Greece′s future: agriculture or high-tech? | Business| Economy and finance news from a German perspective | DW | 09.03.2015
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Greece's future: agriculture or high-tech?

In the row over the provisional agreement between Greece and the Eurogroup, one important issue has been ignored: what should a long-term business model for the country look like?

Tourism and agriculture are the Greek economy's two best-known sectors. In the past year, the country set a new visitors' record of nearly 22 million people. Meanwhile, olive production is now in third place on the worldwide league table, behind Spain and Italy.

There is room for growth in both sectors, even if it is not particularly big. The number of visitors could rise to as many as 24 million per year, according to a study by the consultancy McKinsey, and in terms of agriculture, Greece could invest more in organic products and try to keep more production inside the country.

"If Greek olive oil were no longer refined in Italy, that would already be a big step," said Christoph Schalast, professor at the Frankfurt School of Finance and Management and advisor to a number of Eastern European states during their post-communist transition.

Griechenland Olivenernte

Greece's olive production is now third best in the world

Take risks

But the concentration on tourism and agriculture would not help Greece in the long-term. "That alone won't bring prosperity," said Alexander Kritikos, research director at the German Institute for Economic Research (DIW) in Berlin. "In a conglomerate of industrial nations that are permanently renewing themselves, you'll be left behind."

On top of that, there is the problem that Greek companies are very small. "Most people work in firms of up to nine employees," Kritikos said - which means that larger competitors have huge cost advantages.

He thinks Greece would be well-advised to invest in future technologies in order to secure the chance of growth. "What's less well-known is their strength in the high-tech sector," he said. "Especially in IT technology, pharmaceuticals, and energy technology."

Researcher drain

But at the moment, Greece is wasting this "highly productive resource," says Kritikos, "by limiting it with over-regulation that leads many specialists to leave."

Kritikos cites a stat hat says 85 percent of Greek researchers now work abroad. "That gives us an idea of how big the potential is." The Greek Economy Ministry did not respond to DW's questions for this report.

A study made at the behest of the European Commission also concluded in 2014 that over-regulation and age-old bureaucracy were also impeding the competitiveness of the Greek economy. "The mystery of the missing Greek exports," as the study was entitled, could only be solved with structural reforms.

Cars from Greece

Indeed, the influence of the Greek state on the economy was "partially comparable to the socialist economic systems of Central and Eastern Europe," according to Schalast.

Greece could now learn something from these transitional states - by implementing structural reforms, but also by establishing new industries. "Why should Greece not have an automobile industry, as an assembly location for others?" asks Schalast.

Sonnenenergie aus Griechenland

Renewable energy is one area that Greece could invest in

But the analyst doesn't want to see the booming car assembly industry in non-euro countries like Czech Republic and Romania being used as an argument for dropping Greece from the single currency. On the contrary: "We see it in countries like Portugal, Spain, Ireland, or some of the Baltic states - you certainly can introduce reforms and still have the euro."

The euro as a condition?

The economist Hans-Werner Sinn, director of Munich's Institute for Economic Research (ifo), has a different view. Only without the euro, with a strongly devalued drachma, would Greece have an economic future - limiting its economy to tourism and agriculture.

"The farmers would have a lot to do again and would be able to employ a lot of people there," Sinn told DW.

Kritikos disagrees - he thinks that only the euro can prevent Greece from dropping back into its developing economy stage of the 1980s, because all the industries with prospects for the future - IT, pharmaceuticals, and renewable energy - need investment. These wouldn't come if Greece left the eurozone.

"Then you can expect Greece to start printing money again, and we'll see inflation rates of 30 percent," said Kritikos. "And then no one will invest in the country ever again, because the risk of failing to make a profit with a very weak currency is too great."

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