European Semester Country Report for Greece European commission IOBE conference: Integrating Greece into the European Semester Policy Framework: Priorities for sustainable growth and competitiveness Wednesday, 20 March 2019 Acropolis Museum, Athen Declan Costello Mission Chief for Greece DG ECFIN Barbara Kauffmann Director, Employment, Social Governance DG EMPL
Outline 1. European Semester process 2. Country Report on Greece (27 Feb) 2
The European Semester: why and how - Introduced in 2010 - Framework that enables EU member countries to: - A) coordinate their economic policies throughout the year b) address the economic challenges facing the EU. Goals of the European Semester - ensuring sound public finances - preventing excessive macroeconomic imbalances in the EU - supporting structural reforms to create more jobs and growth - boosting investment 3
The European Semester: why and how Role of the Commission Each year, the Commission undertakes a detailed analysis of each country's plans for budget, macroeconomic and structural reforms. It then provides EU governments with country-specific recommendations for the next 12-18 months. Role of the Council The Commission proposals are endorsed and formally adopted by the Council. Role of EU governments Any policy decisions in response to the country-specific recommendations are made by the national government in question, based on whatever action they deem appropriate. 4
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2019 milestones 27 February 2019 Winter package (Country reports) 18-22 March 2019 Bilateral meetings with MS Mid-April 2019 EL presents National Reform Programme 5 June 2019 Spring package (COM adopts CSRs) Second half of June July 2019 Discussion on CSRs (EPC, EMCO, EFCA, EFC) Council adopts CSRs N.B. Dates for adoption of the various packages are indicative.
European Semester Winter Package: Main Conclusions (1) Some good news but challenges ahead Challenges vary significantly across countries and Growing call European for appropriate economy, and Subdued determined productivity policy levels action: although at a more moderate pace Employment at record high / unemployment at record low Improving public finances overall, though still high debt in some MSs Youth unemployment still unacceptably high in some MSs Intensifying population ageing Real household income below pre-crisis levels in some MSs 7
European Semester Winter Package: Main Conclusions (2) 8
Outline 2. Country Report on Greece (27 Feb) 9
Twin deficit but legacy effects remain
Overview of Greece s challenges, risks and adjustment issues Important legacy issues remain High public sector indebteness Negative NIIP High NPLs Still high unemployment and continue to weigh on the banking sector and potential growth. Vulnerable banking sector Limited credit supply Low investment Weak productivity growth
Key challenges and reform commitments Fiscal and fiscalstructural policies Social welfare Financial stability Labour and product markets Privatisation and HCAP Public administration Respect primary surplus targets. Fully clear arrears, a growth-friendly reform of labour and corporate taxes, a fully independent public revenue authority, public financial management reforms Full integration of pension fuds, primary health care and health procurement, phases-ii and III of the SSI, complete the reform of housing and disability, benefits Household insolvency, e-justice, exit strategy for sale of shares in systemic banks, capital controls Minimum wage updates, undeclared work, investment licensing, cadaster, energy market reforms including divestment Completion of major privatisation projects, monetise real estate assets of ETAD and Appointments of top public managers, mobility and 12 performance assessments, codification of legislation, anti-
Overall economic situation and outlook Real GDP growth 5 4 3 2 1 0-1 -2-3 %, pps. Forecast 2015 2016 2017 2018 2019 2020 Private consumption Public consumption Investment Net exports Change in inventories GDP Source: European Commission
The current account has improved Current account balance, 2009-2018 2 % of GDP 0-2 -4-6 -8-10 -12-14 -16 2009 2010-2014 average Cyclically adjusted CA as % of GDP Net general government lending as % of GDP Current account as % of GDP 2015 2016 2017 2018
06Q2 07Q2 08Q2 09Q2 10Q2 11Q2 12Q2 13Q2 14Q2 15Q2 16Q2 17Q2 18Q2 06Q2 07Q2 08Q2 09Q2 10Q2 11Q2 12Q2 13Q2 14Q2 15Q2 16Q2 17Q2 18Q2 % of GDP % of GDP Exports and imports performance Exports (% of GDP) Imports (% of GDP) 140 120 100 80 60 40 20 110 100 90 80 70 60 50 40 30 0 20 CY IE PT EL CY IE PT EL
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* 2019* 2020* Focus on recovery for growth and jobs 105 100 95 90 85 80 75 70 Employment and GDP levels, 2009-2020 index 2009=100 Employment GDP + Employment continues to recover at an increasing pace. + GDP growth has bottomed out since 2017. But, need for a stronger, sustainable and more inclusive recovery.
