Greek economy to reap substantial benefits from the opening up of closed-shop domains

It is no surprise that Greece’s about 70 closed-shop professions cost the country in high prices and unemployment. For instance, according to a study by the Foundation for Economic and Industrial Research (IOBE), the abolition of barriers to entry to the transport sector would mean a 2.5 percent fall in freight rates and a rise in employment of up to 4 percent annually. The overall result on the economy would be a 1.5 billion increase in the country’s gross domestic product (GDP) and a 0.3 percent drop in the country’s inflation rate. To be sure, it is not just closed-shop jobs that create impediments to growth. A European Commission study estimates that a 25 percent reduction in public administrative costs – better known as red tape – would boost Greece’s productivity by 2.9 percent. The study estimates that the cost of bureaucracy in Greece amounts to 6.8 percent of GDP, or 16 billion, annually. In other words, about half of the surplus value created by businesses is swallowed by red tape. The study, and another recent one by the Center for Economic Planning and Research (KEPE), are being considered by the government, which is looking into ways of speeding up the procedures for a smooth transition to a liberalization of services in the EU by 2010, as envisaged by a draft directive now under discussion. Other studies have estimated that that the direct results from the opening up of closed-shop professions will bring about a 0.3 percent rise in consumption, a 0.4 percent rise in real wages, a 0.9 percent increase in the return on capital, and a rise in employment by 0.2 percent. In the services sector in particular, employment is projected to rise by 0.5 percent and value-added tax by 1.1 percent, which corresponds to an increase of 0.3 billion in the country’s GDP. The approximately 70 closed-shop jobs in Greece include the professions of of attorney, notary public, engineers, architects, pharmacists and accountants. According to IOBE, the strongest impact from a liberalization would be in transport and services such as those offered by notary publics. Transport: The number of firms active in the sector is seen as rising by 1-2 percent annually, employment by 2-4 percent annually, productivity by 1.5-2.5 percent annually, while the quality of services is estimated to improve and the operating costs of enterprises to rise by 2.5-4.5 percent annually. Social costs are projected to drop substantially, due to the abolition of barriers to entry and the resulting abolition of the informal surplus value carried by licenses. Services: The effects are projected to be significant, due, on the one hand, to the small size of the vast majority of Greek enterprises and their virtual absence from European markets, except in tourism, due to their low productivity and competitiveness. The requirements of Greek firms for tax and chartered accountants and auditors are not expected to change in the foreseeable future. The changes may attract a larger number of qualified Cypriot nationals who also have the advantage of the language. The profession of notary public is feared to feel the strongest repercussions from liberalization, in terms of a deterioration in the quality of services and in remunerations. Construction – engineering: Competition is projected to intensify only in the domain of public works and large private works.

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