The Greek economy's struggle with productivity is a multifaceted issue, and the role of business fragmentation is a critical piece of the puzzle. While the country has made some progress, the data highlights a persistent challenge that needs addressing.
The Fragmentation Conundrum
Greece's economy is characterized by a high number of small and medium-sized enterprises (SMEs), which employ a significant portion of the workforce, particularly in low-labor-intensity sectors. This fragmentation is a double-edged sword. On one hand, it provides flexibility and adaptability, allowing for quicker responses to market changes. On the other, it often results in inefficiencies and a lack of economies of scale.
According to Alpha Bank's insights, an SME employee in Greece produces a mere 25.5% of the value generated by an employee in a large enterprise. This disparity is stark, as the EU average stands at 60.9%. The reason for this discrepancy lies in the size and structure of these businesses.
In Greece, nearly half of employees (47.5%) work in very small enterprises with fewer than 10 staff. These micro-businesses often struggle to invest in new technologies and reduce costs, hindering their productivity. In contrast, the EU has a more balanced distribution, with only 30.4% of employees in such small enterprises.
The Service Sector's Challenge
The Greek economy's heavy reliance on service sectors, such as food service, accommodation, trade, and transport, further exacerbates the productivity gap. These sectors are inherently low-labor-intensive, and their productivity levels reflect this. The service sector employs approximately 37% of Greek workers and contributes around 25% of the country's gross value added (GVA).
In contrast, the industrial sector, which relies more on machinery and technology, employs only 9.5% of Greek workers but generates 15.2% of total GVA, indicating a more efficient use of resources.
The Investment Conundrum
The drop in productive investments during the crisis is another critical factor. While investments as a percentage of GDP have recovered, reaching 16.9% in 2025, this is still below the EU average. The recovery is marginal, and the gap with the EU remains significant.
A Way Forward
Addressing business fragmentation requires a multi-pronged approach. Encouraging mergers and acquisitions could help SMEs grow and benefit from economies of scale. Additionally, providing targeted support and resources to these businesses can enable them to invest in technology and training, enhancing their productivity.
In the service sector, efforts should be directed towards improving efficiency and productivity through innovation and technology adoption. This could involve government initiatives to foster a more conducive business environment and encourage collaboration between sectors.
Conclusion: A Complex Journey
The path to boosting Greek productivity is complex and multifaceted. It requires a combination of strategic interventions, policy reforms, and a supportive business environment. By addressing the challenges of business fragmentation, the service sector's inefficiencies, and the need for increased investments, Greece can take significant steps towards closing the productivity gap with the EU.
This journey will demand sustained effort and collaboration between various stakeholders, including the government, businesses, and financial institutions. Only then can Greece unlock its full economic potential and ensure a brighter future for its workforce.
