December 2011
CEP Default Index Country Report Greece – 1st half of 2011
Greece remains uncreditworthy. Particularly problematic is the fact that the Greek economy de-invested significantly in the first half year: the capital stock shrank by 3.2% of GDP. This is exacerbated by the high propensity of the Greek population to consume: since joining the monetary union, they have consumed almost every year more than 100% of net domestic product (NDP).
Reform Prospects
Greece’s unit labour costs have increased by 36.5% since 2001, German’s by 4%. This gap in competition cannot be bridged in the medium term. Greece will not be able to remain a member of the Eurozone without an institutionalised system of transfer payments providing a permanent transfer union.
