CORFU LETTER:A condition of the bailout for Greece is the deregulation of 'closed' professions – with predictably heated consequences
‘HAPPY NEW fear” proclaims a graffito in Corfu town. Another reads: “Do some good – kill a cop.” But, despite the recent renewal of terrorist activity in Greece, those who have most to fear in the coming months are not the security forces but the members of “closed” professions – those self-regulating, self-contained occupations ranging from lawyers and accountants to taxi drivers and electricians.
A condition of the IMF-EU bailout for Greece is the deregulation of these professions – reckoned to number more than 70 – and opening them up to competition, since their existence violates the principle of free movement of goods and services. Legislation was prepared by government before Christmas, but was postponed due to apprehension that the backlash from the vested interests would add to the already unstable political and social situation.
Pharmacists are among the most protected professions. You cannot open a pharmacy in Greece unless you have attended a Greek college; a licence to practice changes hands at about €300,000; pharmacists are guaranteed a 35 per cent profit margin on medicines, and last year the government’s reduction in prices of medications caused a significant drop in that profit. With a breakdown in talks between the health minister and the pharmacists’ union, a series of nationwide strikes has begun. A closed shop indeed.
Lawyers operate a particularly Byzantine form of protection, whereby bar associations are limited to geographical locations, and an attorney in one region may be prohibited from practicing in another.
The operation of closed professions, which include architects, civil engineers, hairdressers, opticians, real estate agents, speech therapists and bakers, has been described by IOBE (the government’s think tank foundation for economic and industrial research) as “the last Soviet-style economy in Europe”. The foundation calculates that opening up to competition and abolishing the minimum fees chargeable would increase GDP by 10 per cent.
Massive disturbances by truckers during last year were faced down by the government, and emergency legislation put an end to a situation where hardly any new licences were created in the past 30 years. It also means young truckers, who may have paid as much as €300,000 to set up in business, are left with an almost worthless piece of paper and a debt they can never hope to repay. For customers, however, it resolves a situation where it may be cheaper to transport goods from Athens to Shanghai than from Athens to Thessaloniki. The truckers’ protest was perhaps the most visible type of reaction to the plans for deregulation. Less overt are threats by lawyers to shut down the courts, and by accountants to block tax revenue.
It could be said that George Papandreou’s government has little option but to obey the IMF-EU diktat. But its determination to do so demonstrates real political courage and a severe break with tradition. The origins of protectionism lie in the creation of a catch-all society led by Papandreou’s father – a previous socialist prime minister – in the 1970s in the wake of a series of right-wing administrations. Government bought political loyalty in exchange for privilege. This explains why the closed professions are not limited to white collar workers. It also explains why the accusation of cronyism can be levelled at the social and political system. The practice of jobs for the boys permeates not only the closed professions but, more seriously, the public service. To open up the professions is one aspect of the massive upheaval Papandreou is attempting. To dissolve the mentality of clientelism is much more challenging.
Will deregulation and the eradication of cronyism cut any ice with young graduates who cannot break into the job market? Some temporary lecturers here at the Ionian University work for less than €700 a month, with the national minimum wage now set at €590. Do they have any future in their own country? Deputy prime minister Theodoros Pangalos, who is responsible for co-ordinating the reforms of the key ministries, acknowledges that Greece’s “original sin” can be traced back to the founding of the Greek state in the 1830s. In a traditionally rural society, peasants became the “clients” of landowners and local government officials. Just as successive governments in the 1970s and ’80s “bought” votes through protectionism, so these historical “patrons” bought obedience and adherence from the land.
So Greek society is permeated by the idea of dependence.
But Pangalos doesn’t stop there: he accuses the hard core politicians who dominate the EU as “lacking inspirational leadership”. It means citizens are disillusioned because politicians seem to have no vision.
This may be an attempt on Pangalos’ part to distract attention from Greek deficiencies, but it is also a claim by an otherwise discredited peripheral country to have an imagination that transcends the pedestrian and mundane mindset of the average Eurocrat.