The Greek economy's struggle with productivity is a multifaceted issue, and one of its most intriguing aspects is the role of business fragmentation. While it might seem counterintuitive, the high number of small- and medium-sized enterprises (SMEs) in Greece is a significant contributor to the country's productivity gap with the EU.
The SME Conundrum
What makes this particularly fascinating is the paradoxical nature of SMEs. On the one hand, they are the backbone of employment in Greece, accounting for almost half of all employees (47.5%). This is a much higher proportion compared to the EU, where only 30.4% of employees work in very small enterprises. However, this high employment rate comes with a productivity trade-off.
In my opinion, the key issue lies in the fact that these SMEs often struggle to invest in new technologies and reduce operating costs. As a result, an employee in an SME in Greece produces only a quarter (25.5%) of the value produced by an employee in a large enterprise, according to Alpha Bank's data. This is the lowest percentage in the EU, where the average stands at 60.9%.
The Impact of Service Sectors
What many people don't realize is that the Greek economy's heavy reliance on service sectors, such as food service, accommodation, trade, and transport, further exacerbates this issue. These sectors are inherently low-labor-intensive, which means they don't benefit from the economies of scale that larger enterprises can achieve. As a result, the service sector employs about 37% of all workers and produces only about 25% of total GVA, leaving a significant productivity gap.
The Industrial Sector's Promise
In contrast, the industrial sector, which relies more on machinery and technology, has shown significant improvement in recent years. It employs about 9.5% of Greek workers and produces 15.2% of total GVA, indicating that the shift towards more automated processes is a positive step towards boosting productivity.
Productive Investments: A Long-Term Challenge
If you take a step back and think about it, the drop in productive investments during the crisis is another critical factor. While investments as a percentage of GDP have recovered in the last five years, reaching 16.9% in 2025, this is still lower than the pre-crisis level and the EU average. This suggests that the long-term challenge of increasing productive investments remains a significant hurdle for Greece's productivity growth.
Conclusion: A Complex Puzzle
In conclusion, the Greek economy's productivity lag is a complex puzzle, and the role of business fragmentation is a fascinating piece of the puzzle. It highlights the need for a comprehensive approach that addresses the challenges faced by SMEs, the importance of diversifying the economy, and the long-term benefits of increasing productive investments. From my perspective, this issue is a call to action for policymakers and businesses alike to work together to unlock Greece's full economic potential.
