EU Commission Warns Greece on Productivity Gap – Challenges for Growth

In its report as part of the Spring Forecasts 2025, the European Commission has issued a warning regarding Greece’s future prospects. While acknowledging some progress, the Commission highlights that Greece continues to show limited improvement in labor productivity, negatively affecting long-term growth potential. The increase in hourly productivity remains below the EU average, and the investment gap is still significant. According to Eurostat, Greek labor productivity stands at approximately 60% of the EU average, despite Greeks working an average of 39.8 hours per week compared to 36 in the EU. Research from KEPE indicates that while overall factor productivity rose by 2.9% in 2024 when using working hours as labor input and 3.8% when using employment, hourly productivity remains low compared to other EU countries. The Commission recommends timely and full implementation of Recovery Fund investments, policies enhancing public investment efficiency, and fostering innovation in high-value sectors, contingent upon reforms and modernization of public administration. However, it notes that longstanding issues persist, such as inadequate technological upgrades in businesses, lack of digital skills in the workforce, and institutional delays in permitting and justice delivery. A major obstacle lies in Greece’s economic structure, dominated by very small, small, and medium-sized enterprises (SMEs), which account for 99.7% of businesses. These SMEs often have limited investments in technology, digitization, and R&D, leading to lower productivity compared to larger firms that benefit from economies of scale. The fragmentation of the Greek market due to numerous small businesses results in low export orientation and added value, as Greek SMEs frequently lack structures to access foreign markets and remain focused on domestic demand. This situation correlates with less specialized jobs and lower organizational performance, reducing productivity per worker, according to Eurostat. Additionally, SMEs face restricted access to capital and networks, encountering greater barriers to secure bank financing or European funds, and rarely participate in collaborative networks and clusters that enhance knowledge and productive collaborations. Therefore, while individual measures to boost investments and production are positive, their outcomes will always be constrained by the structural limitations of the Greek economy.