Greece’s response to Covid-19 has been effective but tackling long-standing challenges also key

Greece has responded swiftly and effectively to the Covid-19 pandemic and has so far managed to contain the spread of infections, but the economy has been hit hard, adding to long-standing challenges, according to a new OECD report.

In its latest Economic Survey of Greece, the OECD says government measures to strengthen the health system, support businesses and people’s incomes need to continue, but also adapt as the situation develops. Helping workers and firms move from badly affected sectors to activities with the best growth opportunities will be essential, it says. The shift will involve strengthening job search and training support, upgrading workers’ skills, particularly in digital technologies, and facilitating firms’ restructuring.

The pandemic risks aggravating Greece’s long-standing problems, the survey says. It is crucial to increase long-term productivity growth to accelerate the recovery and help raise living standards. This will require additional efforts to reduce barriers to competition, especially in professional services, including notaries, lawyers and retail sales of medicines, and increasing the efficiency and effectiveness of the public administration, including the justice system.

The quality of public spending needs to further increase along with the fairness and efficiency of the tax system.

Presenting the survey today, OECD Chief Economist Laurence Boone said: “The Covid-19 crisis has interrupted Greece’s process of recovery and hard-won achievements in rebuilding confidence.

“But the effectiveness of Greece’s management of the crisis so far, including the rapid shift of many public services to digital platforms over recent months, shows the benefits of the reforms over recent years.”

“Continuing to improve the public administration’s responsiveness to the needs of citizens and firms will be essential for reinvigorating the recovery.”

The survey says boosting public and private investment is also key. To finance new business and investment and provide firms with much-needed liquidity, the banking sector needs to address urgently the problem of non-performing loans. The pandemic risks making these worse as businesses run into cash-flow problems.

Despite improvements in recent years, poverty rates among the young and families with children remain high. The Covid-19 shock has exposed the importance of continuing to modernise Greece’s social protection system to better target anti-poverty programmes and strengthen retraining schemes.

The survey says that the Covid-19 pandemic has added to pressures on carers, which were already high. Expanding access to quality care for children and for the elderly would support families and allow greater access to the labour market, particularly for women. Building on the population’s solid education levels by equipping workers with the skills needed by the labour market would also support jobs and incomes.

Covid-19 risks amplifying the health damage caused by polluted urban air. In Greece, fossil fuel subsidies are high. Discouraging their use would help improve air quality and people’s well-being. The survey recommends that Greece implements a national air pollution control programme and improves its air quality monitoring system. A reassessment of how different fuels are taxed is needed both to lighten the costs on low -income families and to provide a consistent carbon price signal.