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Market liberalisation will bring to Greece 5.2 billion euro per year

28 November 2013 / 22:11:31  GRReporter
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In its report presented yesterday by Secretary-General Angel Gurría, the Organisation for Economic Cooperation and Development (OECD) recommends liberalisation of the market in four main sectors of the Greek economy.

The report, which analyzes the problems in the sectors of retail, food, tourism and construction materials, provides that, if adopted, the proposals of its compilers would bring to the Greek economy an annual profit in the range of 5.2 billion euro or a 2.5% increase to GDP.

OECD Secretary-General Angel Gurría

The OECD survey commissioned by the Greek Ministry of Development against the sum of 930,000 euro sets 329 significant and not so significant problems that negatively affect the competitiveness of these sectors, aggravating, at the same time, the situation of consumers.

The survey suggests a solution to every problem, namely through the full liberalisation of the market.

Such proposals and attempts have been made in the past but, reasonably or not, the interested parties in each sector responded to them.

The immediate changes proposed include changing the term for the sale of fresh milk, allowing the sale of medicines without prescription in supermarkets, permitting all shops, regardless of their size, to open on Sundays, removing the restrictions on construction of hotels.

The report proposes changes in the market of bread and bakery products, cement and cruises as well.

Critical two-month period for changes

According to Minister of Development Kostis Hatzidakis, immediate attempts will be made to solve the problems in the areas under his supervision as well as to take, within the next two months, the appropriate measures to eliminate them.

The goal is to adopt 80% of the proposals of the OECD as stated by the Minister. Regarding the areas that are not under his supervision, Hatzidakis stressed that he is in constant contact with his colleagues so that the proposals of the organisation be implemented.

Presenting the OECD study, Angel Gurría said that a similar study had been commissioned by Australia which has subsequently achieved a significant increase in the GDP.

He also stressed that "the Greek economy is in a stage of recovery and we believe that, by this time next year, it will be able to take the path of development which will continue until the end of 2015. We believe that we have already embarked on this path. The first goal has been achieved and now, there are some specific issues related to the total debt and to the reports that have to be submitted in order to achieve certain goals. In fact, I mean an impressive number of issues that we have to track and solve."

According to the OECD, 1,053 pieces of legislation were examined for the preparation of the report, making it clear that 555 regulations are restrictive or that they adversely affect competition. Therefore, 329 proposals have been submitted for removing the limitations established in these four areas of the economy that, in 2011, constituted 21% of GDP and 27% of total employment.

In addition, the report states that if the proposals are fully implemented, the Greek economy will benefit from the results in the long run as they will offer consumers a wider variety of goods, diversity, lower prices, increased productivity and, ultimately, greater economic development.

The main proposals

The main proposals of the compilers of the report are as follows:

* Full liberalisation of the pricing and sale of hundreds of medicines that are available without prescription so that they can be sold in supermarkets, following the example of vitamins and food supplements whose sale in supermarkets has been recently permitted by a decision of the Ministers of Health and Development.

It is expected that this change will provoke strong reactions on the part of the pharmaceutical industry, as it would lead to the transfer of turnovers of hundreds of millions of euro to supermarkets.

With regard to pharmacies, the OECD also recommends full liberalisation of the opening hours of pharmacies, elimination of the maximum number of licences, etc.

* Cancelling the 5-day maximum period for the sale of fresh milk, which is in force in Greece alone. This will enable the dairy companies to sell their products with a shelf life of 1 to 10 days, depending on the method of pasteurisation.

This will unblock the importation of fresh milk, which is currently impossible due to the insufficient time.

This issue is also about to provoke a response from both the Greek dairy companies and the manufacturers.

* Revising the legal framework for bread production and sale. The weight of loaves of bread will be checked and set at 1 kg, thus preventing the sale of pieces of bread, at the bakeries, that can weigh a lot less than what is paid by the consumer.

* Full liberalisation of Sunday working hours for all commercial sites (shops, malls, etc.) rather than just for those with an area of less than 250 square metres, in order to enhance competition and create 30,000 new jobs.

This issue was resolved a few months ago when the Ministry of Development opposed the opening on Sundays of shops with an area of ​​over 250 square metres. However, it is possible that the matter be discussed again under the excuse that the OECD has suggested it.

* Liberalisation of the percentage of discount on new books, which is now set at 10%.

* Lifting the ban on stock shops and outlets to offer discounts.

