Thursday 30 September 2010

Letters from the Καφενείο

Yesterday I learned (from management sources) that a leading global firm with operations in Greece was audited here. The auditors showed up and requested that for the audit in northern Greece, the firm provide the audit team with 5* hotel accommodation, all room/dining expenses paid, a woman in every room at night, and a chauffered car from the hotel to “work”. The firm, which would have passed the audit anyway, but didn't want to get into a protracted legal and procedural battle, gave in to these demands, and passed the audit with flying colours. Yet another facet of business management that won’t make it into the HBR case studies.

Last week, the press reported that COSCO, the Chinese shipping/transport firm that privatised [part of] the port of Pireaus, was complaining about EUR 38 mln in unreturned VAT from the government. The press also reported that for the construction sector alone, there was EUR 1 bln in unpaid VAT. Other acquaintances report massive delays in both VAT as well as European subsidies for investments made. These investments have been audited and approved, but the EU money is nowhere to be found. I have to ask, with reports like this commonplace in local and international press, exactly how much credibility the Ministry of Finance’s revenue numbers have, and whether an official rebuttal or answer should be given by the government on this issue, given its interest in attracting more foreign investment.

Some years back I was drinking a Saturday late-morning beer (those were the days!) with a friend in Kolonaki. The friend, said half-approvingly: “To win this project, we paid the equivalent of 300 Mercedes S-600s.” That’s one for every member of Parliament. Just think of the savings Greece could have if we reduced the number of Parliamentarians from 300 to 200. Or to 150. Or just sub-contracted the job to Luxembourg.

Perhaps saddest of all was the news reported today in Kathimerini, that the Acropolis Museum restaurant was closing. This restaurant, despite some glitches in service, was a marvel, where you could get a cold espresso or a fresh juice for EUR 2.50, in the otherwise cut-throat tourist centre. Apparently the operation was being done using temporary staff, who’s contracts were no longer being renewed. Equally strange was the report that despite EUR 80,000 per month in revenue, the restaurant was not breaking even. Now that Mr. Samaras is no longer Minister of Culture, does this mean that the Museum might hire some employees who are not from Messinia? Whatever the provenance of its staff, expect higher prices. 

Tuesday 28 September 2010

Why doesn't the government enforce the law?

I have been watching the news of the past 24 hours, and honestly fail to see where this country is going. What is so disturbing to me is not so much the news itself, as the fact that major crimes are allowed to occur in broad daylight, with no consequences for the criminals. Let’s look at just two examples:

The Truckers’ Strike
The strike of truck owners and drivers continues, now in its third week. They are implementing a stop of all transport activity as a means of protest against the law on liberalisation of transport professions, which passed in Parliament on September 22nd.

As a result, according to the Athens Chamber of Commerce and Industry, there are:

·         over 6,000 containers “locked” in port – some reports speak of 13,500 containers
·         over 2,500 employees have been laid off
·         at least 120 major enterprises are idling or working reduced shifts
·         over EUR 2 mln per day in lost turnover is being incurred by enterprises.

Two things are stunning about this development:

a.       The law passed with the condition enabling truckers to depreciate the full cost of their license as a business expense over 3-7 years. In other words, the fee paid for their license is tax deductible. This is regardless of how many years the truckers have already been operating, or the fact that, under standard business practice, this depreciation should have already been factored into pricing and contracting.

b.      The truckers have been mobilised, or drafted into the military, since July to prevent fuel shortages. Yet today the truckers are on strike, parked at the side of the road, blocking other truckers from crossing the picket line, blocking trucks from loading on ships, etc. Although one expect such behaviour to be doubly illegal (illegal once for blocking legal movement of goods and passenger traffic, and illegal a second time because they have been mobilised), this strike is apparently not a strike. It’s a work stoppage (παύση εργασίας). In my opinion, it’s treason, and should be treated as such. Either they have been drafted, or they have not. 

In the meantime, Bulgaria has once again protested about the second major blockage of transport in 2 years (the first was the farmers in 2009-2010), while the European Commission has recommended Greece be taken to court for violating European law on the liberalisation of transport professions, which should have been done 5-10 years ago.

