CNBC in a yesterdays article says
From the German press to Stephen Colbert’s hit show on Comedy Central, Greece has been the butt of jokes throughout the financial crisis. The implication is always the same — that the Greek people are lazy and don’t like to work. Greek Protests AFP | Getty Images Greek Red Cross workers demonstrate in front of the Greek Parliament on Oct. 11, 2011. The stereotype makes Michalis Chrysochoidis, Greece’s minister of development and competitiveness, bristle. “There is a myth that the Greeks don’t work many hours. This is a big lie,” Chrysochoidis said. “The reality is that the Greek people work more than any other country in the European Union.” He’s right: Greek workers put in longer hours than any other Europeans or Americans, according to a new report by McKinsey. (Click here to read the full report) The consulting firm’s 60-page brief, “Greece 10 Years Ahead,” examines what makes the Greek economy so uncompetitive relative to its neighbors and offers advice on what to do about it. Within the McKinsey report, however, there are two additional data points that explain why more hours worked by Greeks haven’t led to a growing economy. First, Greece has the lowest labor participation rate in all of Europe — just 66 percent of the employable population have jobs, compared with 73 percent in the European Union and 70 percent in Southern Europe. Second, not only are fewer Greeks working, those who do are far less productive: A Greek worker’s productivity comes in at $35 an hour, compared with $49 an hour in the EU, $55 an hour in Central Europe, and $58 and hour in the U.S. Michelle Caruso-Cabrera CNBC Anchor Put it all together and it led McKinsey to one inescapable conclusion: “A relatively smaller percentage of Greeks work longer and harder hours than their European peers to support a generally unproductive system.” Therein lies the problem—the Greek economy is uncompetitive, and until that changes it will be unable to grow at a sufficient rate to generate enough tax revenues to pay its bills. Having combed through the databases of the International Monetary Fund [cnbc explains] , Eurostat, Global Insights, and the Conference Board, McKinsey paints a vivid picture of why the Greek economy is so uncompetitive — primarily, its extensive bureaucracy and rigid labor rules. Both are strangling Greece’s ability to compete in a global economy, whether in the shipping industry, tourism, or even exporting its high-quality olive oil and famous yogurt. Chrysochoidis, the minister of competiveness, agrees with this assessment. “The Greek economy was not competitive during the last decades,” he said, adding emphatically, “We are going to create a new Greece.” The first step, Chrysochoidis said, is to “reform the business environment.” Chrysochoidis used to be the minister of public order, and is credited with shutting down two Greek terrorist organizations. His new task may be even more daunting — eliminating the mountains of bureaucratic red tape that hinder entrepreneurship and business investment. Greek Protests AFP | Getty Images Greeks chant slogans at central Athens Syntagma square in front of the Greek Parliament during a demonstration on Oct. 15, 2011. He’s taken some key first steps. Beginning in April of this year, his ministry established a new streamlined electronic registry system for new businesses called One-Stop Service (OSS). “A new firm can now be established through a single procedure, in one day, with significantly lower costs,” according to a ministry statement. Before the OSS, it would take at least 38 days to register a limited liability corporation in the country. Now, it takes as little as 38 minutes, according to the ministry. The cost of registering a new business has dropped by more than two thirds, as well — to 910 euros ($1,243) from 2,377 euros ($3,248). Chrysochoidis adds that the ministry has identified 72 additional obstacles to entrepreneurship and has introduced new legislation that will eliminate them. Among those obstacles are the role the government plays in many sectors of the economy — either through outright ownership of assets, such as a utility; price controls; and high barriers to entry, such as strict limitations on the number of players in a profession, and/or difficult licensing requirements, according to the McKinsey report. Add to all that very tough labor restrictions on large enterprises. RELATED LINKS Current DateTime: 01:43:31 18 Oct 2011 LinksList Documentid: 44944438 * Greece Faces ‘Hellish Week’ * EU May Reach Bailout Pact * Greece Needs 100% Haircut: Analyst * Bigger Writedown Needed: Germany The result is that very few businesses have been able to get started or grow in size, and among those that do small family-owned businesses still dominate — 30 percent of manufacturing employment in Greece is in firms with nine or fewer employees. In Italy, that number is 15 percent, while in Germany it’s just 5 percent. Without what economists call “economies of scale,” such as the advantages achieved when you have a large factory versus a small one, it is impossible to achieve higher levels of productivity. That means lower profitability and fewer jobs — something desperately needed in a country where unemployment is at 16 percent. It’s tourism industry is also beset by red tape, which has lead to fewer large-scale hotels and resorts being built. “Cumbersome licensing processes