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The annual turnover of the informal economy in Greece is 59 billion euros

01 December 2010 / 10:12:51  GRReporter
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Greece is second in Europe by size of its informal economy the annual turnover of which reached 59 billion euros. At the same time, the government is struggling to reduce the budget deficit through stringent cost cuts and the debts of the public sector exceed three times the revenues in the Treasury. That said Vasilis Antoniades, manager of The Boston Consulting Group and a member of the Foundation for Economic and Industrial Research in Greece (IOBE), during the second day of the conference on The Greek Economy-Rebuilding Greek Credibility. He stressed that Greece is experiencing the most serious economic problems in comparison with the other Eurozone countries. Countries having debts similar to the Greek one, for example, sooner or later have to seek rescheduling from their creditors. Vasilis Antoniades stressed that the situation in Ireland and Italy is similar as they also have padded debts and disproportionate deficits.
Greece has an advantage in the process of fiscal consolidation and it is that the revenue levels in the budget are low each year, which means that there is significant opportunity for growth. The first step for this increase in revenue is to find ways to reduce the informal economy.  Uncollected revenue from taxes and fees as well as more efficient collection of taxes after the reorganization of the tax system and its organizations can cover a large part of the budget deficit we know now.  

Another untapped opportunity, according to Vasilis Antoniades, is the more active utilization of the numerous state property that could also bring additional funds to the budget. Privatization, restructuring of public administration, facilitating business processes and eliminating tax breaks for large taxpayers are just some of the proposals economists give to accelerate the process of financial stabilization.

At the end of 2009 the Institute for Economic and Industrial Research in Greece submitted a list of 123 proposals to revive the local economy, some of which were implemented with the signing of the Memorandum of financial support. Vasilis Antoniades appreciated that most efforts have been made so far for the banking system and public finances recovery. However, very little has been done for the merchant marine sector, health care and education. Some of these sectors have great potential for development and investment and others – for structural reform and operation streamlining so as to achieve a better quality of service with insignificant resources.
"We need to reduce public presence and to facilitate the business," said the economist. Vasilis Antoniades gave an example of how Turkey has handled the economic crisis in 2001. "They decided to look beyond their Memorandum and made steps towards positive economic growth." Turkey has undertaken serious reforms in the banking sector and not only by providing aid, when necessary, but through privatization and restructuring of state banks. The second important step the Balkan neighbour took was to found a major institution to undertake the privatization of the public sector and to reduce as a whole the state presence in economic life. Thirdly, Turkey engaged in attracting new investments by reducing the procedures related to public administration and by opening 21 offices for business development in the country in world commercial and corporate centres.
"Our economy is focused in the wrong direction – we produce to satisfy the domestic consumption rather than exports. Products and services we offer are of secondary or even poor quality, and technologically underdeveloped." This is the opinion of the President of the Institute for Economic and Industrial Research in Greece Yannis Stournaras. Innovative technologies and production of goods and services of high added value are not yet popular in Greece, which also contributes to the lack of competitiveness of local production. Consumption in the private sector is 70% of GDP and 20% of GDP in the public sector, while the remaining 10% are saved. Stournaras stressed that these levels of savings are extremely low. He gave the example of Portugal, which has similar macroeconomic indicators, but manages to save up to 30% of GDP. The cconomic analyst was clear that in the next ten years Greece has to reduce consumption by at least 10% without reducing the volume of public investment and to reduce imports by about 10% too.

According to Yiannis Stournaras the privatization program of the government should include much braver projects that will release new forces in the productivity of the country. He did not fail to note that despite the reform of the social security system in 2010 the government will soon have to make new changes. He called for a merger of hospitals that are financially inefficient or leasing their management to private owners who have managerial experience. At the same time, opportunities for private hospitals should be offered, which still face difficulties due to outdated laws in the field. "Greece has the capacity to accommodate retirees from around the world who need diagnostic and health centres." Investments in the coming years should focus on sectors such as tourism, transport and green economy in order to open new jobs in areas that will give the country a base to recover the positive economic growth.

Tags: Informal economyCompaniesCrisisGreece
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