Once again, we are in a situation where a small handful of people enjoying disproportionate profits in a closed profession are able to shut down a country, despite the presence of legislation to the contrary. Instead of acting to force legal compliance, the Prime Minister was speaking at an educational conference in Delphi, with yet more proposals to “revolutionise” the higher education sector. Not a single thing has been said about the economic crisis affecting the business sector, which is now exacerbated by the truckers’ strike.

The irony, of course, is that if any private citizen followed the same tactics as the truckers, we’d be put in jail immediately. The other irony is that the vast majority of Greek businesses and citizens are tired of the illegal and extortionate behaviour of a minority, yet the government does not enforce the laws of the land. 

I suggest that if the truckers are not off the blockades and back at work within 24 hours, three corrective mechanisms kick in:

a.       Anyone found blocking the road, a harbour or railroad or other public place, or preventing another business or citizen from implementing their lawful activity is arrested and prosecuted and their vehicles be impounded.   

b.      The government issues 12-month, renewable licenses at EUR 500/license to anyone wishing to set up a transport company (who complies with the legal requirements for driving licenses), including through the use of rented vehicles.

c.       The real army and the police be mobilised and deployed to assure the free movement of goods within the country, and through its border posts, airports, and ports. 

Enough is enough.

The Vatopedi Scandal
The other amazing finding which has been making its round of the news programmes and print media is that New Democracy is claiming that there is no evidence that the Vatopedi land exchange resulted in a loss for the Greek state. To my vast surprise, I read today in Kathimerini that

The state’s official evaluators have delivered two reports on the property swap and neither was able to establish that the deal had left taxpayers worse off. The evaluations were both scrutinized by independent property evaluators, who found that the state officials had got their sums right. The parliamentary committee investigating the swap has now ordered a third evaluation.

This is simply unacceptable. The Vatopedi scandal resulted from the illegal exchange of commercially useless wetlands around Lake Vistonida, which were claimed by the Vatopedi monastery, against prime seafront land and government property, including parts of the Olympic village. Anyone with a calculator and a list of assets exchanged is able to calculate the relative value of the properties exchanged.

Over 24 months later, neither government has implemented a true forensic accounting of what should be obvious: that a major financial crime was committed against the Republic of Greece by the monks of Vatopedi, certain members of both parties, and a shady network of offshore companies, contractors and intermediaries. If the government is not in a position to correctly value the damage from the land deal, and has not done so already, then I suggest the following corrective measures:

a.       Fire the official evaluators who are not in a position to draw the obvious conclusions for gross incompetence and negligence;

b.      Force all members of the Parliamentary committee investigating Vatopedi to resign on ground of gross incompetence and appoint new ones;

c.       Censure and fine the current and former Ministers of Justice for neglect of duty and gross negligence; force them to leave Parliament;

d.      Investigate and prosecute any member of the government or the judiciary found to have covered up testimony or not followed the full letter and meaning of the law in this case;

e.       Turn the case should be turned over to an objective, independent forensic accountant selected by international tender within 1 month. Assure that this firm has the full backing of Greek and Cypriot governments–much of the money laundering occurred through Cyprus, and if that government does not cooperate, the Greek government should quite simply withdraw its military forces from the island and begin a tax audit of every Cypriot company operating in Greece;  

f.        The report will not take more than 3 months to publish, and the case should be turned over to an independent prosecutor with a mandate to make criminal charges and claw back the lost funds. If this means expropriating Vatopedi and turning it into a hotel, so be it. There are more than enough remaining monasteries and churches in Greece, and perhaps this will encourage them to respect the laws of the land and, possibly, even pay their taxes.

If the problem is a legal one, then the laws should be changed, since in this case they are a disgrace and an insult to the citizens and residents of Greece.

If any private citizen attempted to follow such a practise, he would be laughed out of the courtroom. Why is there a different standard in this case? How much money was made, who was implicated, and how many bribes were paid, for there to be a legal deadlock in what is a painfully obvious case of financial crime?

