ECONOMY

Greece lags in innovation performance, report finds

Greece has made at least nominal progress in four of five priority policy areas identified last year as hampering competitiveness, but still lags significantly in so-called «innovation indicators,» a study by the Organization for Economic Cooperation and Development (OECD) has found. The study, «Economic Policy Reforms: Going for Growth», is part of an annual series, the third of its kind, seeking to explain why certain OECD member states’ economies (notably Japan and continental Europe) have fallen behind others and to make policy recommendations. Last year’s study had identified «policy priorities» for each OECD member state to improve its competitive position. The verdict on Greece was that «despite brisk growth in recent years, a large gap in GDP per capita remains vis-a-vis the European Union. Labor market regulations are rigid and barriers to product market competition are high.» The five policy priorities outlined by the OECD study were the following: – Ease employment protection legislation. OECD recommended bringing high severance costs for white-collar employees down and ending discrimination against part-time unemployment. So far, the government has passed a law abolishing permanent contracts for new employees in state companies; implementation is at an early stage and no significant push has been made to promote part-time employment. – Ease product market regulation through the deregulation of key sectors and the strengthening of sectoral regulators. In this field, the government has taken steps to facilitate the opening up of the energy sector and has boosted the powers of the Competition Commission. – Reduce the administrative burden for start-ups. Registration and licensing procedures for new businesses have been further simplified. The great obstacle remains banks’ reluctance to finance new businesses. – Further simplify the tax system. Corporate tax rates are being reduced and a reform of personal income tax will begin next year. – Reduce incentives for early retirement. Not only has the government failed to take any action but has encouraged former state-controlled banks and utilities to implement costly early retirement packages. The OECD report finds Greece’s innovation performance is weak and makes the following recommendations: – Improve educational achievements in mathematics and science by introducing practical science subjects in compulsory school curricula and retrain teachers. – Reduce barriers to entrepreneurship. – Strengthen industry-science (and industry-university) linkages. – Reform public research institutes to make them attractive to private partners; introduce effective evaluation.