and a volatile tax framework discourages investments,” according to the McKinsey report. Hence Greece hasn’t been able to cater as effectively to modern demand patterns in tourism, such as integrated resorts, vacation homes, large ports for cruises, and marinas for yachting. That leads to an industry based on mass-market travelers rather than the affluent, and hence a loss in revenue: In Greece, tourists spend on average 146 euros ($200) a day, while in Turkey they spend 162 euros ($222) a day, and in it’s Italy 200 ($274) a day. McKinsey also takes aim at the power of unions in the country and the collective bargaining agreements struck over time. Greece, because of its location on one of the largest intercontinental routes, ought to be a good place for cargo port hubs. Yet the country is losing customers to Bulgaria, Turkey, and Romania, because they offer “better operational stability (e.g. fewer non-operating days due to strikes),” the report said. Perhaps the most difficult hurdle for Greece to overcome, at least politically, is the size of the public sector versus the private sector. “We cannot serve this huge public economy,” said Chrysochoidis. “The small private sector cannot serve the huge public sector.” That kind of talk, unheard of by a member of the government just six moths ago, will be welcome by the country’s leading business people. In June, Dimitri Papalexopoulos, the head of Titan Cement, one of the largest publicly traded companies in Greece, said the country needs to reduce the size of the public sector, and “take a hatchet to this bloated system that pervades all economic activity, cut it down, reduce regulatory burden, (and) cut red tape.” Greek Protests AFP | Getty Images Civil servants occupying the Greek Finance Ministry building wave Greek flags and shout anti-austerity slogans in Athens on Oct. 14, 2011. The size of the public sector isn’t known for certain. For the first time, the government took a census of government workers and estimated the number at 800,000, but not all municipalities provided data. The Athenian Chamber of Commerce puts the number at 1 million. Downsizing the public sector is going to be enormously difficult, because the mere notion violates a long-held social compact between the government and the Greek people. The Greek Constitution states that once you are an official government worker, you have a job for life. This rule is the result of a well-intentioned labor reform from early last century—at the time government workers were fired every time there was a change in the party in power. The government’s attempts to lay off a mere 30,000 workers out of 800,000 is already meeting stiff, and sometimes violent, resistance. Wednesday, a massive two-day strike will get under way, in which thousands of government workers and union members are scheduled to descend on Parliament to protest the layoffs, as well as a new law that would effectively eliminate the mimimum wage and reduce the influence of collective bargaining agreements. For the most part, the public sector has stopped functioning already: Garbage collectors have stopped collecting garbage; tax collectors have stopped collecting taxes; and the permitting office isn’t issuing permits. The city is set to run out of gasoline in a few days because workers are on strike. (These are known as “white strikes,” when employees go to the office but don’t actually do any work.) Greek Protests AFP | Getty Images Greek police officers stand on Oct. 17, 2011 in front of the Panathinaiko Stadium during a demonstration in Athens. The leader of one of the nation’s Communist parties refutes the notion that the government sector is too large. Alexis Tsipras, leader of the Syriza coalition for the radical left, says the government is just too inefficient. McKinsey agrees: The report found that northern European countries have even larger governments relative to their sizes—however, they’re far more efficient. In addition to contributing to a lack of efficiency, giving government workers a job for life has led to another tough economic consequence — Greece has the lowest employment turnover rate in Europe, the sign of a stagnant economy. It contributes directly to high levels of youth unemployment, which minister Chrysochoidis acknowledges: “Imagine that in Greece we have 45 percent of young people unemployed,” he said. “It’s a defeat for Greece because the economy could not employ and absorb those people.” © 2011 CNBC.com Topics:European Union | European Central Bank | IMF | Politics and Government | Greece | Italy | Germany | France | Britain | Economy (Global) PrintEmail * CNBC HIGHLIGHTS » More: Blogs | Quizzes | Slideshows | Special Reports | Video * Occupy protesting the banks * Occupy Wall Street * The bank used by Occupy Wall Street protesters is under scrutiny by federal banking regulators. * Corporate Understands? * Steve Jobs * Renaissance Man * Besides the world of computers, Steve Jobs left his mark in retail and architecture. * Apple’s Partners * Giant bicycle * Reinventing The Frame * How the adoption of carbon fiber transformed America’s high-end bike industry. * Complete Coverage * Laughing at Wall Street * It’s No Joke * Investor Chris Camillo says he can show how the average consumer with no previous financial education can outsmart Wall Street. * * House, Not Home * India’s richest man has yet to move into his extravagant 27-storey