But instead of a search for a solution, Greece’s elected leaders search for political blame. Instead of real measures to reassure investors and its own citizens that Greece follows the rule of law, we have endless dithering and political committees. In the meantime, we are sliding rapidly into a deeper recession, while our international reputation deteriorates still further.

I can’t imagine why Cosco or Abu Dhabi Mar or anyone else would want to invest in Greece given the illegal transport blocks, the militant and illegal unionism, the illegal delays in VAT reimbursement and the long string of broken promises the Greek government has given to its citizens, and to the investors that entrust it.

Both these cases should have served as a litmus test in which the government stood up to illegal behaviour and enforced the law. Instead, it has failed, and we will be paying the price into 2012 and beyond. And in the meantime, the same corrupt political class will be elected in the regional and local elections in November, and apparently nothing will happen. But maybe we will have a revolution in higher education.

Sunday 26 September 2010

Flaming Garbage Cans: Greece’s Transition to the Second World

One of the strangest sights I’ve seen were the flaming garbage cans of the new Athens International Airport back in 2001-2002. AIA is a modern, efficient airport: of all the European airports I use, it’s one of the best in terms of accessibility and ease-of-use. But if it’s such a great airport, why were the garbage bins on fire?

Back in 2001 when AIA was commissioned, all flights were required to become non-smoking flights. For the average Greek traveller, this was a cruel torture. They would deplane in Athens after a four hour flight from Heathrow, shaking with impatience and suppressed rage, and light up while on the airport bus or at the foot of the escalators.

Since the terminal was also a non-smoking area (smokers’ corners were later installed), there was nowhere to put the cigarette butts, except in the garbage cans. So nearly every time I flew into Athens between 2001 and 2002, I would see smoke and flames rising from these ubiquitous receptacles.

This memory of flaming garbage cans in a shiny new airport illustrates for me where Greece finds itself now. In the 50 years after World War II and the Civil War, Greece transitioned from a Third World to a Second World country. Its ability to become a First World Country, long cherished by its political classes and the majority of its citizens, remains illusive.

Greece lost some 10% of her population and most of her industry between the Nazi occupation in 1941-1945 and the Civil War in 1946-1949. When these conflicts subsided, Greece was in ruins. The reconstruction effort, supported by the Marshall Plan, the Greek diaspora and the efforts of the government and population itself, was responsible for re-creating a country. Roads, ports, airports, and cities were re-built or, indeed, built for the first time.

The rush to rebuild, or indeed create, modern Greece on the ashes of these two conflicts has been unprecedented in Greek history. Although we tend to forget these things, the Greece of 2010 is very different from the Greece of 1960:

·         In 1960, the large-scale trend of urban migration was well underway, transforming metropolises such as Athens and Thessaloniki, which were in no way prepared for the influx. From an agrarian, rural country, Greece was transformed into an urban country in the space of less than 30 years, or about one generation. This was then exacerbated in the 1990s and into the present decade with the influx of a further 1 million illegal economic refugees and migrants from the former Soviet bloc and other less-developed countries.

·         In 1960, the ratio of early school leavers was high and university graduates was low. Although this trend has been reversed, thanks in no small part to the European Union, it’s clear that the educational system has not been able to modernise or transform itself at the same rates as the economy and society in which it is embedded. While quantitative targets may have been implemented, qualitative targets have not.

·         In 1960, the large majority of rural areas were still without electricity, indoor plumbing, running water, municipal sewerage, telephone access, or a range of other amenities. My mother, for instance, grew up in a village house where the only source of fresh water was from the village spring. Today, of course, the situation is vastly different. You can (theoretically) sign up for ADSL service in the countryside; electricity and water provision are available, and despite the odd problem, the situation is far better than it was 50 years ago.

This development has come at a financial price. Greece has had to invest high amounts to achieve a basic level of living standards. Anyone in doubt as to the actual benefits of Greece’s development should visit rural areas in Hungary, the Czech Republic, Bulgaria or Romania to see the difference.

Unfortunately, Greece has chosen to implement this investment primarily through the state. If the state organisations were as efficient and transparent as, say, Singapore’s, this could have been done at a lower cost, and more rapidly. But Greek state organisations are not interested in efficiency or transparency: they are primarily mechanisms to assure political loyalty to the two main political parties. This is ironic, since both parties profess to be against clientilism, corruption and inefficiency, yet both parties do their best to further precisely these attributes.   

