Understanding the Crisis in Greece: From Boom to Bust

286 Pages·2011·1.405 MB·English

by  Michael Mitsopoulos, Theodore Pelagidis (auth.)

Understanding the Crisis in Greece
Also by Theodore Pelagidis
WELFARE STATE AND DEMOCRACY IN CRISIS (co-edited)
Understanding the Crisis
in Greece
From Boom to Bust
Michael Mitsopoulos
and
Theodore Pelagidis
© Michael Mitsopoulos and Theodore Pelagidis 2011
Softcover reprint of the hardcover 2nd edition 978-0-230-23777-3
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work in accordance with the Copyright, Designs and Patents Act 1988.
First published 2011 by
PALGRAVE MACMILLAN
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registered in England, company number 785998, of Houndmills, Basingstoke,
Hampshire RG21 6XS.
Palgrave Macmillan in the US is a division of St Martin’s Press LLC,
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Palgrave Macmillan is the global academic imprint of the above companies
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ISBN 978-1-349-31518-5 ISBN 978-0-230-29475-2 (eBook)
DOI 10.1057/9780230294752
This book is printed on paper suitable for recycling and made from fully
managed and sustained forest sources. Logging, pulping and manufacturing
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A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Mitsopoulos, Michael.
Understanding the crisis in Greece : from boom to bust / Michael
Mitsopoulos and Theodore Pelagidis.
p. cm.
1. Financial crises—Greece—History—21st century. 2. Greece—
Economic conditions—1974– 3. Political corruption—Greece—History—
21st century. I. Pelagidis, Theodore. II. Title.
HB3807.5.M58 2011
330.9495—dc22
2010034185
A catalog record for this book is available from the Library of Congress.
10 9 8 7 6 5 4 3 2 1
20 19 18 17 16 15 14 13 12 11
To Georgia and to our daughter Veronica
M. M.
To Elli
T. P.

Contents
List of Figures xi
Part I
1 Introduction 3
2 Vikings in Greece: Rents, the Design of the Greek
Political System and the Blockage of Reforms 6
2.1 Introduction 6
2.2 Description of the players of the game 7
2.3 Powerful interest groups as rent-seeking “Vikings”
in Greece 8
2.4 Rationally ignorant and misinformed voters who are
afraid of reform 10
2.5 The role of the media as an obstacle to reform 14
2.6 The administration as a prize for the interest groups 15
2.7 The failure of the mandate holders 16
2.8 Conclusion 20
References 22
3 Corruption, Policy Inadequacy and the Greek
Constitution 24
3.1 Introduction 24
3.2 Literature survey 26
3.3 Mandate holders and their motive to get corrupted 30
3.4 Democracy: The strength of the government,
minorities and the separation of powers 32
3.5 Minorities: Potential corruptors and protectors
of democracy 34
3.6 The practice of creating strong governments with
sufficient separation of powers 37
3.7 Proposals for constitutional reform in Greece 48
3.8 Conclusion 51
References 52
vii
viii Contents
4 Efficiency and Quality of Justice in Greece 55
4.1 Introduction 55
4.2 Measures of the judiciary’s efficiency 57
4.3 Analysis of an indirect measure of the time required
to dispose justice in Greece 59
4.4 Appeals court decisions – case facts as a direct proxy
for the time needed to dispose justice in Greece 63
4.5 European Court of Human Rights decisions regarding
delays in Greek courts 68
4.6 Time needed to dispose cases and resources 71
4.7 The increase in the appellate rate 74
4.8 The cost of using official arbitration 76
4.9 Rents and the judiciary: The Greek case of demand
and supply for legal services 77
4.10 S implifying procedures and strengthening
accountability 84
4.11 P reserving the independence of the judiciary during
reform 102
4.12 Conclusions 103
References 104
Part II
5 Strong Growth and Weak Institutions: The Greek
Paradox Reconsidered 109
5.1 Introduction 109
5.2 Greece: Rapid growth over the past years 111
5.3 Low competitiveness combined with a weak labor
market 121
5.3.1 Low competitiveness 121
5.3.2 A weak labor market 136
5.4 Taxation and labor market paradoxes 144
5.4.1 Facts on personal income taxation 144
5.4.2 A summary of the facts on personal income
taxation 160
5.4.3 Paradoxes of the Greek labor market explained 163
Contents ix
5.5 Private sector salaried employment attributes, corporate
taxation and corporate profitability 165
5.5.1 Private sector salaried employment, employer
size and the relative attractiveness of public
sector employment 165
5.5.2 Corporate income tax contribution in Greece 174
5.5.3 Profitability of Greek companies 182
5.6 The current crisis and the Greek financial system 187
5.7 Certain basic parameters of the Greek pension system 198
5.8 Main parameters of the Greek public finances 206
5.9 The examples of Finland and Ireland and how they
can be an example for Greece 214
5.10 Conclusions 219
Appendix 1 Road Transport in Greece and Government
Intervention 227
A1.1 A n example of how the reform debate in Greece does
not focus on issues that are crucially related to the low
competitiveness of the country 227
Appendix 2 Shop Opening Hours in Greece 231
A2.1 A n example of how consumer interests are not a
consideration in reform debates when one
has to deregulate, rather than regulate 231
Appendix 3 Basic Examples of Details that Degrade the
Greek Business Environment 236
A3.1 Tax on raised capital 236
A3.1.1 The situation in Greece 236
A3.1.2 European trends 236
A3.2 Publications in the Government Gazette 236
A3.2.1 The situation in Greece 236
A3.2.2 European trends 237
A3.3 Multiple notifications of a new hiring 237
A3.3.1 The situation in Greece 237
A3.3.2 European trends 238
A3.4 Taxing the transfer of private limited companies 238
A3.4.1 The situation in Greece 238
A3.4.2 European trends 238