2. Greece Toward 2027: Structural Transformation, Industrial Policy, and Economic Development

The Greek Economy was severely affected by the 2008 economic crisis. The roots of Greece’s unprecedented crisis should be sought in the country’s unfavorable economic structure. The main structural problems of the Greek Economy are limited exports with low diversification; low participation of the manufacturing and technologically advanced sectors in production and exports; weak linkages among different economic activities; high dependency on intermediate and final imports with high-income elasticity of demand; and specialization in activities of low technological level. The above structural features lead to trade-balance deficits and low international competitiveness. Furthermore, the implementation of three Economic Adjustment Programs and the imposed austerity policies failed to drive the Economy into a growth trajectory and have led to an ongoing recession.

The country’s peculiar economic structure emerges as the main obstacle to economic growth and development, and current policies do little to improve the economic situation. Therefore, the transformation of the Greek Economy’s productive structure through appropriate industrial policies is recognized as the only way to achieve economic development. In this chapter, a solution to an optimization problem is presented in the form of an optimal economic structure for the Greek Economy. This optimal structure can boost the growth rate in the country’s Gross Domestic Product (GDP) and reduce the deficit in the balance of goods and services. Furthermore, based on the optimal productive structure, policymakers can pursue a mix of structural policies, integrating sectoral and macroeconomic interventions.