A concerted export drive in tandem with a weaker euro may offer the Greek government its best combination shot at economic salvation as it looks to drag a country mired in debt and protectionism into a free market world.
Hostage to a web of regulations, restrictive laws and combative unions that plague the entire economy, it carries an unenviable reputation as one of the worst places to do business in the western world.
The speed and scale of the economic transformation Greece is embarking on have few precedents.
Economists say developing a wider export base — especially outside the euro zone — will be key to reaching the levels of growth the cash-strapped country needs to cope with a public debt expected to swell to 149 percent of GDP in 2013.
"Supply-side reforms are the make-or-break for the Greek economy over the longer term," said Ken Watrett, chief euro zone market economist at BNP Paribas.
But the impact of the country's deepest recession in almost four decades, along with a sluggish global recovery, mean any attempt to force though a brutal austerity plan while dismantling the special interests that keep large parts of the economy regulated — driving up businesses' costs — is fraught with risk.
"If the economy contracts massively, by more than 4 percent, reform fatigue could set in," said Citigroup economist Giada Giani.
The cruise industry — which should be thriving against a natural backdrop of stunning islands and azure seas — offers a case in point of why Greece is the European Union's least competitive economy.
Restrictions on foreign-flagged cruise ships have capped the cruise sector's contribution to the economy at about 500 million euros ($635 million) — one third of its estimated potential.
"It's sheer suicide to be losing that kind of money in the debt crisis we're in," said Michael Nomikos, an agent who works out of Piraeus port near Athens and represents Royal Caribbean, the world's number two cruise operator.
Tackling this competitiveness deficit is the most daunting challenge facing the socialist government of Prime Minister George Papandreou as it imposes a painful bout of belt-tightening in return for 110 billion euros of EU and IMF aid.
The country ranked 52nd in a competitiveness survey of 57 developed countries by the International Institute for Management Development (IMD).
"You have to be a patriot to invest in Greece," concedes Konstantinos Mihalos, who runs the Athens Chamber of Commerce.
Data from the United Nations Conference on Trade and Development (UNCTAD) shows that Portugal, which has a slightly smaller population than Greece and an economy that is two thirds the size, attracted more than twice as much foreign direct investment on average between 2001 and 2008.
"Greece has perhaps the most stringent regulations of any OECD country," Claude Giorno, an OECD expert on Greece, told Reuters. "When it comes ... starting a business, public sector influence (and) ... restrictions on certain professions (means) it is often dead last."
As part of its austerity program, the government has promised to introduce laws to simplify licensing procedures and open up restricted professions such as notaries, accountants, lawyers and road freight services.
But it is likely to meet strong resistance from Greeks who have grown used to a state-driven economy over many decades. If the government fails to win over the population and implement its steps quickly, it could struggle to hit the ambitious economic targets set out in its deal with the EU and IMF.
Down the line, economists say, that could mean the country being forced to restructure its debt or even quit the euro zone and reintroduce its old currency, the drachma.
Exports, which have been made less competitive by the exorbitant costs of doing business at home, offer another, potentially more promising route back to growth.
Greek exports of goods and services accounted for just 24 percent of GDP in 2008, the lowest share in the EU. Consumption, which will be hardest hit by the austerity measures, made up more than 70 percent.
Most exports are in services such as tourism and shipping. Manufactured exports are generally in low-tech products, such as food and mineral fuels, where Greece has lost market share to lower-cost rivals.
But a silver lining is that the country's fastest growing export markets are outside the euro zone. Exposure to markets like Turkey, which is growing faster than EU economies, could be an advantage, especially if the euro falls further.
"Greece does more trade outside the euro zone than within it, so the falling euro is a help," Watrett said.
Another positive factor for the country is the impact of its draconian austerity program on inflation, which has consistently exceeded the euro area average over the last decade, also weighing on competitiveness.
Precedents for Greece's economic challenge are few and far between.
One example cited by economists is Finland, which overhauled its regulatory regime, privatized state-owned companies and reformed the tax system as the Soviet Union — its biggest export market — began to collapse.
But Greece must do in a few short years what it took Finland half a decade to accomplish without being plagued by the levels of corruption and waste Greece has.
Economists say no country in recent history has managed to slash its deficit and overhaul its economy in such a short time and under such adverse conditions without devaluing its currency — an option Greece doesn't have as a euro area member.
"Is it possible that Greece will make it? The short answer is yes, but if it is likely, that's a different issue," Watrett said.
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