The image of the flaming garbage can for me illustrates Greece’s struggle to transition from second to first world country.  How do I define a first world country?  

·        Political maturity. Greeks are increasingly sceptical of government and the promises of its political classes. The standard political approach of sloganeering or the search for external or internal enemies, is present, but is less valid.

·        A desire for higher quality public services. Greek citizens want quality education and healthcare. The achievements of the past 30 years, which saw the foundation of basic services across the country, are now no longer enough. Trading a vote for a place in the government has also lost its allure, at least among the upwardly-mobile professionals.

·         Higher productivity. Greece today is a Second World country with emerging pockets of world-class productivity: Athens International Airport; the Attiki Metro; Aegean Airlines; high-speed ferry operators and shipping groups such as Blue Star/High Speed Ferries; banking groups such as Ethniki, Alpha, Marfin, Eurobank or Pireaus Bank, which have expanded beyond Greece’s borders and control a significant share of banking in the region. Other notable cases include natural resources and energy companies such as Titan, Mytilineos or Motor Oil; food processors such as Vivartia; tourism groups such as Grecotel. In the future, this same productivity will extend to smaller companies now making their drive towards internationalisation.

·        A desire for greater personal mobility. Greek citizens above all want the assurance of an economy which offers them a meaningful career and personal development. The older model, of working for a single company over a lifetime, or working in the public sector, are less attractive that we may believe. Particularly younger Greeks, or professionals returning from abroad, are leading the way in this respect.

·         An emphasis on accountability. In theory, at least, citizens are against the status quo of statism, clientism, or corruption. While actual behaviour contrasts markedly with the idealism expressed, (e.g. many complain, but continue to bribe or avoid the law), more and more citizens and voters want to see effective public services which do their job properly.

·        Greater social involvement. The number of NGOs and other organisations emphasising volunteerism and community service has skyrocketed in recent years. This is highly encouraging, as it shows that citizens are concerned and will contribute if the correct framework is available.

·         Environmental integrity. Even before the massive fires of 2007 and 2009, Greek citizens have been taking a greater interest in the environment. We can only hope that this trend will accelerate in the future.

I see these trends occurring in every domain of public life: politics, public administration, business, social work. Yet three major questions remain:

a.       Can these changes actually materialise in a systematic way given the traditional deficiencies of the public and private sectors?

b.      Can Greece survive the dramatic public debt situation, and in the process transform the public sector from the corrupt morass of the present day into something leaner and more efficient in the future?

c.       Have Greece’s political parties and citizens really accepted the need for change, and do we see demonstrable indications of a new form of political, economic and social interaction?

To my considerable dismay, the answer I would give to these three questions is negative. The changes forced by the recent debt bail-out have been accepted in theory, but rarely in practise. Five of the six parties in Parliament are actively campaigning against the “Memorandum”. Few of the government reforms introduced over the past 6 months have truly addressed the needs of the sectors they purport to regulate, and few comply with the letter and spirit of EU law. Implementation is everywhere delayed, and the true magnitude of public revenue and expenditure numbers is increasingly open to question.  

Any objective observer reviewing the current local and regional elections will immediately conclude that nothing has changed. There is no vision, no coherent plan, few new faces with an idea of what is actually going on. It’s the same tired slogans, the same party hacks, the same intra-party manoeuvres. What real political choice is there? What political responsibilities exist when the same parties nominate the same members of a failed political class for power?

And finally, any objective observer would be shocked by the standards of public life and social intercourse in Athens and nearly everywhere in Greece. Whether queuing at the supermarket, or driving to school, or walking on the sidewalk, or travelling by ferry, there is remarkably little consideration for one’s fellow man. Public behaviour is as far removed from the cherished values of “philotimo” or “philoxenia” or even “philhellenism” as the planet Pluto is from the sun.

With democracy and freedom come the fundamental responsibility of self-respect and respect for one’s fellow citizens / residents. This is the grand paradox of Greece: despite decades of investment and relative political stability since 1974, the standards of public life and public service have slipped further than ever.

