OECD’S recipe could help Greece stand out in key areas, says senior economist
Greece has broken every record with the speed of its fiscal adjustment and reforms, yet after three memorandums and six years, the competitiveness of its economy continues to lag behind some developing countries, according to Sean Ennis, senior economist at the Organization for Economic Cooperation and Development’s Competition Division.
In a competition assessment review for Greece, presented in Athens recently, Ennis outlines 356 recommendations for reforms with an economic effect of 414 million euros that would help Greece stand out in key sectors.
Do you believe it’s worthwhile for the government to bear the political cost of additional reforms for such a small return or are there non-quantitative effects as well? If so, what are they?
We would not regard this improvement as small, particularly given that the estimated impact is 414 million per year and that these figures are conservatively calculated. This is the total of estimated consumer surplus and higher turnover as a result of removing current regulatory barriers to competition. But the effects can be much larger, as we have estimated conservatively. For example, if e-commerce trade becomes much more successful as a result of clearing the legal uncertainties that currently exist, the trade could expand much more than the 3.6-million-euro benefit in our figures. Moreover, there can be many benefits to businesses from reducing unnecessarily burdensome regulation that are not measured and which can lead to more economic activity.
Do these conservative calculations suggest that Greece has almost completed all the necessary reforms for competitiveness? Previous studies had recommended reforms with an economic effect in the billions of euros.
The economic value of reforming regulations is substantial and prior research suggests that eliminating regulations that unnecessarily restrict competition can yield substantial benefits. A careful, systematic review of all sectors where there are restrictions can yield benefits; modest benefits, when aggregated together, can have a multiplier effect on economic dynamism.
The Greek economy’s competitiveness has actually deteriorated since it started implementing the bailout programs and the OECD’s “toolkits,” according to World Economic Forum and Doing Business reports. How do you explain that?
Going from passage of reforms in laws to implementing regulations to business response that requires investment and further permissions can take time. Unfortunately, reversing a trend of deterioration cannot happen immediately. But that does not mean that nothing should be done. On the contrary, that is the time to take action to set new and better foundations for the future.
Does the OECD take into account any particular characteristics of the Greek economy and market? What are the benefits and challenges of such a small market?
The OECD takes into account the specific features of the Greek economy and its markets in considering its recommendations, including small size. Small size may create challenges in some respects, but small can be beautiful, because a few areas of economic success can have a big effect.
