Progress and Problems for Greece

 Progress and Problems for Greece

Alkman Granitsas, Wall Street Journal, 29 April 2013

ATHENS—Greece's efforts to overhaul its dysfunctional bureaucracy still remain a work in progress, a new report showed Monday, underscoring the major challenges Athens still faces even as it rushes to secure new aid from international creditors. Despite renewed efforts in the past several months to both corral public spending and revamp its public sector, the latest report by the European Commission's Task Force for Greece warns that the country's ability to return to growth—after more than five years in recession—will depend on continued public-sector reforms.

"Much work has already been done, in very challenging circumstances," said Commission monetary affairs chief Olli Rehn. "It is important to maintain the tempo of reform, together with the commitment and determination shown by the Greek authorities and people in recent months."
 
The report comes just hours after the Greek Parliament, late Sunday, approved legislation that paves the way for thousands of public-sector layoffs and ratifies other demands made by the country's creditors to unlock the next two loan installments for Greece, totaling €8.8 billion ($11.5 billion).
 
The law includes plans to dismiss 4,000 civil servants by the end of 2013, and 11,000 more by the end of next year, as part of a broader commitment by Athens to reduce the public-sector workforce by at least 150,000 workers by the end of 2015. Schoolteachers will be required to work two additional hours per week in an effort to cut the cost of hiring substitute teachers.
 
The law also introduces softer repayment terms for households with tax arrears or past due social security contributions, while it also cuts rates on a controversial property tax introduced in late 2011. The law was passed by a vote 168 to 123, with lawmakers from the three party coalition government backing the measure, and opposition deputies voting against.
 
Established in mid-2011 at the behest of the Greek government, the Commission's 60-member task force has been given the job of fixing Greece's hidebound bureaucracy. Drawing on experts from around Europe and international bodies like the International Monetary Fund, the team has dispensed advice on everything from tax reform to public-works projects.
 
Its work is parallel, but not directly linked, to Greece's troika of international creditors—from the Commission, the IMF and the European Central Bank—which decides on the loan tranches.
 
Since it was established, more than half of the task force's efforts have been aimed at advising Greece on tax reform and broader reforms to public administration. But according to the latest report, Greece continues to fall short in those areas—particularly in tax reform, where Greece has failed for years to tackle widespread tax evasion.
 
"Many of the operational benchmarks... were missed in 2012," the report says, highlighting shortcomings particularly in debt collections, or in the auditing procedures of high net-worth tax payers. "Strong efforts will be needed if the 2013 operational benchmarks are to be launched successfully and remain on track."
 
It adds that in the second quarter of this year, those tax-reform efforts will hopefully "coalesce to unblock some of the long-standing barriers to a functioning revenue administration," but warns "it is still too early to tell whether these reforms have led to a permanent increase in the capacity of the State to collect taxes."
 
Likewise, the report points to a renewed efforts at reforming the functions of Greek central government ministries, but also notes that the legal framework underpinning cooperation between the ministries has yet to be put in place.
 
However, the report also underscores some successes. With the help of task force advisers, Greece this month relaunched several major highway concessions that had been stalled for months due to financing difficulties. While another team, made up of both task force and United Nations officials, have worked on a plan to simplify procedures for Greek feta cheese and fresh fruit exports abroad.
 
http://online.wsj.com/article/SB10001424127887323528404578452430947572790.html