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1. Economic Growth • Strong Growth continues, albeit a slower pace and with a smaller lead over the European average • During the last two decades, it has become the imperative of economic policy and the prerequisite for reforms and changes in various sectors. • In 2001-2004, growth rates averaged more than 3 percentage units above EU15. With a per capita income at 80% of European average, it would have taken 8 years to close the gap. • In 2005-2008, the growth lead slightly exceeds one unit and the gap would require 25 years to close, almost a generation. • Factors contributing to growth, mainly exogenous: -World demand (including EU) -Maritime sector -Tourism Growth vulnerable to outside uncertainty • Housing sector: still strong, but strained. -Ever-increasing interest burden on households -Property tax uncertainties prevail 1 2. Signs of fatigue • Current account deficit is widening. By far the highest as % of GDP in the Euro area. (Greece 13,1%, Spain -9,1%, €Z +0.1%) • Competitiveness deteriorates. Relative to 2004, more than 10 positions were lost in international ranking. • Public investment slows down. 1% of GDP down from the pre-2004 levels Serious delays in CSF financing. Low absorption rates, huge bureaucracy ahead. Increased private investment not (yet?) filling the gap. Housing sector slows down • Oil prices threaten purchasing power: Energy prices up (incl. electricity, natural gas) Retail prices up. 2 3. Fiscal front • Hopes built on the GDP bubble revision vanished. The EU authorized only 9% of GDP technical enlargement, versus 25% required. • Non-investment primary expenditure risen Excluding interest payments, public expenditure: In 2008 expected to reach 20% of new GDP In 2005 was 19.4% of new GDP In 2003 was 18.7% of new GDP • Revenue losses still dramatic. More than 2% of GDP is lost from the revenues of indirect taxation, compared to the collection capacity before 2004. • Embarrassing shift between personal/corporate taxation 2005: Labour taxes 75% above corporate ones 2008: Expected to be 165% above • Public corporations in critical conditions -Borrowing requirement to reach 2 bn € in 2008, from 1.3 bn in 2006 and 537 m € in 2003. -PPC: Profits vanished -Olympic: Bleak prospects -GTO: Ownership fight intensifies 3 4. New Growth perspectives • Outwardness: The most critical ingredient -Regional: Strong potential in SE Europe -EU: -International: • Outward-looking sectors -Banking -Maritime -Tourism -Energy -Consumer goods (e.g. food industries) 4 5. Education and the knowledge society • Substantial expansion of education • Quality upgrading: Questionable Greece is lagging behind in international competitions (eg. Mathematical League) Departmental specialization: Too thin Several degrees not met with professional qualifications Private college recognition: Thorny and dubious Research institutions: Thin and scattered Underfunding: 2008: 3,3% of GDP 2004: 3,7% of GDP No strategy for quality –awarding funding • …. but hope still survives: -Evaluation at last started (voluntarily) -Some universities strive for excellence -Public perceptions more sympathetic to reforms 5