Greece’s political and economic environment improved during the period under review, despite the constraints of the COVID-19 pandemic. By 2018, Greece had exited the third Economic Adjustment Program (2015–2018), and by 2019 a new, more predictable and more reform-oriented government had come to power. In 2020–2021, domestic political tensions became less palpable and foreign investors renewed their interest.
Bolder reform efforts across sectors
In the July 2019 elections, New Democracy won 39% of the total vote, capturing an absolute majority of parliamentary seats. Compared to the past, the incoming New Democracy administration was bolder in reforming various policy sectors. It improved government coordination, lowered taxes, made labor relations more flexible, promoted digitalization of the public sector, replaced the old auxiliary pay-as-you-go pensions system with a new individual retirement account, expanded family allowances to counter population decline, built new reception and identification camps for migrants and refugees, and inaugurated performance reviews in elementary and high schools, and granted further management autonomy to state universities.
Overall, the New Democracy government created an institutional and policy environment that was friendly to private investment, which – owing to high levels of taxation and very rigid employment regulations – had been sluggish until 2019.
Governing with a
In the period under review, democracy in Greece operated well, as the government refrained from influencing the justice system and the state media, as its predecessors in power had done, and rarely, if ever, quelled social protests, despite the associated risk of mass rallies further spreading COVID-19. On the other hand, the government’s selective distribution of subsidies to private media, via an awareness campaign against COVID-19, was met with justifiable criticism.
Good outcomes in first pandemic wave
In 2020, the government imposed a strict lockdown at the onset of the COVID-19 pandemic and increased support to the public healthcare system (new ICUs, and additional medical and nursing personnel). As a result, Greece performed relatively well in the first waves of the pandemic.
Death rate rises as restrictions relaxed
In 2021, the government relaxed restrictions related to COVID-19 in order to support economic growth, which had been hit by restrictions on economic activity. People resumed their economic and social activities, while tourism also picked up in a country that relies heavily on tourist revenue to sustain economic growth. As a result and since less than 70% of adult population was vaccinated, the number of COVID-19 cases and associated deaths rose abruptly in late 2021.
Continued support for governing party
Despite the political cost of managing the negative economic and social effects of the pandemic, the New Democracy governing party was always ahead of the second-largest party (Syriza) in the polls throughout 2020–2021. This trend was probably owed to the political stability of the post-2019 period, as well as to the subsidies to small businesses, and housing and social allowances for low-income groups, which were distributed during the periods of lockdown.
Economic growth after pandemic slump
Because of the political stability and government intervention, the economy grew by 6.7% in 2021 (after a contraction of almost 9% in 2020) and unemployment decreased further. The government was eager to facilitate private investors, but took time to overcome the legal difficulties and bureaucratic impediments typical of large-scale investment projects. Eventually, investments by foreign companies were rolled out and new national highway and railway infrastructure projects began.
to address risks
to address risks
Meanwhile, Greece has faced multiple risks. These have included several waves of migration, as migrants and refugees continue to arrive in Greece, albeit in declining numbers; environmental destruction, as the government has mismanaged wildfires, particularly in 2021, which destroyed large swathes of land, properties and businesses in rural areas and on the outskirts of Athens; and rising tensions with Greece’s neighboring country, Turkey. The government has partly reorganized public services, and increased spending on security and defense in order to manage these risks.
However, unemployment rates and extensive relative poverty remain serious challenges. The Greek economy is still rather frail. In the future, once the pandemic subsides, the government will need to maintain a delicate balance between reviving the economy, and meeting security and defense challenges. Much will depend on the government’s willingness to continue reforms, as well as on its ability to maximize the use of resources from the European Union’s Resilience and Recovery Fund.