Small stores up against the wall

For Stella Xenou, it’s a simple problem. If her lingerie shop on Athens’s trendy Syntagma Square is closed, her customers will go somewhere else. «I cannot change my opening hours as I cannot afford to hire an employee,” said Xenou, 45, who inherited the one-woman operation from her mother-in-law. Xenou’s complaints are echoed by small-business owners across Greece, where the government has introduced a series of labor reforms that have cheered investors and angered trade unions. The government says flexible working hours, cheaper overtime pay and longer trading hours will cut double-digit unemployment and boost businesses’ ability to compete, especially against new European Union members with low cost labor. Small and medium-sized businesses say the reforms will force family-run stores out of business. Trade unions say workers’ incomes could also be hit. «The new labor law favors big businesses,» Xenou said. Workers have taken their opposition to the streets with a one-day strike last month, which caused transport chaos. Unions have warned of more action as the government prepares a national reform plan, to be announced in October. «Nearly all the reforms are hostile to workers,» said Christos Polyzogopoulos, head of the private sector’s umbrella union GSEE. Greece’s struggle to push through structural reforms mirrors similar changes in other European countries. France and Italy are under pressure to copy Britain, Sweden and the Netherlands, which reformed their economies and labor markets in the 1980s and 1990s and now boast higher employment rates. High unemployment in the eurozone can partly be blamed on rigid labor market laws that make it difficult to fire workers or cut salaries when demand is low. But reform-minded governments are finding it hard to push changes through, especially at a time when global competition is forcing many companies to move jobs to low-wage countries in Eastern Europe and Asia. Many economists say the Greek reforms are essential. «These measures are expected to improve cost competitiveness and lift the impediments in increasing employment,» Greece’s Alpha Bank wrote in a research note. It said longer trading hours could also boost tourism, which accounts for around 18 percent of gross domestic product. Investors have been cheered by the reform plans, pushing the Athens benchmark stock index up more than 18 percent this year. The New Democracy government hopes the longer hours, which took effect at the end of August, will crank up the tills, boost competitiveness and create jobs. Until now, shops closed at 5 p.m. on Mondays and Wednesdays, with longer trading hours during the rest of the week. Under the new law, shops now stay open until 9 p.m. on weekdays. The reforms also allow employers to ask staff to work up to 10 hours a day during busy periods, rather than the normal eight, in return for working fewer hours on another day. Workers can refuse the request. Overtime pay will now be calculated at 125 percent of the normal hourly rate instead of the current 150 percent. Economists say the reforms may initially hit short-term growth as greater job insecurity will weigh on consumer sentiment. Trade unions say the longer hours could push some small businesses, like Xenou’s lingerie shop, to the wall. «Deregulation of shop opening hours is usually at the expense of smaller businesses, reducing their profitability and leading to job losses without benefiting consumers,» said Nikos Skorinis, secretary-general of the General Confederation of Merchants and Small Enterprises of Greece (GSEVEE). Prime Minister Costas Karamanlis’s party came to power last year vowing to tackle unemployment, which stood at 10.4 percent in the first quarter, and lower the budget deficit. Last year, the deficit stood at 6.1 percent and EU finance ministers have given Athens a 2006 deadline to bring it below the EU ceiling of 3 percent. The Bank of Greece said earlier this year that Greece had no choice but to proceed with structural reforms to improve its competitiveness and public finances.

Subscribe to our Newsletters

Enter your information below to receive our weekly newsletters with the latest insights, opinion pieces and current events straight to your inbox.

By signing up you are agreeing to our Terms of Service and Privacy Policy.