While the past traditional values were sufficient to help Greece survive through civil wars and occupation, these values have been so eroded in the last 30 years as to make Greece an essentially ungovernable country. We may have increased enrolment in public education, we may have increased the number of hospitals, and we may have better banking and internet access, but we have still not accepted the need for self-respect and respect for others.

This can neither be mandated nor legislated by government, nor by the Troika or any other “external enemy”. It cannot be bought with European subsidies or Goldman Sachs loans. It can only be done by the Greeks themselves.

Thursday 16 September 2010

Thoughts on Emigration from Greece

The New York Times ran an article on September 14th entitled Young Greeks Seek Options Elsewhere, which comprised a series of vignette-style interviews with young Greek professionals seeking to leave Greece for better jobs, or academic degrees, abroad.


While I agree with its broad conclusions—that the political scandal, the austerity measures and the nature of the Greek private sector all contribute to increasing emigration from Greece—I would like to add some perspective which balances the negative sentiment of the article.


There is no doubt that for urban, educated professionals, working in either the public or private sectors in Greece can be difficult. But we should look at the structural problems which affect skilled, professional employment in general, rather than the economic crisis or “cronyism” alone:


1.      In Greece, payroll taxes for social security (IKA) amount to 44.06% for employee and employer combined. Annual wages are paid on the basis of 14 monthly salaries. These two facts combine to force many potential employers—such as myself—think very carefully before deciding to employ in Greece. The risks and costs in offering formal, highly-paid employment are often too high to justify a hiring decision.


2.      Exceptionally poor value is derived from high social insurance costs. Although the employer and employee pay a combined 44.06% of net salary to IKA, we know that a private health policy is necessary due to the poor quality of the public system, while a private pension will also be necessary, since IKA itself cannot provide an actuarial assessment of likely retirement benefits. This leads to a situation where the employer and employee have to double-pay for already-expensive public services.


3.      These risks are compounded by the fact that most of the employees available in the labour market in Greece may have one or two degrees, but these are highly academic and often of little real value in the workplace. I do not speak solely of Greek academic degrees, but of the vast diploma mill which churns out qualifications in the United Kingdom or the United States. In my experience, gained from hiring and deploying consultants and staff on behalf of clients in over 6 countries, hiring an MBA graduate from most universities or business schools usually means four things:


·         A very theoretical approach to complex business problems;

·         A shocking lack of applied skills or problem-solving ability;

·         The need for at least 6-8 months re/training before the employee is ready to perform;

·         A vastly inflated self-assessment of personal value, leading to unreasonable wage demands.


This third point, in conjunction with the first two, means that we are paying a high price for often unproductive MBAs who very often refuse to get their hands dirty or put in the hours needed to become productive. Yet not everyone can sit behind a desk “managing”.


4.      The large majority of Greek companies are micro-enterprises, usually classified as self-employed professionals. Most companies employ less than 10 people. Even larger, internationally-oriented companies, such as Titan Cement or Boutari, are often family-owned and operated. This means that cronyism is in fact a symptom of the particular ties that bind a family-owned enterprise.  In this environment, it is not unusual to see the entire B- and C-level management positions filled by family members, who by nature cannot be fired or replaced. This accounts for an unusual stagnancy among management boards, which may also be a factor in the small prospects of advancement for Alexandra Mallosi or others mentioned in the article.


5.      A large number of Greek companies are heavily seasonal in nature. The tourism industry, for instance, accounts for at least 17% of Greek GDP in official terms. Yet it is heavily seasonal in nature, usually operating for at most 4-6 months per year at capacities in which the company actually breaks even. This makes it economically impossible for the largest sector of the Greek economy to develop and retain professional managers. A further particular factor in tourism, of course, is the small-scale, family-run hotel model which has been adopted by successive governments in Greece. This, more than anything else, has ruined the professional development of the tourism sector.


