Thursday, December 5, 2013

Greece's Reforms Have Only Cracked the Surface

by Aristides N. Hatzis

Wall Street Journal

December 5, 2013

Last week Ángel Gurría, the secretary-general of the Organization for Economic Co-operation and Development, visited Athens to present the OECD's latest economic survey of Greece. Since 2010, the report said, Greece "has made impressive headway in cutting its fiscal and external imbalances and implementing structural reforms to raise labor market flexibility and improve labor competitiveness."

But the OECD also emphasized that "more needs to be done." The organization's assessment of competition in four key sectors in Greece, also released last week, identified 555 problematic regulations and 329 provisions.

Is this merely the case of a glass half-full versus glass half-empty? The last three Greek governments have introduced numerous economic reforms, especially in the labor market. These initiatives have translated into significant improvement in Greece's placement in the World Bank's Doing Business ranking: from 109th place out of 183 countries in the 2010 report to 72nd place in the 2014 report.

Yet the improvement in Greece's business climate is largely nominal, as reflected in other global surveys. In the World Economic Forum's latest Global Competitiveness Report, Greece ranks awfully for wastefulness of government spending (140th out of 148 countries), burden of government regulation (144th), efficiency of the judicial system (138th), and the effects of taxation on incentives to invest (142th) and on incentives to work (137th).

The effects on the ground are easy to spot. It's impossible, for instance, to find a profession in Greece that isn't sheltered from competition, despite numerous attempts to liberalize services. Why? The answer was given by Poul Thomsen, the head of the International Monetary Fund's mission in Greece, in an interview last month with Kathimerini: "Many professions have not yet been touched, and even where legal restrictions have been lifted, new administrative or other barriers often crop up."


Read the OECD Report

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