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2009 OECD Economic Surveys: Greece 2009

image of OECD Economic Surveys: Greece 2009
OECD's periodic review of Greece's economy.  This 2009 edition examines how well Greece is weathering the economic crisis. It also looks at how to bring Greece's public finances on to a sustainable path, how to improve the performance of the public health care system, and how to raise education outcomes. Greece has weathered the economic crisis relatively well, but putting public financing on a sustainable path will require strengthening tax administration and tighter expenditure management. Greek health outcomes compare favourably with the OECD average but the system is seen as not working well by the population. Greece's educational indicators lag behind those of other OECD countries and OECD makes wide-ranging recommendations in this report.

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Assessment and recommendations

The robust expansion of Greece since its entry into the euro area has slowed significantly under the weight of the international crisis. However, the economy has weathered fairly well the initial impact of the shock that plunged most of the OECD countries into a serious recession. Growth remained positive until the end of 2008 thanks to relatively buoyant exports to the Balkans and large wage increases which supported consumption. The banking sector has benefited from marginal exposure to the toxic assets which were at the root of the international storm. Even so, the impact of the crisis substantially shook the confidence of households and businesses, which are reining in spending. Furthermore, persistent structural imbalances, illustrated by the poor state of public finances and the large current account deficit, limit room for policy manoeuvre, and Greece’s exposure to south-eastern Europe has increased the country’s vulnerability to the crisis. In the wake of a general increase in risk aversion, the long-term sovereign interest rate spread vis–à–vis Germany widened sharply in early 2009. In line with market assessments, rating agencies downgraded the sovereign debt and credit risks of the leading Greek banks, as in a number of other European countries.

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