ECONOMY

The World Bank gives Greece low marks for business conditions and labor flexibility

Greece has the least-friendly conditions for entrepreneurial activity among the 30 members of the Organization for Economic Cooperation and Development (OECD) and ranks a low 80th among 155 countries, according to the World Bank’s report, «Doing Business 2006: Creating Jobs,» which was released yesterday. The report makes a direct link between an improvement in business conditions, such as ease in setting up a new business, lowering taxation and limiting red tape, and the potential for creating new jobs. However, true to the economic orthodoxy of the so-called «Washington triangle» which it forms with the International Monetary Fund and the US Treasury, it does not examine whether the jobs created with the reforms are less secure and lower paid than those they replace. On the factor of easiness to hire and fire, Greece is ranked as one of the 10 worst among the 155 nations, together with Portugal, Congo, Mali, Romania, Spain, Sierra Leone, Togo, Niger and Burkina Faso. At the other end of the spectrum are New Zealand, the USA, Australia, the UK, Hong Kong, Switzerland and Denmark. In Greece, those dismissed are entitled to receive up to 17 monthly salaries as severance pay. In Switzerland it is three months, in Australia, Georgia, Iraq and Nigeria one month, and in the US and New Zealand none. Nevertheless, the report acknowledges that Greece is taking positive steps toward reforms that will make the labor market more flexible. The World Bank’s general recommendations include a higher retirement age in those countries with an aging population, its equalization for men and women, the introduction of apprenticeship contracts for young employees and at a lower pay, and the replacement of severance pay with unemployment benefits (in the form of unemployment insurance deducted from the salary) for limited periods. The report refers to a study carried out for Portugal (one of the countries with the most restrictions in its labor market), according to which the creation of new jobs per quarter is 59 percent compared with the US and in proportion to the population. «A Portuguese business is 40 percent less likely to make new hirings than a US one during a period of economic recovery,» says the report. This means that some people are left without a job for longer periods in countries with inflexible labor markets, it goes on to comment without referring to the possibility that flexible firing possibilities may actually intensify the downturn by raising unemployment and reducing effective demand. The report praises Afghanistan for reducing the number of documents needed for the setting up of a business from 28 last year to just one this year, and the number of days from 90 to seven. Thus a country which has no reliable electricity supply or paved roads figures at the top of the world table in terms of the easiness of setting up a business. Overall, the report notes that the greatest progress in this respect is being registered by the countries of Eastern Europe, which are trying to lure foreign investors and encourage local business. In contrast, the least progress is noted in African and Middle Eastern countries.