The Greek economy stands at a critical crossroads, where macroeconomic stability clashes with long-standing structural pathologies. The European Commission's recent report for the European Semester, while acknowledging progress and growth rates exceeding the EU average, does not pull any punches for the Greek authorities. Instead, it highlights 20 specific "thorns" that prevent the country from transitioning to a sustainable and resilient economic model. The central mandate from Brussels is clear: the era of horizontal subsidies has passed indefinitely, and Athens must proceed with a painful "snip" to tax exemptions that weigh heavily on the budget.
The End of Horizontal Support and the New Fiscal Discipline
The Commission is categorical regarding the management of public resources. With the return of strict fiscal rules, the practice of horizontal support measures—such as the "energy passes" or generalized fuel subsidies seen in previous years—is now considered counterproductive. The Commission is asking the Greek government to withdraw any remaining support measures that are not strictly targeted at vulnerable social groups. The logic is twofold: first, to reduce the deficit and public debt, and second, to avoid reigniting inflationary pressures through excessive liquidity.
At the same time, tax exemptions are under the microscope. Greece has one of the most labyrinthine systems of tax breaks in the Eurozone, which often serves as a loophole for tax evasion and the erosion of the tax base. The Commission calls for a full review of these exemptions, aiming to save resources that could be directed toward public investment and further reducing the tax burden for compliant taxpayers.
Structural Bottlenecks: Justice, Education, and Labor
Beyond the numbers, the report focuses on the "open wounds" of the Greek state. The number one obstacle to attracting serious foreign direct investment remains the speed of justice delivery. Despite digital reforms, the time required for a case to reach a final verdict in Greece remains dramatically high, creating a sense of legal insecurity in the market. The Commission points out that without a radical overhaul of the judicial system, economic growth will remain "shallow."
In the labor sector, the picture is equally concerning. Although unemployment is falling, Greece faces a paradox: high unemployment rates in certain groups (youth, women) and, at the same time, massive labor shortages in critical sectors such as tourism, construction, and technology. The skills mismatch is the "thorn" that the government is called upon to address through the Recovery and Resilience Facility, but the results so far are deemed insufficient by Brussels.
The Productivity Challenge and Private Debt
One of the most serious points in the report concerns the productivity gap. The Greek economy remains oriented toward low-value-added services. The Commission emphasizes the need to transform the productive model toward innovation and exports. Furthermore, private debt remains a "stranglehold" on the banking system and the real economy. Despite the reduction of non-performing loans (NPLs) on bank balance sheets, the debt remains within society, managed by credit servicers, which limits the ability of thousands of businesses and households to access new credit.
- Abolition of horizontal subsidies and transition to targeted measures.
- Strict review and cutting of ineffective tax exemptions.
- Acceleration of justice as a prerequisite for investment.
- Addressing the shortage of specialized labor.
- Reducing the current account deficit through exports.
In conclusion, the Commission's report serves as a reminder that the grace period is over. Greece is no longer judged by the criteria of the crisis, but by the criteria of a normal European country that must correct decades of distortions if it wants to avoid a future setback.
