Changes in Greek economy baffle

Published: 8:18PM Tuesday July 19, 2011 Source: Reuters

Source: Reuters

If you want to be a dancer in Greece, you can now swirl freely into your new career. But if your heart is set on opening a pharmacy, things are not that easy.

As part of its overhaul of the economy to send investors a message it is making changes to tackle its debt crisis, the Greek government is opening up professions but the jobs market is still far from an even playing field.

Athens has promised international lenders to untangle a web of rules on about 135 "closed" professions, allowing anyone who wants to drive a Greek taxi, open a bakery or guide tourists on the Acropolis to do so without restriction as of July 2.

But in practice, the much-touted liberalisation has so far been limited, with the government bowing to the demands of powerful unions and keeping regulations on many sectors.

"Ballets and dancing schools have been liberalised but more complicated professions such as civil engineers, pharmacists and lawyers have not opened at all," Yannis Stournaras, head of the IOBE think-tank,said.

"The political system resists."

IOBE estimates a complete opening up of professions would benefit the economy by 17 percent of GDP in the long run.

"The problem is that the law that liberalises a profession passes through parliament and then the implementation law includes such complicated rules and regulations that it is effectively not open," Stournaras said.

In place for decades to protect professions from internal and foreign competition, the controls must be lifted to boost lagging Greek competitiveness and meet strict conditions set by the EU and IMF in exchange for handing Greece a 110-billion-euro lifeline last year to avoid bankruptcy.

After a rocky start with the raucous truck drivers' union, whose walkouts and protests caused fuel and other shortages last year, the government has effectively watered down measures.

Policies muddled, watered down

Sectors such as sea-faring are already suffering from rising unemployment, seen reaching 17 percent this year, as Greece plunges into its deepest recession in 40 years.

Facing almost daily protests, sometimes violent, from a public incensed with lender-prescribed austerity and declining popularity, the government is struggling to balance social stability with tough reforms needed to turn the economy around.

But the strikes are damaging. Taxi drivers staged a 48-hour strike from Monday this week to protest against the deregulation of the sector which relaxes the licensing process for drivers, some of whom paid up to 200,000 euros (NZ$333,700) for a permit.

They blocked access to the Athens airport and main port of Piraeus, causing flight delays and affecting 10 cruise ships and about 16,000 tourists at the height of the summer season.

Controls are widespread across a variety of sectors. On the ancient Athens Acropolis, a Greek tour guide often stands silently next to a Japanese guide lecturing his compatriots in their native tongue about the glory that was Greece.

A 1977 law allows only licenced tour guides to operate in Greece, so foreign visitors must have a guide for their own language plus a Greek guide to comply with the rules, which if broken carry a penalty of one year in jail and a 2,000-euro fine. The practice remains in place despite liberalisation laws.

But even where the law was meant to free up a sector, such as pharmacies, the government cut a deal instead of truly freeing the profession from strict zoning rules, fixed drug prices and regulated opening times.

After intensive talks and strikes, the Health Ministry agreed to open 300 pharmacies on top of the existing 12,000 in exchange for a discount on drug prices.

Pharmacists are still not pleased. They say they can't face even the competition of a few hundred more shops while the state, whose health funds and hospitals make up 80 percent of their business, does not pay its debts.

"The state hasn't paid us since January," Constantine Lourantos, head of the Attika region pharmacists' union told Reuters. "One fund hasn't paid since 2008. State debts may well be up to half a billion euros (NZ$834 million)."

The government said it was premature to criticise its reforms and that it was committed to liberalising professions.

"The deadline expired on July 2. Isn't it a bit early to evaluate the result? All restrictions have been lifted by law and there are only some left for bailiffs and some medical professions," said a finance ministry official, who requested anonymity.

No free sailing

But industry officials say the government's half-hearted approach is already costing Greece, especially in the lucrative cruise ship business, a main contributor to tourism that makes up nearly 20 percent of GDP.

In an archaic system called "cabotage", non-EU flagged cruise ships could not moor overnight at Greece's ports and white-washed islands unless they had Greek-only crews.

In practice, even EU-flagged ships followed the system just to avoid protests despite the high costs involved.

When the government tried to lift cabotage last summer, seamen's unions blocked ports and turned some ships away. But ensuing legal changes have made it almost equally difficult for ships to sail around the azure Aegean waters freely.

"The new law requires contracts with conditions that don't apply anywhere else in the world. To put it simply, the law is not applied in practice," said Michalis Nomikos, head of Donomis, the port agent for cruise ship companies, including the Royal Caribbean group.

Nomikos said the state is now burying cruise companies in bureaucracy, demanding company charters, three-year contracts describing exactly which islands they will visit, and other paperwork equivalent to setting up a company in Greece.

The restrictions are turning off companies which prefer other Mediterranean destinations, costing Greece about one billion euros (NZ1.7 billion) in revenues a year, he added.

Analysts and industry officials said Greece won't be able to protect professions for much longer, as it undergoes regular inspections by the so-called "troika" before every EU/IMF loan instalment is granted.

The inspectors said in their latest review that although some steps had been taken, the reform was not complete and further progress was needed.

"The troika has realised what is going on and it's a lot stricter. The government has been given until 2012 to truly liberalise professions," Stournaras said.

Changes in Greek economy baffle | WORLD News