* Productivity remains subdued Productivity is hampered by the country s economic structure Labour productivity by company size 100 75 50 25 0 1-9 persons 10-19 persons 20-49 persons 50-249 persons 250 persons or more Labour productivity (manufacturing and services) Employment (business economy) 17
Denmark United Kingdom Sweden Lithuania Estonia Finland Latvia Ireland Germany Austria Spain France Poland Portugal Czech Republic Netherlands Slovenia Slovak Republic Belgium Italy Romania Hungary Cyprus Croatia Bulgaria Luxembourg Greece Malta Greece ranks 27 out of 28 EU economies in ease of doing business 0 10 20 30 40 50 60 70 80 90 global rank Source: World Bank Group, Doing Business Report 2019 18
Registering property, enforcing contracts and accessing credit remain an obstacle to firms 100 90 Score Global rank (rhs.) 0 20 80 40 70 60 60 80 50 100 40 120 30 140 20 160 10 180 0 200 Source: World Bank Group, Doing Business Report 2019 19
A wide investment gap remains... More than 15bn investment missing to reach EU average Source: EC: DG ECFIN AMECO database
Investment opportunities Investment needs are high & support to growth enablers is needed Transport and logistics: ports, completion of the railway axis Patras- Athens-Thessalonica, small port infrastructures, coastal shipping routes Energy market: generation, transmission, energy efficiency, innovation Public infrastructure: climate adaptation, environmental challenges Skills and employability: education, social inclusion, public employment service, childcare and long-term care Build-up of competitive advantage: agro-food, tourism, health, R&D 21
Human capital gap: reducing unemployment Employment recovery but long-term unemployment challenge Labour market situation improving. Unemployment down to 18% (from peak of almost 28% in 2013). Source: ELSTAT But, long-term unemployment remains stubbornly high.
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Other key labour market trends 60 50 40 30 20 % Steady fall in youth unemployment (to 40% from 60% peak) Very low female labour participation. 10 0 Tertiary education 30-34 NEET 15-24 Early school leavers 18-24 Unemployment rate (15-24) Population ageing and shrinking due to strong emigration since 2011 and very low fertility rates.
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Poverty rates finally declining 40 35 30 25 20 15 10 5 % of population thanks to: Employment recovery Enhanced social welfare system 0 But situation is still difficult. At-risk-of-poverty-or-social-exclusion rate At-risk-of-poverty rate Severe material deprivation People living in low work intensity households
Big achievement of welfare reforms 800 700 600 500 400 300 200 100 0-100 EUR Change in mean annual disposable income by decile 1 2 3 4 5 6 7 8 9 10 SSI Child benefit Housing benefit Social Solidarity Income (2017) provides basic safety net Reformed child benefit (2018) alleviates child poverty New housing benefit to be introduced addresses housing rental cost overburden.
Social scoreboard depicts still challenging situation SOCIAL SCOREBOARD FOR GREECE Early leavers from education and training (% of population aged 18-24) Better than average High gender gap (19.7%) Equal opportunities and access to the labour market Gender employment gap Income quintile ratio (S80/S20) At risk of poverty or social exclusion (in %) Youth NEET (% of total population aged 15-24) Employment rate (% population aged 20-64) Critical situation Weak but improving Critical situation Critical situation Critical situation High poverty rate (34.8%) High NEET rate (15.3%) Low employment (57.8%) Dynamic labour markets and fair working conditions Unemployment rate (% population aged 15-74) Long term unemployment (% population aged 15-74) GDHI per capita growth Weak but improving Weak but improving Critical situation Low income growth Net earnings of a full-time single worker earning AW Impact of social transfers (other than pensions) on poverty reduction On average Critical situation High inequality Social protection and inclusion Children aged less than 3 years in formal childcare Self-reported unmet need for medical care Weak but improving Weak but improving Individuals' level of digital skills To watch
More effective labour market policies required Favourable environment needed for sustainable growth and job creation Return to well-functioning collective bargaining Increased investment in human capital Reinforcing policies directly improving employability and promoting participation Public employment service to deliver individualised services to the unemployed Job-matching, re-skilling, well-targeted subsidies Improved availability and attractiveness of VET
Making further progress in labour market and social welfare reforms On-going modernisation of the social welfare system Completion of setup of single pension fund EFKA Completion of primary health care system Completion of the disability benefits Improved support for the unemployed Modernisation of public employment service More effective design and delivery of active labour market policies Full implementation of Action plan to fight undeclared work
Thank you for your attention! 29
Gross fixed capital formation (as % of GDP) 30 % 28 26 24 22 20 18 16 14 12 Euro area Cyprus Greece 10 2001 2003 2005 2007 2009 2011 2013 2015 2017
Net capital stock (volume index 2010 = 100) 110 105 Greece euro area 100 95 90 85 80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017