OECD chief says broad reforms are long overdue in Greece

Angel Gurria focuses on shortcomings in pension system, education, labor market

OECD Secretary-General Angel Gurria unveiling the organization’s latest report on Greece in Athens last week, with Economy Minister Giorgos Alogoskoufis. ‘It is time for reforms in... administration, the social insurance system, the labor market and competition in the product markets,’ Gurria told Kathimerini.

Greece may be proud of its economic performance in recent years but must not rest on its laurels if it is to maintain its prosperity in future, according to Organization for Economic Cooperation and Development (OECD) Secretary-General Angel Gurria.

“The growth rate in the last decade was one of the highest among the OECD countries... (But) now that economic circumstances are favorable, it is time for reforms to proceed in sectors such as public administration, the social insurance system, the labor market and competition in the product markets. Greece also needs to continue efforts to rehabilitate public finances and improve its educational system,” he said in an article specially written for Kathimerini.

Gurria notes that the Balkans is one of the fastest-growing regions in the world and this is one of the reasons for Greece’s fast growth, particularly in banking, shipping and trade.

Greece can gain from the experience of other OECD members in a number of fields.

“Tertiary education in Greece has for many years had one of the lowest degrees of autonomy and flexibility among the OECD countries. The percentage of degree holders in Greece is (also) among the lowest in the OECD, while the rate of students who abandon their studies is one of the highest and the duration of studies among the longest.”

Despite an impressive improvement in public finances in the last two years, public debt remains high and more has to be done in the way of conserving resources, “as, for instance, by making public enterprises and public services more efficient,” Gurria argues.

“Securing fiscal stability requires, above all, a radical reform of the social insurance system. In this domain, Greece has lagged far behind most OECD countries... public opinion, according to research, appears to be unaware of the seriousness of the problems.”

Without reform, Gurria projects, pensions will absorb more than 20 percent of GDP by 2050, one of the highest rates in the OECD, leaving inadequate resources for other social services.

“Most OECD countries now link pensions with incomes throughout the duration of working life, rather than just at the end of it. An increasing number of countries automatically adjust their social insurance systems to the rising life expectancy.”

There has been significant progress which has made product markets more competitive. This has undoubtedly been one of the main reasons for the strong improvement in productivity in the last decade. However, the regulatory framework in force impedes competition, relative to what applies internationally, and lags greatly compared to the best practices of countries such as Australia, the US and the UK. Action is urgently needed to improve competition among professional groups, in the retail trade and in utility sectors such as electricity, telecommunications and transport.

Gurria argues that reforms are also needed in the labor market to facilitate the entry of young people and women in the 30s and 40s age groups. “Unemployment in Greece has fallen but remains comparatively high... the way in which minimum wages are set, in conjunction with strict legislation to protect employment, makes it particularly difficult to find jobs in the case of those entering the labor market for the first time, or re-entering it after a period of absence. The high number of young people who are not in employment, but also do not study or are not in training, is particularly worrying.”