The debate on the Greek economy’s restoration came to the fore once again as it now seems inevitable that labour costs will be reduced through eliminating the 14^th salary in the private sector and reducing the minimum wage.

By Nikos Chrysoloras

Indeed, the minimum wage in Greece is the fifth highest in Europe, lagging behind much richer countries such as Luxembourg, France, Germany and Britain. However, is this really the key factor in the Greek economy’s lack of competitiveness? The views of foreign as well as local investors, as recorded in the World Economic Forum’s Global Competitiveness Report lead in fact to other conclusions (http://reports.welforum.org/global-competitiveness-2011-2012/).

In particular, factors that lead to Greece’s lack of competitiveness, leading to its lowest score in the world, are based on the government’s (present and previous) failure in reducing the deficit and restoring the fiscal balance. As a result, no one wants to do business in Greece and the failures of the country should not be blamed on high wage costs.

The second factor in which Greece comes out with a low score (96^th out of 142 countries) are the “institutions”. Excessive legislation, lack of justice in the legal system, corruption, bribes and bureaucracy make it impossible for a serious organization to contemplate entering the Greek market.

Greece is in 126^th place regarding its “flexible labour market”. And that’s, in truth, logical. Labour laws in Greece are extremely rigid where a worker with 20 years of experience is well paid even if he/she literally does nothing whilst the costs of dismissing an employee are very expensive. In essence, hiring someone is almost akin to a marriage. This results in companies not having the resources to neither attract nor hire new and talented employees with good wages nor hire 40 or 50 year olds because collective agreements stipulate that these employees cost a fortune.

Another factor that detracts from Greece’s attractiveness in investing in Greece is sub standard access to financing. Naturally, this issue cannot be resolved as long as the Greek state and banks are excluded from the global capital markets.

Taxation legislation follows the list of barriers to doing business in Greece due to its complexity. N.B. Regular tax rates (excluding one off contributions) which the New Democracy party has made a huge fuss over are however, placed far behind other problems cited by prospective investors as well as World Economic Forum analysts. The problem lies inherently in the labyrinth of taxation laws.

All of the above does not point to the cost of wages as the problem. Even with salaries that could be comparable to a country like India, Greece will not gain a competitive edge as a) financial stability has not been restored, b) government and business access to international markets has not been restored, c) essential problems such as bureaucracy, excessive legislation and delays in the justice system are not being combatted head on, and d) corruption and opacity are not being fought. These are the major problems which interested investors brought up and the answers behind our lost competitiveness. Furthermore, they are a reality of our everyday life here in Greece.