* Liberalisation of the construction of new hotels in areas such as Attica, eliminating the concept of "market saturation" and changing the provisions for structure works in order for them to facilitate the change in the use of buildings and their conversion into hotels.

* Removing the restrictions on cruises such as the requirement that the ships that set out from a specific port must return to it and others.

* Cancelling the control and approval procedures applied by the state laboratory in terms of detergents.

Regarding the cement market, the OECD report notes that the expensive infrastructure by non-producers increases the price of the product.

For example, the capacity of the silos that store the cement should be minimum 500 tonnes. Ultimately, this means that the high investment cost restricts competition and increases consumer prices.

The report also states that the 2% fee on the retail price of cement collected in favour of the pension fund of the workers in the industry is increasing the end price and brings additional costs to both manufacturers and importers, thus reducing the flexibility of market prices.

Administrative burden amounting to 14 billion euro

At the same time, OECD Secretary-General Angel Gurría and the Greek Minister of Administrative Reform and eGovernment, Kyriakos Mitsotakis, discussed the first results of the OECD survey carried out for 9 months on 13 sectors of the economy.

The OECD had to describe the administrative burden in the legislation.

The aim of this project is to reduce the red tape by 25% by the end of 2013, which is the responsibility of the state under the memorandum.

The value of the administrative burden in Greece costs the GDP 14 billion euro and is the highest in Europe. Reducing it by 25% by 2025 would increase the GDP by 2.4 %. Every year business in Greece is forced to spend more than 2 billion euro to cover expenses caused by bureaucratic obstacles.

The OECD analysts have identified weak points and unnecessary administrative costs incurred by business, which adversely affect both the effective operation of companies and households. It is expected that the reports indicating the necessary changes will be submitted soon.

Recommendations for another debt haircut and for resolving the issue of "bad" loans

In addition, Angel Gurría insisted on immediate intervention to reduce Greece’s sovereign debt by partial forgiveness of the loans granted by the public sector whereas the Minister of Finance, Yiannis Stournaras, mentioned that the discussion on this issue would begin after April 2014.

The OECD has supported the International Monetary Fund which also insists that the European Commission should trigger new measures to reduce the Greek debt.

OECD Secretary-General Angel Gurría said that the longer it takes to find a solution to the debt, the longer it will continue to burden the country and prevent its economic recovery. He added that the high debt is an obstacle to the economy, despite the reforms carried out in the country.

The report by the OECD has estimated that the government debt of Greece in 2014 will increase to 181.3% of GDP from 176.6% this year and it is believed that it will not be viable without additional measures.

Angel Gurría suggested that since the larger part of the debt is already in the public sector, it would bear its burden.
 
"I know that the sources of loans are mainly public; earlier they came mainly from the private sector whereas they have now turned to the state. And if it is clear that the debt is too high and should be reduced, it is also clear that, at some point, some state institutions will have to take a decision as regards this issue." Angel Gurría said that the two PSI procedures, which had reduced the private sector debt in Greece, had been carried out despite the responses in connection with them.

For his part, Minister of Finance Stournaras stressed that the new changes in the debt based on the decisions of the Eurogroup of November 2012 will start in April 2014 when Eurostat verifies the primary surplus achieved in 2013.

Meanwhile, the OECD report advocates the immediate resolving of the issue of "bad" bank loans which it perceives as a consequence of the crisis.

In this context, it suggests the establishment of the so-called "bad" banks to take over all the "bad" loans, thus improving the balance sheets of the commercial banks.

The report stresses that the idea can be implemented through the creation of "bad" banks to every system bank or by creating a single "bad" bank the liquidation of which should be the responsibility of the state.

The OECD also recommends the following:

* Implementation of reforms.
* Reduction of the administrative burden on businesses.
* Combating tax crimes and improving tax administration.
* Completion of the administrative reform.
 *Redirecting the social programmes in order to meet the health care needs and the minimum standard of living of the poor groups of the population.
* Overcoming, by all possible means, the very high rate of unemployment, especially among young people.

Praising the progress of the adjustment programme

In addition to the presentation of the OECD report Secretary-General Angel Gurría expressed satisfaction, praising the efforts of Greece. "You have done an excellent job", Gurría told Greek Prime Minister Antonis Samaras during their meeting in the Presidency.

 

Tags: ReportOrganisation for Economic Cooperation and DevelopmentOECDAngel Gurria
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