house completed last year, heightening gossip and raising questions. * IBM * Biggest Employers * Some of the world’s largest companies aren’t cutting jobs, in fact they are adding to their payrolls. Take a look. * Business Killers 66 Comments Total COMMENTS brayrobin | Oct 18, 2011 11:47 AM ET Because the rich Greeks who lie about their income don’t pay their correct amount of taxes and the government has not gone after them. Report Abuse ravinos | Oct 18, 2011 11:51 AM ET Finally, Michelle..you got Greece right. Report Abuse NewWorldPartyDotOrg | Oct 18, 2011 11:54 AM ET Tax collectors and lawyers went on strike today! You can assume that Greece is going to do a worse job of collecting taxes, not better, regardless of any new austerity laws. This means that their deficits will balloon even more. This will make a mockery of Troika’s conditions for bail out money. Eventually, voters of other European countries will pressure their politicians to end this madness, let Greece default and stop throwing away good money after bad. The Greek populace will force a default, regardless of what their parliament wants to do. If Greece defaults, Italy and Spain will want to default or get a haircut. Because their debts are growing everyday, they will need way more money than is estimated today. With all the strikes in Greece, it’s turning into a cesspool. Civil servants occupied the finance and labor ministry buildings. Railways, journalists, ferries, garbage collectors went on strike today. Teachers, doctors, taxi drivers, air traffic controllers, bank employees and the country’s two main unions will strike tomorrow. Report Abuse NewWorldPartyDotOrg | Oct 18, 2011 11:56 AM ET Last week was a head fake. Every part of a potential plan has a roadblock: Leverage the EFS – France loses AAA rating, which means EFSF cannot sell bonds. Therefore, can’t do this. Ackerman of DB said leveraging the EFSF is against the constitution and illegal. What about insuring 20% of the bonds? Would you buy Greek or Italian bonds, if they insured 20% of it? RBS said that ECB must shore up the system otherwise any plan is doomed – Trichet said that ECB has “exhausted its role as lender of last resort” Sell Eurobonds – Germany said no. Schauble wants private investors to increase haircut to 50% – IIF said no and want to stick with July agreement of 21%. If the banks do this, they will get downgraded again. If the government forces this, then it is involuntary and a default may be triggered to pay CDS holders. EU wants banks to recapitalize. – IBF is fighting this, stating that they rather sell assets and shrink than sell shares at such low prices. If banks shrink, economy shrinks. It’s Checkmate. The laws of math wins. Report Abuse NewWorldPartyDotOrg | Oct 18, 2011 11:56 AM ET 5 of the 17 countries need to be bailed out. Others such as Slovakia, Belgium, Cyprus, Estonia, Luxembourg, Malta and Slovenia are poorer or smaller than the 5. How can Germany & France bail out 5 countries? Spain was downgraded last Friday. Germany and France have higher Debt to GDP ratios than Spain. Moody’s just warned France of a downgrade, even before the EFSF. What happens when they get downgraded? Who is going to bail out who? If either gets downgraded, you can say goodbye to EFSF. If you’re poor, you cannot become wealthy overnight by saying you have a plan. Report Abuse Freedom76 | Oct 18, 2011 11:58 AM ET Because the fractional reserve system is designed to create debt at interest that can only be paid back by creating more debt. The goal of the central banks is to create debt slaves out of the 99%. Ron Paul is the only candidate that wants to End the Fed. A vote for anyone other than Ron Paul is a vote for slavery. The media is owned by the same people who own the central banks; that is why the average Joe succumbs to bread and circus. But guess what, We the People are awakening from our slumber and the genie is out of the bottle and it ain’t going back in. Report Abuse No2RepublicanConJob | Oct 18, 2011 12:01 PM ET Again, these non-stop negative reporting about Greece “debt crisis..” by US Media is meant to enable the Republican lunatics to then say, See: “US is next if we do not stop Government spending…” or “Socialism only works until you run out of other people’s money to squander…” etc. Psycho babble Demonstrating yet again the Con Job Republicans & right-wing Media are playing on American people, FOR: 1- Germany, Norway, etc. European countries whom have lil Debt and much LOWER Un-Employment, compared to US, have much more of a “Socialism” based economies than Greece. 2- In fact main reason behind Greece’s debt is that it has not been enough of a “Socialism” based country as other European countries are. To be exact this means that Greece has NOT been collecting Taxes as other European countries do. All of which points you can see proven by Euro being a MUCH More valuable than US Dollar. More: http://www.realnewspost.com/sa.php?a=45417 Report Abuse No2RepublicanConJob | Oct 18, 2011 12:02 PM ET To be more exact Problems with Greece in particular are two fold: I- Greece’s main industry is tourism, as it has little or no manufacturing, and the beaches and sites in Turkey, which is next to Greece, are just as nice as they are in Greece, so with the stronger Euro Europeans have been by and large by passing Greece and going to Turkey who does not currently use Euro so its currency is much cheaper in relation to Euro. As a result this has devastated Greece’s main source of income. 