EU fund gives ‘Greece 2.0’ chance to reset economic model

After more than a decade marked by economic and financial crises, Greece is looking to rebuild its economy with a plan to spend billions of euros from the EU’s post-pandemic recovery fund, and in the process to transform its industrial model, attract foreign investment and mend public finances. 

Kyriakos Mitsotakis, Greece’s prime minister, has hailed the programme, known as “Greece 2.0”, as one that “essentially changes the model of the Greek economy, making it competitive and outward-looking”. 

It comes as Greece looks to recover from the coronavirus pandemic which has hit its economy, heavily dependent on tourism and services, particularly hard. In 2020, output fell 10 per cent, while national debt as a proportion of gross domestic product climbed above 200 per cent, the highest in the eurozone.

However, some observers worried about Greece’s poor record in policy delivery and its ability to make the best use of the money it will receive from the recovery fund. 

Greece 2.0 will be sent for final approval to Brussels early next week. Officials will scrutinise its 2,000 pages, which lay out in detail how the government will use €31bn from the EU and another €27bn expected from investors over the next six years. 

The submission will be the culmination of six months of work, during which Greek officials have held more than 100 meetings with their counterparts at the European Commission.

“The Greek plan is one of the best we have seen so far,” an EU official said. The blueprint, based on a growth strategy designed by Nobel Prize-winning economist Christopher Pissarides, was among the most coherent of the plans submitted by member states, the official added. 

Greece emerged from eight years of international bailouts in 2018, but it remains under a system of “enhanced surveillance” by the commission designed to ensure that Athens meets agreed deficit targets. Although the way the bailout was administered by the commission, IMF and European Central Bank — known collectively as the “troika” — was deeply unpopular in Greece, some in Brussels think the arrangement has worked to the country’s advantage. 

“The programme experience helps a lot,” said the EU official, who pointed out that the commission had been working closely with Greek authorities for more than a decade. 

The injection of EU funds will give Greece an opportunity to carry out reforms previously stymied by the dire state of its public finances. For example, the implementation of Greece 2.0 will see the injection of substantial amounts of capital into e-governance and the digitisation of the public sector.

Under the plan, 57 per cent of the funding will be used for green transition and digital transformation projects. Among the measures envisaged are the creation of 5G infrastructure, improving the connection of Greek islands to the mainland electricity grid, digitising tax services and retraining or “upskilling” the workforce.

The plan also comes with an ambitious target of increasing Greek GDP 7 per cent and creating 180,000 jobs by 2026. 

“Greece 2.0 is a comprehensive, ambitious, and modern plan as far as promises are concerned,” said Maria Demertzis, deputy director of the Bruegel think-tank in Brussels. “But it remains a promise, as implementation and absorption of EU funds has always been an issue. I hope Greece will do better this time.” 

Mitsotakis and his advisers have assumed responsibility for delivering the project, with alternate finance minister Theodoros Skylakakis in the lead. He said he was aware of the challenges posed by the traditional failings of the Greek public sector. 

“This is both a historic opportunity and a unique challenge because we have to change the efficiency and culture of the state itself to succeed. It won’t be an easy task, but we are confident in our plan and in the country’s future,” Skylakakis said. 

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