6.      We should also be aware that in the current labour market, there is a tremendous mis-match between demand for academic versus vocational qualifications. Greece attracted over 1 million immigrants since 1990, usually from the Balkans and former Soviet Union. These individuals are today employed in a large spectrum of vocational trades: plumbers, carpenters, masons, farm hands, etc. The fact is that many Greek students associate vocational trades as a less-prestigious form of development compared with academic degrees. As a result, it is quite rare today to find Greeks working on construction crews or repairing the plumbing or gathering olives. It is much more difficult to find a qualified plumber in Greece than to find a “qualified” marketing executive.


The result of these facts is the incoherent system we experience today:


·         We have a “surplus” in academic degrees being produced by Greece (annual enrolment in academic tertiary-level institutions is over 600,000 per year), versus the “deficit” in vocational qualifications and degrees being produced (less than 250,000 enrolled).


·         We have a country which desperately needs to promote employment, particularly among the theoretically highly-skilled management professions, but propagates a tax framework in which legal employment is prohibitive.


·         We have a country in which the business environment in the best of times (e.g. delays in payment, bureaucratic obstacles, family-run businesses) does not provide an attractive option for professional employment.


In this situation, there are typically three options available to those educated professionals who do not have the advantage of a family business to receive them: 


a.       Accept work in an often demeaning professional environment, and gradually watch your skill set and ambition wither;


b.      Set up your own company (which was my decision) and put in the long hours and sleepless nights needed to succeed;


c.       Emigrate.


Emigration is hardly the bugbear made out in this article. I’ve had the privilege of working in the US, France and Germany during my career. I learned positive and negative things in each country in this time, but have been able to synthesize the good elements and, I hope, become a better person and a better consultant. And I returned to Greece, bringing my particular skills and competencies with me.


I am therefore in favour of emigration, and I don’t see this as a zero-sum game. In my opinion, every young Greek should go abroad for at least 5-10 years. They should learn how international business culture and active citizenship works, and try to match employment with educational background. Along the way, that person will do more than just earn an income: s/he will change and hopefully develop in a positive way, using different role models and inspirations than what one would find in Greece today.


Implicit in my opinion is the hope that, like me, the emigrant eventually returns to Greece, putting his or her skills to good use in this country. Should this be the case, I strongly recommend that the returnee comes back an entrepreneur. This is the only way of controlling one’s own destiny (insofar as any entrepreneur actually does), but it is also usually the only way to increase the competitiveness of the domestic market.


Greece needs new people, new ideas and new professions to move forward, and I can attest that there is plenty of room in the market for growth of this kind. 

Tuesday 14 September 2010

The Good News from Thessaloniki

Perhaps for the first time since the present financial crisis broke, I see encouraging signs of progress in the way the PASOK government made its case at the Thessaloniki International Exhibition. The reasons for this are both due to what was said, and what was not.

On the tangible side: Both the Prime Minister and the Minister of Finance made an explicit case for continued reforms, including the liberalisation of closed professions, continued tax inspection, and public sector reform. Some of the interesting initiatives announced include:

·         A potential reduction in corporate income tax rates from 24% to 20% in 2011, accelerating the schedule of tax reform initiated by the Karamanlis government. This is potential, because the specific measure announced is to reduce the tax for reinvested profits or dividends, while the Ministry is studying the impact of making the measure apply to all profits and dividends from 2011.

·         A final tax assessment, or “closure” (περαίωση) under which companies and individual professionals will pay a fee for the final closure of tax years 2000-2009.

·         Additional employment support for up to 500,000 places of employment through a 50% (or subsidy) of social payroll taxes.

While these are not in themselves significant enough to engender an economic recover, they are encouraging signs that the government understands the need to improve the business and economic environment of the country, and support employment-creation measures.

Indeed, the President of the Hellenic Chamber of Commerce and Industry described these measures as “aspirin”, given the more competitive tax systems in Cyprus or Bulgaria. But we must reflect that one of the main sources of the deficit in Greece is the fact that companies and independent professionals do not pay their full tax assessment.

I therefore assess them as a net positive. The tax closure in particular is expected to result in EUR 2.5 bln in “additional” income being declared for the years 2000-2009. This has a double benefit, in that 25% of the tax must be paid as a downpayment, and that a large number of legal cases currently in court could be resolved through this settlement, freeing up the court system to address other issues.

