Uncertainty remains one of the most significant drag factors on Greece’s economic recovery, directly affecting investment decisions, hiring plans, and broader business strategy. A new study by the Foundation for Economic and Industrial Research (IOBE) quantifies the economic cost of uncertainty in Greece—and finds its impact is far from uniform. Effects vary across sectors, firm size, and, critically, business expectations about the economy’s trajectory.
Strong, Lasting Impact on Investment and Employment
Across the Greek economy as a whole, rising uncertainty has strong and persistent negative effects on both investment and employment, according to the IOBE analysis. Specifically, an unexpected one-standard-deviation increase in uncertainty is estimated to trigger an immediate €200 million drop in investment—felt within the first few quarters and lasting up to two years.
This effect was especially pronounced during Greece’s debt crisis (2009–2015), when heightened uncertainty is estimated to have accounted for roughly one-third of the annual investment gap between Greece and the EU-27 average.
In the labor market, the impact peaks around three quarters after the initial shock. Between 2010 and 2013, up to 40% of the total decline in employment may be attributed to uncertainty alone.
Sectoral Vulnerabilities: Services and Industry Most Exposed
At the sector level, services and industry appear most sensitive to fluctuations in uncertainty. For example, the sharp rise in uncertainty at the onset of the Greek crisis (2009–2010) is estimated to have led to €500 million in lost industrial investment over two years—a figure equivalent to nearly one-quarter of the sector’s total investment decline during that period.
Expectations Shape Business Responses
The study highlights that uncertainty doesn’t affect all firms equally. Its impact depends heavily on how businesses themselves assess the economic outlook. The negative effect on investment is primarily observed among firms with neutral or pessimistic expectations—while it is statistically insignificant among those with optimistic views.
A similar pattern emerges for employment: uncertainty hits hardest those firms anticipating a bleak future, while its effect is markedly muted where expectations are positive.
SMEs Bear the Brunt
Firm size also plays a decisive role. Micro, small, and medium-sized enterprises (SMEs) are disproportionately affected by rising uncertainty—especially when it comes to investment decisions. This underscores uncertainty’s role as a major barrier to SME growth and resilience.