World Economy

Greece Should Incur Greater Flexibility

Greece Should Incur Greater FlexibilityGreece Should Incur Greater Flexibility

The International Monetary Fund has called on the Greek government to expand labor market flexibility, foster competition in service and product markets and improve the business environment in its eurozone economic health check report.

In its report the IMF points out that Greek authorities have largely completed OECD recommendations aimed at enhancing competition in key sectors (e.g., sales period, trucks, tourist rentals, milk, bakeries, pharmacies, beverages and petroleum products) and are proceeding with the opening up of some restricted professions (notaries, bailiffs) and liberalization of the market for tourist rentals, Tovima quoted the IMF report as saying.

As such, the fund notes that recent labor market reforms must be preserved, including on the minimum wages, which on a GDP per capita basis, is at the top end of the EU countries. The fund also maintains that the ‘subminimum wage’ must be kept, as youth unemployment in Greece remains high.

The IMF added that legislative changes must be adopted in order to align framework on collective dismissals and industrial actions with EU best practices.

Furthermore, Greece is urged to continue opening up regulated professions, giving priority to macro-critical professions (such as engineers, lawyers and stevedores), implement pending OECD recommendations in additional sectors (such as wholesale trade, construction, e-commerce and manufacturing) and continue to reduce administrative burdens.

The fund also pushed Greek authorities to take action to manage the high rate of nonperforming loans that are burdening Greek banks. Cyprus, Ireland, Italy and Portugal share similar problems to Greece with NPLs, the fund said.

A European official in Brussels commented on Friday that Greece will not be on the agenda of talks for the second eurogroup in a row next Monday. The official indicated that authorities have not yet fallen behind in the implementation of reforms but emphasized that “there will be challenges over the summer.”

Separately on Friday, the European Commission decided to suspend the disbursement of €13.5 million ($14.92 million) in structural funding for construction projects in Greece as it awaits adequate reassurances from Athens that cartels are not operating in the sector.