Structural Reforms in Greece, 2010-2018
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STRUCTURAL REFORMS IN GREECE, 2010-2018 Final Report Centre of Planning and Economic Research (KEPE) Athens, Greece March 2019 This Final Report has been prepared for the European Commission (DG GROW) implementing the framework Service Contract entitled “Studies in the Area of European Competitiveness” (ENTR/300/PP/2013/FC-WIFO) and coordinated by the Austrian Institute for Economic Research (WIFO coordinator: Andreas Reinstaller). The study has been coordinated by Ersi Athanassiou, Agapoula Kotsi and Elisavet Nitsi. Written by Ersi Athanassiou, Agapoula Kotsi, Elisavet Nitsi, Ioannis Cholezas, Roxani Karagiannis, Aristotelis Koutroulis, Vassilis Lychnaras, Sotiris Papaioannou, Theodoros Tsekeris (Centre of Planning and Economic Research-KEPE) 2019 EUROPEAN COMMISSION Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs Directorate A — Competitiveness and European Semester Unit A.2 — European Semester and Member States’ Competitiveness Contact: Tomas Brännström E-mail: [email protected] European Commission B-1049 Brussels 2 EUROPEAN COMMISSION Structural reforms in Greece, 2010-2018 Final Report Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs 2019 Europe Direct is a service to help you find answers to your questions about the European Union. Freephone number (*): 00 800 6 7 8 9 10 11 (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). LEGAL NOTICE This document has been prepared for the European Commission however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. More information on the European Union is available on the Internet (http://www.europa.eu). Luxembourg: Publications Office of the European Union, 2019 ISBN 978-92-79-90373-1 doi: 10.2873/100377 © European Union, 2019 Reproduction is authorised provided the source is acknowledged. 4 Structural Reforms in Greece, 2010-2018 CONTENTS ABSTRACT 7 EXECUTIVE SUMMARY 9 1. INTRODUCTION 13 1.1 Background 13 1.2 Objectives and scope 13 1.3 Methodology and data sources 14 1.4 Structure of the study 17 2. THE PRE-PROGRAMME PERIOD 19 2.1 Introduction 19 2.2 The Greek politico-economic environment during 2000s 20 2.2.1 High economic growth rates and rising incomes 20 2.2.2 Positive economic sentiment 22 2.2.3 Constitutionally strong governments and a pro-Europe public opinion 22 2.3 Institutional deficiencies and inertia 23 2.4 Explaining the Greek paradox 23 2.5 Concluding remarks 26 3. BUSINESS ENTRY REFORMS 27 3.1 Introduction 27 3.2 Screening and qualitative assessment of regulatory changes 28 3.2.1 Procedures and costs for establishing a new business in Greece prior to the reforms 28 3.2.2 The simplification of the procedures for establishing new businesses 32 3.2.3 The introduction of the Private Company 34 3.2.4 The reduction of costs/capital requirements for establishing new businesses 37 3.2.5 Electronic start-up notification 40 3.2.6 Assessment of the reforms on the basis of business environment indicators 41 3.2.7 Assessment of the reforms on the basis of business opinion surveys 45 3.2.8 Discussion and policy implications incorporating information from interviews 47 3.3 Quantitative analysis of the impact of the reforms 49 3.3.1 Developments in business entries and exits 49 3.3.2 Empirical analysis 57 3.4 Concluding remarks 66 4. THE LIBERALISATION OF PROFESSIONS AND ECONOMIC ACTIVITIES 68 4.1 Introduction 68 4.2 Methodology and data 70 4.3 Screening of the reforms 70 4.4 Qualitative assessment of the impact of the reforms 78 4.5 Quantitative analysis of the impact of the reforms 80 4.5.1 Regulation indices of professions/economic activities 80 4.5.2 New registrations and exits from the database of the Ministry of Finance 85 4.5.3 Empirical analysis 86 4.6 Concluding remarks 91 5 Structural Reforms in Greece, 2010-2018 4.7 Assessing the reform of the system of professional qualifications recognition in Greece 92 4.7.1 Introduction 92 4.7.2 Assessment of the impact of the reform 95 4.7.3 Case study: The effect of the reform on TEE new members 100 4.7.4 The effect of the reform on prices 103 4.7.5 Concluding remarks on the reform in Greece 105 5. ENERGY MARKET REFORMS AND PRIVATISATIONS 107 5.1 Introduction 107 5.2 Methodology and data 108 5.3 Market liberalisation and increase of competition 108 5.3.1 Reforms of the Greek electricity market 109 5.3.2 Competition in the Greek electricity market – Assessment of the impacts of the reforms 113 5.3.3 Reform of the renewable energy support schemes 116 5.4 Privatisation procedures 119 5.5 Summary and conclusions 123 6. PRIVATISATIONS IN THE TRANSPORT SECTOR 126 6.1 Introduction 126 6.2 Objectives and tasks 126 6.3 Methodology and data sources 129 6.4 Reforms to liberalise transport markets and enhance competition 130 6.5 Empirical analysis of preliminary impacts of transport privatisations 137 6.6 Conclusions, policy implications and recommendations 