NY Times article: Push to End Job Barriers Rattles Greece
- From: Eustace <emfril@xxxxxxxxxx>
- Date: Wed, 20 Oct 2010 18:57:48 -0400
Push to End Job Barriers Rattles Greece and Economy
Angelos Tzortzinis for The New York Times
[Long-existing regulations have made pharmacies a lucrative trade in Greece.]
By SUZANNE DALEY
Published: October 14, 2010
ATHENS — Antonios Avgerinos, 59, a retired army pharmacist, always wanted his own pharmacy here. And why not? Greek law ensures that pharmacists get a 35 percent profit on all drugs sold, even over-the-counter medications.
[Truck owners displayed black flags from their vehicles to protest Greek government reforms of the regulation of their profession.]
But Greek law also limits just about everything else about pharmacies. They must be at least 820 feet apart and have a likely market of no fewer than 1,500 residents. To break into the business, an aspiring pharmacist generally has to buy a license from a retiring one. That often costs upward of $400,000.
“It is an absurd system,” Mr. Avgerinos said recently. “But it has been that way my whole life.”
Maybe not for much longer.
As the government of Prime Minister George Papandreou struggles to get the nation’s financial house in order — reducing the size of its bloated civil service, chasing after tax evaders and overhauling its pension system — it has also begun to tackle a much less talked about problem: the cozy system of “closed professions” that has existed here for decades, costing the economy billions of dollars a year.
These efforts have prompted almost weekly strikes in the last few months from interest groups firmly opposed to breaking down the barriers to entry in lucrative professional niches. But experts say that much is at stake: Greece’s ability to service its tremendous debt to other European countries and avoid default rests on the government’s ability to inject more competition and dynamism into its sclerotic economy.
“Greece is the last Soviet-style economy in Europe,” said Yannis Stournaras, an economist and the director of the Foundation for Economic and Industrial Research, known as IOBE Athens, who has studied the issue. “Other countries have some closed professions. But nothing like Greece. Every stone you turn here, there are regulations.”
For selling a cancer drug for $4,200, Mr. Stournaras said, a pharmacist makes a profit of around $1,400. “That’s a movement of the elbow that is more expensive than one of Roger Federer’s.”
Experts say there are about 70 closed professions here, including those of lawyers, engineers, taxi drivers, speech therapists, welders, notaries, street market vendors, newsstand operators and architects. Each is protected from competition by a byzantine tangle of regulations and licensing requirements that result in high prices for consumers and a reliable living for insiders.
No use shopping around for a less expensive lawyer or notary, for instance. They all charge fixed fees, as do many other professions. There are numerous restrictions on licenses, too. Some are not even available to some classes of citizens. For instance, newsstand licenses are reserved for war veterans, the disabled and those with large families to support. Others are limited, like the number of long-haul trucking licenses, which has been frozen for 25 years.
A study carried out by IOBE in 2006 estimated that opening these professions would increase gross domestic product by about $35 billion, or 10 percent, in five years.
But nobody expects change to be easy. Already, austerity measures in Europe have prompted unrest here and elsewhere. Thursday saw strikes by civil servants protesting cutbacks in Athens and in France. Many believe that tackling closed professions will mean even more groups taking to the streets.
That is what happened this summer when the government took on the trucking industry. Greece has issued only a few new licenses for truckers since 1970, though Greece’s economy has more than tripled in that time. This created a hot market for the licenses, which have sold at prices approaching $500,000. Not surprisingly, experts say, trucking costs in Greece are far higher than anywhere else in the European Union.
The IOBE report found it was more expensive to truck something from Athens to Thebes, about 45 miles, than from Athens to Rome, a distance of more than 600 miles. Businessmen say it is cheaper to ship goods here from China than it is to move them from Athens to the island of Rhodes, 285 miles away.
But when the government announced that it would begin issuing new licenses over the next three years, the truckers blocked the borders for weeks, creating shortages of all kinds, including fuel. Mr. Papandreou invoked an emergency regulation to force the truckers back to work.
Within a few weeks, however, work stoppages began again. The truckers did not cease their occasional blockades until Parliament passed a new law that could see them lose their licenses altogether.
For their part, the truckers say they should not be stripped unilaterally of their investment.
“All of a sudden you have nothing,” said Vassilis Sachinidis, the president of one of the truckers’ unions, representing about 3,000 owners of trucks with cranes. “That is not right.”
After tackling the truckers, the government plans to dismantle the remainder of the closed professions. It is likely, however, that it will wait until after local elections in November.
“All these regulations must go away,” said Theodoros Pangalos, Greece’s deputy prime minister. “I don’t understand why there can be only one pharmacy outside a hospital — and often it’s closed. There is surely one pharmacist who would come there and stay open all night, if he had the chance.”
But some pharmacists say the proposed changes will surely prompt strikes, and Mr. Avgerinos — who now heads a union of 3,200 pharmacists who have never managed to buy their own pharmacies — is pessimistic about the government’s ability to dislodge such an entrenched system.
“People need their prescriptions,” he said. “The government will have to give in.”
Greece’s system of closed professions evolved over decades, experts say, with each generation of politicians, whether from the left or the right, essentially buying votes by assuring various groups a hold on lucrative livelihoods.
Now, however, Greece is under particular pressure to change. Many of these regulations violate European Union rules on the free movement of goods and services. And Greece’s creditors have demanded an overhaul of the country’s closed professions as part of its rescue plan.
The way some professions run here would be hard to fathom elsewhere. In addition to having fixed fees, most lawyers will be admitted to the bars only in their hometowns or in large cities and then can practice only there. And they must participate in a system of wealth redistribution. A percentage of the fees they earn — 12 percent in Athens — goes to their local bar associations, which in turn divvy up most of it among all members.
Spilios Spiliakos, 32, an Athens lawyer, says there are so many lawyers in the city that payments from the bar here are very small, perhaps a little over $1,000 twice a year. But in some other parts of the country, fees piling up from expensive real estate transactions mean that lawyers sometimes get checks of $2,800 to $4,200 a month from the bar.
While bar associations in the big cities will admit anyone who passes their exams, it is a different story in the smaller towns.
“Some lawyers there don’t even have to work,” Mr. Spiliakos said. “But you can’t just go join those bar associations. They wouldn’t let you in. You would have to have some sort of a connection to the town. Usually your family has to be from there.”
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