IMF on Greece’s reform priorities, progress

In an IMF Survey on the Eurozone, it is argued: “growth in 2015 accelerated or stayed steady across the four major euro area economies. Performance across the rest of the euro area varied more widely, with Ireland expanding by nearly 8 percent, while Greece lapsed back into recession. In nearly all countries, domestic demand was the main driver of growth. Despite the fastest expansion since 2012, overall euro area growth remained relatively subdued, especially when compared to the recoveries in the U.K. and U.S.”

Referring to structural reform plans and progress in Greece, the IMF Survey noted the following:

Reform priorities: Preserve and further expand labour market flexibility; foster competition in service and product markets; improve the business environment.

Recent progress: The 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.

Concrete measures to liberalize a few restricted professions (e.g., engineers), reduction of administrative burdens, and simplification of the licensing system are under discussion.

An independent review of labor market frameworks is underway with recommendations expected in September 2016.

IMF staff recommendations: Preserve recent labor market reforms, including on the minimum wages, which on a GDP per capita basis, is at the top end of the EU countries. Keep the subminimum wage as youth unemployment is high. Adopt legislative changes to align framework on collective dismissals and industrial actions with EU best practices.

Continue opening up regulated professions, giving priority to macro-critical professions (engineers, lawyers and stevedores); Implement pending OECD recommendations to reduce barriers to competition and expand the work to additional sectors (wholesale trade, construction, e-commerce, manufacturing); Continue to reduce administrative burdens.

Continue overhauling the licensing system in line with international best practice targeting food and beverage as well as tourism sectors.