If this tax closure does take place, the Ministry of Finance may be on track to achieving its EUR 18 bln deficit target in 2010. In addition to the extra EUR 500-2,500 mln from the “closure”, the Ministry will gather at least EUR 1 bln in vehicle circulation taxes in December, together with the QIII VAT payment in September-October. These could close the gap in deficit spending, although it is too early at this point to tell if these can be collected within financial year 2010.

The Thessaloniki was also notable for what wasn’t said. Contrary to expectations, there was only minimal pandering to the electorate in the form of government hand-outs. (We should make no mistake here: a tax closure, corporate income tax reductions and subsidy of payroll taxes are certainly a form of hand-out for companies).

Some additional measures announced deserve comment:

·         The Prime Minister confirmed that there would be no equalisation of VAT on heating fuel and unleaded gasoline, since a mechanism for social equity was not in place. If we read between the lines here, it appears that the choices will either include raising the tax on heating fuel to the tax on gasoline, or raising the minimum VAT level from 11% to 13%. This issue will be decided and postponed until 2011.

·         A range of measures have been announced to increase female employment. This is an area Greece needs to do much more work in, since it has among the lowest female employment rates in the European Union, and thus marginalises a valuable human resource for the country.

·         A range of initiatives on liberalisation of closed professions, streamlining bureaucracy, restructuring semi-governmental organisations, promoting investments, and other points were promised. Some important ones here include restructuring the court system to provide for the more rapid settlement of legal cases; privatisations; liberalisation of the energy sector; completion of a Single Payment Authority; bank sector restructuring; health sector procurement reform; and others.

These initiatives, should they be implemented, will be among the boldest and most far-reaching reform of the public and private sectors ever attempted in Greece

The first signs are small, but encouraging. The price of pharmaceuticals purchases has apparently declined by up to 25%, according to the Minister of Finance. The truckers strike, scheduled for Monday and Tuesday, has so far been dealt with firmly by the police, with the result that the truckers have not entered Constitution Square as they had in July. Four large renewable energy investments have been announced. A Coordinating Committee of key ministers meeting under the Prime Minister has been set up

The problem Greece faces, however, is not so much the scale of reforms, as the pace of their implementation given the scale of problems in total. For every reform announced, there seem to be 2-3 negative issues holding Greece back.

·         In the pharmaceutical procurement sector, for instance, despite the price reduction, the debt settlement for previous years has still not been implemented, and pharma providers are threatening to withhold supplies from public hospitals. There are press reports that unpaid pharma invoices so far in 2010 amount of over EUR 1.7 bln.

·         The truckers may be acting in a more civilised manner, but the entire issue of tax evasion and price setting in the petroleum refining, distribution and retail value chain will continue to be a barrier to the transparent development of this sector. Gasoline sales are being used as a tax collection mechanism; most filling stations operate at a loss on their primary gasoline sales.

·         In the energy sector, the fear is that the “liberalisation” is being accomplished in such a way that favours the entrenched monopolist, DEH, which has set up its own renewables firm with a EUR 2 bln budget.

·         Investments in the energy sector are taking far too long, primarily because the Renewable Energy Authority claims to lack staff. Of the four projects announced yesterday, the SunRay and EDF projects have been under study for 3 years; while the Rokas and Ellaktor projects for 4 years. The total value of these projects amounts to EUR 2.072 bln; the output will reach 835 MW.

·         The backlog of projects under study apparently amounts to thousands of MW: the danger is that, as in other EU countries, a main investment incentive is the ability to sell renewable energy to DEH (or other customers) on a “green tariff”. The experience of Spain, Germany and other countries, however, indicates that this green tariff may be too high under market conditions, and too high for the government to subsidise. A future change in incentives may therefore be necessary to prevent yet another “green bubble” from emerging.

Such reforms would be difficult to carry out even in a relatively healthy economy (as the public sector and pension reforms in the UK and France demonstrate). In a time of economic crisis, they are even more difficult.

But it seems that the reform train has left the station: let’s hope its momentum in the next months will increase, and tangible benefits start becoming apparent at the ground level in this country.