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News : EU Economy Last Updated: Nov 28, 2013 - 7:17 AM


OECD identifies 555 regulatory restrictions that hinder Greek economy
By Finfacts Team
Nov 28, 2013 - 7:13 AM

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Angela Merkel, German chancellor, praised the reforms being implemented in Greece, when she met Antonis Samaras, Greek prime minister, in Berlin, Nov 22, 2013.

The Organisation for Economic Cooperation and Development (OECD) said on Wednesday that an 11-month investigation by the think-tank for 34 mainly developed countries in cooperation with the Greek authorities has identified a wide range of regulations and legal provisions that undermine competition. In its report into Greece’s food processing, retail trade, building materials and tourism sectors, the OECD identified 555 regulatory restrictions which it says, if lifted, would have major benefits for the Greek economy, not least through lower prices. The OECD said separately that serious consideration may have to be given to cutting the country's debt burden again.

The Competition Assessment Review of Greece makes more than 320 recommendations on legal provisions that should be amended or repealed. The report says the Greek authorities have taken important steps in recent years to reinforce competition law, strengthen the Hellenic Competition Commission and liberalise professional services.

A competition assessment “toolkit”, developed by the OECD, was used to structure the analysis. It provides a checklist that guides the assessment of laws and regulations to identify crucial restrictions to competition.

The report argues implementation of the report’s recommendations would lead to substantial benefits for Greek consumers, and help remove barriers to growth. It estimates the benefit to the Greek economy would be around €5.2bn - - the equivalent of 2.5% of GDP - due to increased purchasing power for consumers and efficiency gains for companies.

Implementing the recommendations would have an even wider impact over time, the report says. OECD studies demonstrate that the removal of barriers to competition in a number of markets across the wider economy will lead to increased productivity and hence stronger economic growth and job creation.

The main findings include:

  • Barriers to entry (such as the definition of “fresh” milk which sets the maximum shelf-life at five days, exclusive distribution of over-the-counter medicines (OTCs) by pharmacies, minimum requirements for touristic infrastructures and activities);
  • Price distortions (such as regulated prices of OTCs, requirements to submit prices to trade associations and various forms of price notification and approvals);
  • Rules that constrain the operation of businesses and their commercial practices (such as the regulation of promotions and sales, restrictions on the establishment and ownership of pharmacies);
  • Third-party levies (such as the levy on cement, on the wholesale price of medicines and on flour);
  • Obsolete legislation (such as various provisions in the Code of Foodstuffs and Beverages, including restrictions on bottling apple vinegar or importing certain types of peppers).

The OECD also said on Wednesday that Greece has made impressive headway in consolidating its public finances and undertaking key structural reforms to boost productivity and enhance competitiveness.

In its latest Economic Survey of Greece, the OECD says the crisis has been much deeper than expected, leading to a sharp contraction in activity that has pushed unemployment up to almost 28% of the labour force, created hardship for vulnerable social groups, and is posing risks to the sustainability of the country’s government debt.

Presenting the survey in Athens, Angel Gurría, OECD secretary general, said: “For the reform efforts to succeed and be accepted by citizens, it is imperative that both the costs and the benefits of adjustment are shared fairly.”

He acknowledged that the country’s government debt trajectory has worsened as a result of slower-than-expected growth, despite the 2012 restructuring. 

“If Greek growth again disappoints, or deflation persists - -  even after the implementation of structural reforms -- then it will be extremely difficult to reach the debt-to-GDP target of 120% by 2020. In this case, serious consideration should be given to reducing the current debt burden,” he said.

The survey says accelerating and broadening the structural reform programme is essential for a sustainable recovery. It says privatisations should be speeded up, particularly in the energy sector and in railways, regional airports, ports and real estate.

The report recommends better targeting of benefits, including a minimum income scheme, to strengthen the safety net. Health care cuts must focus on further reducing inefficiencies while safeguarding cost-effective and critical services.

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