ECONOMY

Greece’s low-performing and inefficient public administration

Greek public administration could offer citizens the same performance in terms of services and the general economic environment at a cost to the budget 27 percent lower than today’s, and the efficiency of the Greek government is only 65 percent of what it could be with the money it spends, according to a study by the European Central Bank (ECB) titled, «Public Sector Efficiency: An International Comparison.» The study, co-written by Antonio Afonso, Ludger Schuknecht and Vito Tanzi, ranks Greece last among 23 developed countries in terms of total public sector performance. The main causes of this are seen as corruption, bureaucracy, shadow economy and inflation. In the top four positions are Luxembourg, Japan, the Netherlands and Austria. ‘Miracle’ Things are slightly different when the efficiency of public sector spending is measured (the result in relation to the resources spent): Greece is in a relatively good position here, slightly above midscale. However, this is due to just one factor, and something of a «miracle.» Greek public education services are rated exceptional in relation to the money spent on them. While Greece’s average grade is 1.06, its education grade is 2.25 (which is almost a statistical anomaly, as no other country of the 23 is graded that high in any of the seven indices included in the survey). This high grade counterbalances the poor grades in administration (0.79, due to corruption and bureaucracy), in infrastructure (0.87, due to poor quality in transport and communications), in stability (0.61, due to inflation and a fluctuating growth rate) and in economic performance (0.78). Best graded in terms of total efficiency are Japan, the USA, Australia and Luxembourg. The seven indices measuring performance are administration (its criteria being corruption, bureaucracy, quality of the judiciary and the shadow economy), education (secondary school enrollment, educational achievement), health (average life expectancy, infant mortality), public infrastructure (quality of services in transport and communications), income distribution (percentage of total income earned by the poorest 40 percent of population), stability (fluctuation of growth rate, inflation) and economic performance (GDP per head, growth rate and unemployment). The general conclusion of the study is that differences in public sector efficiency are much more pronounced than differences in public sector performance across the 23 countries. Countries with «small government» (absorbing less than 40 percent of GDP) appear to have significantly higher efficiency that those with «big government» (spending more than 50 percent of GDP) or even those of «medium» size (spending between 40 and 50 percent of GDP). European Union member states, which generally have large public sectors, use about 27 percent more money than non-EU countries whose public sectors produce roughly similar results. Indeed, on this count they lag behind both the USA and other members of the Organization for Economic Cooperation and Development (OECD). The study is a working paper, not an ECB policy document, and the authors caution that the results are simply indicative and have to be interpreted carefully, as there are considerable difficulties in the comparability of data and in the calculation of the impact of economic and social outcomes of public expenditure.