SOEs in Greece: structural reforms, economic crisis and financial constraints

Abstract

The global financial crisis starting in 2007/2008 revealed the structural and diachronic deficiencies of the Greek economy that were depicted in the twin-deficits' problem. The inefficiency of the operation of state-owned enterprises (SOEs), due to policy reluctance for structural reforms, fuelled the deterioration of public finances. SOEs, since the state could not adequately finance their operation, entered into a phase of gradual economic rationalisation and harmonisation with the European environment, based, mainly, on the implementation of a privatisation program, which was accompanied by some changes in the institutional framework. The strict fiscal environment, during the recent adjustment period, affected the policy orientation and led to structural changes, focusing on financial constraints, semi-automatic correct procedures and control. Nevertheless, the current situation underlines the need for further and more radical institutional changes in order to improve the SOEs' functioning, as well as their contribution to sustainable public finances.