credit lines and all-time low interest rates are already considerably subsidizing Greece’s public finances.
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