As Greece continues to lose its manufacturing industry, becoming all the more dependent on the service sector, an urgent restart and shift to a complex economy is crucial for the country’s economic viability.
A complex economy is interconnected with other industries that are not necessarily geographically concentrated or thematically related but which share common infrastructure, resources, and solid interdependencies in production and supply chains. The Internet of Things (IoT), automation, and data-sharing are vital for the development and success of a complex economy.
A recent Bank of Greece report states that tourism in 2024 accounted for 13 percent of the country’s GDP. The government presents this as a sign of success, but, behind the numbers, there is a sad ascertainment: Greece is no longer producing goods, and almost everything other than agricultural products is imported. Substantial revenue from tourism is definitely not a bad thing. However, the average Greek does not benefit from tourism revenue. As the cost of living rises, bragging about “soaring tourism revenues” is not filling the citizen’s supermarket cart.
According to Statista and the World Bank, between 2013 and 2023, 68.6 percent of Greece’s GDP came from the service sector, while 15.2 percent of revenue stemmed from industry and 3.3 percent from agriculture. Kostas Axarloglou, the dean and a professor at Alba Graduate Business School, says the Greek industry needs a restart and transition to a complex economy. In other words, Greece needs to enter “Industry 4.0,” or the Fourth Industrial Revolution, in which interconnectedness, automation, and real-time data are key.
According to Axarloglou, only four percent of the Greek population is now employed in sectors related to Greece’s complex economy, which amounts to approximately only 11 percent of the value added to the country’s GDP in general. Additionally, in the Eastern Mediterranean nation, there is fragmentation into a large number of small businesses, exhibiting both low labor productivity and wages.
As per The Atlas of Economic Complexity, the industry sector in the Greek economy presents a relatively low degree of complexity in relation to GDP, an element indicative of low potential for economic growth in the future. Nonetheless, from 2018 onwards, The Atlas of Economic Complexity records positive growth in exports with the main contributors, among others, being the pharmaceutical and IT sectors.
A gradual structural transformation of the economy is also being observed, with the transfer of productive resources and activity towards manufacturing sectors with higher added value and productivity, such as electronics and machinery manufacturing. Finally, significant opportunities to strengthen and complement the country’s existing productive fabric have been recorded.
Axarloglou argues that there are both an overall low degree of complexity as well as structural problems in Greek manufacturing. The existence of companies with high levels of specialized know-how, however, provides a sufficient launching point in supporting the restarting of industry and the general production base of the country, which could lead to sustainable development in the Greek economy.
Axarloglou referenced the US industry and its contribution to the economy. While the manufacturing industry in the US constitutes 11 percent of GDP, it contributes 35 percent in productivity increase and 60 percent in exports. Furthermore, the complex economy in the United States is the engine of innovation, with related industry sectors producing 55 percent of patents and contributing 70 percent of total expenditure on research and development.
A recent study (Yong, 2020) analyzes the contribution of complexity in a set of economies with varying characteristics. The importance of dynamic industries in economic growth as well as the development of social capabilities and a significant contribution to the achievement of the UN Sustainable Development Goals (SDGs) in each country’s economy were scrutinized.
Overall, the study found there is a direct impact of economic complexity on the development of specific UN Sustainable Development Goals (SDGs), including on poverty reduction, education, job creation, technological economic upgrading, and overall economic development. Moreover, policy interventions for manufacturing expansion are especially vital as they contribute to the development of skills in the country, triggering technological innovation and creating new markets and institutions.
Consequently, the development of a complex economy in Greece could greatly contribute to GDP and the implementation of UN SDGs. It must be mentioned that, in previous decades, manufacturing significantly lagged behind in general, but this lag has eased in recent years.
The development of a sustainable complex economy should be based on two pillars, Axarloglou argues: firstly, extroversion and internationalization and, secondly, innovation and specialization. The Greek industry would profit from participation in International Production Networks (IPNs). This is more feasible now, as these networks evolve from the impact of circular economy, digital transformation, sustainability, and new technologies such as robotics. The mechanisms and structures that would aid in the development of a complex economy are related to the National Recovery and Resilience Plan “Greece 2.0.”
According to Axarloglou, Greece should also orient its manufacturing production towards the international market and within the framework of the Global Value Chain Networks (GVCN), developing even at regional levels. This would include energy networks in the southeastern Mediterranean and innovation pockets in Thessaloniki and Northern Greece. In addition, market megatrends, namely digital technologies, automation-robotics, sustainability and climate change, and a circular economy, should seriously be considered as worthy endeavors.