142 7. UTILISATION OF PUBLIC REAL ESTATE ASSETS 144 7.1 Introduction 144 7.2 Overview of the real estate assets privatisation programmes 145 7.3 Assessment – expected results 168 7.3.1 Revenues from real estate assets privatisation programmes 168 7.3.2 Assessment of the privatisation process 169 7.3.3 Assessment of the expected impacts 172 7.3.4 Policy implications 173 8. PRODUCT MARKET LIBERALISATION OF UPSTREAM SECTORS 175 8.1 Introduction 175 8.2 Theoretical framework 177 8.3 Empirical literature 178 8.4 Econometric specification 179 8.5 Data and construction of variables 180 8.5.1 TFP estimates 180 8.5.2 Measures of regulation 182 8.6 Econometric estimates 183 8.7 Conclusions 189 9. CONCLUSIONS AND POLICY IMPLICATIONS 190 REFERENCES 200 6 Structural Reforms in Greece, 2010-2018 ABSTRACT Since 2010 Greece undertook a wide range of structural reforms to deal with its fiscal challenges, loss of competitiveness and weaknesses in productivity and efficiency. The present study aims to assess reforms pursued in the framework of the requirements of the first and second economic adjustment programmes, focusing on eight major reform categories and issues: the facilitation of new business entry, the liberalisation of professions/economic activities, energy market reforms and privatisations, privatisations in the transport sector, the utilisation of public real estate assets and product market liberalisation of upstream sectors. For each of these issues, the study provides a more or less self-contained analysis, based on detailed and, in many cases, non-publicly available data and information, and using both qualitative and quantitative methodologies adapted to the nature of the issues examined. The screening and assessment of the reforms indicated considerable progress in the direction of facilitation of new business entry and improvement of competition in the transport and energy sectors and professions/economic activities of the service sector. Progress has also been recorded with respect to privatisation programmes in transport, energy and the utilisation of real estate assets. Privatisation processes are still in progress, and initial indications of the impacts from recently completed privatisations are positive. Given that several of the reforms examined in the study have been completed recently or are still ongoing, the economic benefits of the reforms are expected to materialise progressively in the future, along with the improvement of economic conditions in the country, the development of new business activities and the generation of new investments linked to the reforms. 7 Structural Reforms in Greece, 2010-2018 [This page is intentionally left blank] 8 Structural Reforms in Greece, 2010-2018 EXECUTIVE SUMMARY Since 2010 Greece undertook a lengthy list of structural reforms to deal with its fiscal challenges, loss of competitiveness and weaknesses in productivity and efficiency. In this context, the present study evaluates the implementation of structural reforms agreed in the first and second adjustment programmes and aimed at the enhancement of competition in markets, the improvement of the business environment and privatisations. The study focuses on eight major reform categories and issues affecting key sectors of economic activity in Greece or inducing significant changes in the business environment and the operation of markets. The methodology adopted includes the screening of the relevant reforms, the analysis of their implementation and economic impact and the evaluation of their progress with respect to original goals. The analysis is based on detailed and, in many cases, non- publicly available data and information from a wide range of official national sources, and employs both qualitative and quantitative methodologies. In each case, the methodologies used are adapted to the nature of the issues examined, and selected so as to overcome as far as possible the objective difficulties relating to the timing of the reforms, the effects of the crisis and data availability. In the case of very recent reforms or reforms that are still largely in progress, quantitative information is utilised to the extent possible, mainly for descriptive and qualitative analysis. Moreover, existing impact assessments or ex-post evaluations of the reforms are taken into account. Through this analysis, the study reaches conclusions and policy implications, including the identification of remaining reform needs. For each of the individual reform categories examined, the study provides a more or less self-contained analysis. Chapter two discusses the pre-programme period, describing the debate in domestic political circles, as well as among stakeholders, about economic reforms during the 2000s. The focus of the discussion is placed on reforms related to the functioning of product and services markets, state-owned enterprises and the general business environment.