The international economic role of Athens

The international economic role of Athens will be analysed from three different perspectives: international economic activities, supra-regional infrastructures supporting those activities and the attraction of international capital. For obvious reasons, it is necessary to examine two periods: before and after (or during) the crisis.

In the 10-15 years preceding the crisis , Athens was generally absent from various international rankings of metropolises, except for those that also took non-economic factors into account, usually population size or administrative role. The map below (ESPON 2013, 32) presents an assessment of the cities playing some kind of global role in 2008 and places Athens in the third category. It simply confirms various other classifications, which systematically assigned a limited international scope to Athens, no matter which theoretical and methodological approach was used.

Map 1: Global network of cities 2008

Source: Link

At an economic level, the international role of Athens was consistently weak in terms of the higher tertiary sector, especially in the field of services to companies with a supranational scope (including decision-making mechanisms), high tech industries and foreign direct investment (FDI). These weaknesses led to low international competitiveness and the lack of direct and indirect foreign investment. Other points were the absence of globally active financial corporations and) of research activities of global significance. Given the extremely high relative weight of Athens in the Greek economy (almost 50% of GDP) and considering the absence of other cities [1] with a metropolitan role the weakness of Athens could be linked to the weakness of the Greek economy as a whole in the global division of labour. We should bear in mind that the period we are referring to was marked by increasing emphasis (both in literature as well as in the assessments by international organisations) of the importance of international metropolises as active agents in the international role of countries and regions. The weakness of Athens should be examined further, in light of that approach.

The arguments already mentioned do not mean, of course, that there were no data indicating Athens’ international presence. As regards the economic activities themselves, tourism and foreign trade (especially imports) did have an international outreach. In terms of infrastructure (which is also a precondition for these activities), the Piraeus Port and the El. Venizelos airport met all technical and geographical conditions for an international role. Although utilised to some extent, these capacities did not reach their full potential. In certain periods, the Athens Stock Exchange attracted foreign capital (although speculative and without ever having acquired a permanent and strong international role). These isolated elements certainly reflect some comparative advantages of the city, but their concentration and scale do not imply a strong international role.

The limited international economic role of Athens was the result of a number of weaknesses and shortcomings, which can be divided into two categories. The first category comprises the intrinsic dynamics of the national economy that determines the emergence of cutting-edge international activities, which however “come from within”. Parameters such as macroeconomic balance, economies of scale and economic growth rate play a decisive role in creating endogenous activity of this type and, in the case of Athens as well as Greece, these have remained at a low level. The second category comprises factors affecting the spatial choices of international capital in search of appropriate investment locations. Some of them are: proximity to international markets, the nature and stability of fiscal policy, the receptivity of the local community, the environment and quality of life- which have a negative image in most cases in Athens. The city did have comparative advantages (e.g. cultural heritage, climate) but these could not offset its negative characteristics (urbanisation and environmental problems).

In fact, a number of ambiguous characteristics were also not utilised, because this would require a systematic strategy and effort.An example is Athens’ geographical location: negative due to the distance from the European “centre”, but potentially positive for activities in the south-eastern Mediterranean. The last observation points towards another weakness: the failure to understand the importance of Athens’ international presence and the absence of a relevant strategy. A telling fact is that the subject was not even mentioned in the Athens Master Plan for this period (L. 1515/1985 in force until 2014). The planning of the Olympic Games remained focused on the event itself and not on how to exploitat possible multiplier effects, which would definitely reinforce the city’s international role (Οικονόμου 2010).

In the early 2000s, it was thought that strengthening the international role of Athens, to promote it to a higher quantitative and qualitative scale, was a realistic goal. This impression was based on a number of factors, including the provision of new supralocal, large-scale infrastructure (the “El.Venizelos” airport is a typical example), the steady increase in GDP per capita and the climate created by the 2004 Olympic Games. The Games in particular triggered investments that improved the city’s image to some extent, as did the organisational success of the Games that was unparalleled given the size and the administrative tradition of the country.

However, the events that followed did not fulfil these hopes and the international role of Athens was not distinctly reinforced before the onset of the Greek crisis: critical cutting-edge activities in the tertiary sector generally remained unchanged (the penetration of Greek banks in the Balkans did not prove to be viable, research funding remained stagnant…). The impact of the Olympic Games was less positive than what it could have been, for reasons relating to both their extremely high cost and the absence of a timely post-Olympic strategy, while no new investments were made in supralocal infrastructure. Furthermore, a number of negative developments had occurred in fields such as exports to certain countries and, of course, the increase in public debt. Tellingly, those issues, created a dead-end and held back Greece’s international competitiveness, a fact reflected directly on Athens, given its role in the country: A continuous decline in international competitiveness has been recorded since 1987-1988, with the only temporary exception in 1998-2000, where competitiveness accelerated following the accession to the Eurozone (Τράπεζα της Ελλάδος, 2010, 137-138).

The difficulties increased due to developments in the international environment, which had already started to change quickly and had a negative impact on Athens’ prospects for an international role. Indicatively, one can mention the international financial crisis and the European Union’s continuously deteriorating position in the global economic system, as a result of dynamics developing in other parts of the world, especially in Asia but also in South America, which now caused structural changes at a global scale.

The Greek crisis, from 2008-09 onward, hit a city whose international role was already weak, a city that had not seized any opportunities for a positive international course in the previous years and was noted for multiple internal weaknesses. Due to the above reasons, the consequences of the crisis were extremely pronounced. As regards aggregates, Attica suffered the greatest decline in GDP per capita compared to most other regions, while unemployment (which in general increased dramatically in the country) peaked in Attica. Although these parameters are not directly related to the city’s international role, they do indicate that the lack of a strong international presence -to the extent that it characterises Athens- did not make the city more resistant to the crisis.