The adoption of new technologies and digitalization of operations and processes are likewise vital. Such technologies are directly related to the internet, including the IoT, the cloud, and digital platforms and ecosystems. These lead to a greater degree of integration of production, a reduction in transaction costs and easier participation, and more effective coordination of cooperating companies from various geographical locations.
Data collection and analysis (data analytics) help in better production coordination and management within GVCNs and geographically dispersed networks. Moreover, the use of online commercial platforms (e-commerce) results in easy and direct access for producers to raw materials and semi-finished products. Large markets of potential customers are also much more readily accessible.
All the more, a global trend for sustainable development is affecting the structure, organization, and development of GVCNs. There is a growing need to closely monitor and control companies’ social and climate footprints and their alignment with Environment, Social, and Governance (ESG) priorities. At the same time, the imposition of rules on sustainability issues by governments directly affects the structure and operation of GVCNs since these lead to changes in transportation costs and countries’ advantageous dependence on renewable energy availability.
The necessity for sustainability and more efficient management of resources is leading to countries’ adoption of regulations for the operation of the economy and dynamic industries, and businesses are formulating business models and strategies compatible with the imperatives of the circular economy. Technological development now results in technologically and economically feasible production processes that operate within the framework of the circular economy. There is a focus on significant waste reduction, savings, and recycling / reutilization of raw materials and products.
Companies, therefore, develop business models within ecosystems based on collaboration with other companies in order to sustainably produce and deliver value. The purpose of these models and ecosystems is to effectively manage the life cycle of products and spare parts. Of course, the transition from a traditional-linear / operation-production model to a circular one mandates that companies make significant changes in the way they perceive the creation and distribution of value in the economy.
At the same time, the way in which producers in the complex economy model collect revenue is also changing. While, traditionally, income came from product sales, in the circular economy model, profits stem from product rental and other such services. This of course requires new skill development for value production more closely aligned with industrial product usage services, often the result of strategic partnerships among companies.
The circular business model, therefore, has the potential to revitalize manufacturing sectors and businesses by giving them the opportunity to develop new partnerships with companies and ecosystems within the framework of the GVCN, minimizing the burden on the environment, maintaining economic robustness, and achieving the triptych of objectives: an interconnection between the environment, society, and economy, leading to robustness.
The participation of the Greek complex economy in the GVCNs—and mainly in the regional GVCN—requires horizontal interventions that will establish and even improve the required structures and environment, thereby enabling Greek manufacturing to become competitive. Axarloglou argues that Greece has a great opportunity to improve its complex economy with the National Recovery and Resilience Plan “Greece 2.0.” It is a comprehensive plan of reforms and investments for the restructuring of the country’s production model within the extroversion-competitiveness-innovation axis.
The plan is based on initial funding of $35.6 billion (€31.1 billion) for the 2022-2026 period (approximately $21 billion in the form of subsidies and about $14.5 billion in the form of loans), with the prospect of drawing additional investment resources totaling $67.4 billion (€58.8 billion). The plan consists of four Pillars (and 18 sub-axes), namely green transition; digital transition; employment, skills, and social cohesion; and private investment and transformation of the economy.
Green transition emphasizes the energy transformation of the Greek economy towards renewable energy sources and a more energy-efficient operation of the economy, the more efficient use of natural resources, and the promotion of a circular economy.
The digital transition of the economy includes investment in infrastructure (optical fibers, 5G, etc.), the digital transformation of the state, and the promotion and adoption of digital technologies by businesses so that they can be interconnected in the International Production Networks (IPNs).
Employment, skills, and social cohesion includes actions to improve the functioning of the labor market, the reintegration of the unemployed into the labor market, the creation of jobs, and the reduction of inequalities, poverty, and social and economic exclusion.
Finally, private investment and economic transformation includes investments and actions to modernize public administration, strengthen the financial system, promote and support research and innovation, modernize and improve the resilience of key sectors—such as tourism and manufacturing—of the economy, and ultimately improve competitiveness and promote private investment and exports.
The acceleration of the “Industry 4.0” transformation program includes digital transformation as well as the development of “smart” production and a new generation of industrial parks in Greece. The promotion and support of investments for the development of new or upgraded production lines would enhance production and cooperation in GVCNs and improve competitiveness with an emphasis on advanced and digitally controlled industrial equipment, production control systems, and the establishment of industrial partnerships.
Furthermore, there should be significant structural changes to reduce bureaucracy related to business operations and simplify procedures for attracting and implementing foreign direct investment in the country. This will be possible with the implementation of horizontal actions to strengthen the Greek economy within the framework of the National Recovery and Resilience Plan “Greece 2.0.” Therefore, the “Greece 2.0” and “Industry 4.0” programs are inextricably linked to each other for the development of a productive complex economy in the country.