2- Greeks do not pay their Taxes. In fact in Greece it is considered the national past time to not pay your Taxes and you are, or were, considered to be a dork if you paid your full Taxes. And the Government had, to date, turned a blind eye to this systematic dodging of the Taxes by the population. For example whereas Athens harbor is filled to the rim with Multi-Million Dollar Yachts, as are all the other beautiful beaches in Greece, last year something like 1000 people in entire Greece declared an income of greater than 100,000 Euro! More: http://www.realnewspost.com/sa.php?a=39732 Report Abuse beachbum40 | Oct 18, 2011 12:06 PM ET What a joke. Let it die already. Report Abuse bigGaryinlouisville | Oct 18, 2011 12:07 PM ET Greece has the same problems as the US and other developed nations, a large trade deficit. Everyone wants to blame the unions, look at Germany and you’ll realize that it isn’t the unions. You can’t run a large trade deficit without finally collapsing under the debt incurred. Report Abuse More Comments « First | « Previous 1 | 2 | 3 | 4 | 5 of 7 Next » | Last » Thank you for joining our discussion. Your comment has been posted. ADD COMMENTS Please Sign In or Register to participate. 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From the German press to Stephen Colbert’s hit show on Comedy Central, Greece has been the butt of jokes throughout the financial crisis. The implication is always the same — that the Greek people are lazy and don’t like to work.
The stereotype makes Michalis Chrysochoidis, Greece’s minister of development and competitiveness, bristle.
“There is a myth that the Greeks don’t work many hours. This is a big lie,” Chrysochoidis said. “The reality is that the Greek people work more than any other country in the European Union.”
He’s right: Greek workers put in longer hours than any other Europeans or Americans, according to a new report by McKinsey. (Click here to read the full report) The consulting firm’s 60-page brief, “Greece 10 Years Ahead,” examines what makes the Greek economy so uncompetitive relative to its neighbors and offers advice on what to do about it.
Within the McKinsey report, however, there are two additional data points that explain why more hours worked by Greeks haven’t led to a growing economy.
First, Greece has the lowest labor participation rate in all of Europe — just 66 percent of the employable population have jobs, compared with 73 percent in the European Union and 70 percent in Southern Europe.
Second, not only are fewer Greeks working, those who do are far less productive: A Greek worker’s productivity comes in at $35 an hour, compared with $49 an hour in the EU, $55 an hour in Central Europe, and $58 and hour in the U.S.
Put it all together and it led McKinsey to one inescapable conclusion: “A relatively smaller percentage of Greeks work longer and harder hours than their European peers to support a generally unproductive system.”
Therein lies the problem—the Greek economy is uncompetitive, and until that changes it will be unable to grow at a sufficient rate to generate enough tax revenues to pay its bills.
Having combed through the databases of the International Monetary Fund, Eurostat, Global Insights, and the Conference Board, McKinsey paints a vivid picture of why the Greek economy is so uncompetitive — primarily, its extensive bureaucracy and rigid labor rules. Both are strangling Greece’s ability to compete in a global economy, whether in the shipping industry, tourism, or even exporting its high-quality olive oil and famous yogurt.
Chrysochoidis, the minister of competiveness, agrees with this assessment.
“The Greek economy was not competitive during the last decades,” he said, adding emphatically, “We are going to create a new Greece.”
The first step, Chrysochoidis said, is to “reform the business environment.”
Chrysochoidis used to be the minister of public order, and is credited with shutting down two Greek terrorist organizations. His new task may be even more daunting — eliminating the mountains of bureaucratic red tape that hinder entrepreneurship and business investment.
He’s taken some key first steps. Beginning in April of this year, his ministry established a new streamlined electronic registry system for new businesses called One-Stop Service (OSS). “A new firm can now be established through a single procedure, in one day, with significantly lower costs,” according to a ministry statement.
Before the OSS, it would take at least 38 days to register a limited liability corporation in the country. Now, it takes as little as 38 minutes, according to the ministry. The cost of registering a new business has dropped by more than two thirds, as well — to 910 euros ($1,243) from 2,377 euros ($3,248).
Chrysochoidis adds that the ministry has identified 72 additional obstacles to entrepreneurship and has introduced new legislation that will eliminate them.
Among those obstacles are the role the government plays in many sectors of the economy — either through outright ownership of assets, such as a utility; price controls; and high barriers to entry, such as strict limitations on the number of players in a profession, and/or difficult licensing requirements, according to the McKinsey report. Add to all that very tough labor restrictions on large enterprises.
