IMF backs major labor sector liberalization for Greece

The International Monetary Fund (IMF) weighed in on the state of Greece’s labor sector this week, calling for extensive interventions to achieve greater flexibility and to reduce the very high unemployment rate for young adults.

The IMF’s recommendations, contained in a report, come ahead of what are expected to be tough negotiations between Athens and its international creditors in the autumn over labor sector reforms.

The Washington-based Fund also warned that reforms already passed, such as the minimum monthly wage reduction, should not be overturned, pointing out that the figure for Greece is the highest in the EU, in relation to per capita GDP.

As reported by “N” in the past, the IMF continues to push for liberalization in the law governing mass layoffs in the country, in line with the “best practice” EU framework. Among others, in Greece the relevant labor minister must sign-off on mass layoffs for a private sector company if the redundancies exceed a certain number. Given the ubiquitous political costs involved, rarely if ever does a serving minister (or other Cabinet member) put a signature under a decree allowing for mass layoffs. Nevertheless, larger companies in financial straits are often impeded from necessary restructuring, including a reduced workforce, which will allow them to continue to operate.

Additionally, there have been numerous instances over the past years where major businesses have simply stopped operating, with hundreds of employees owed back wages, bonuses and severance pay having no other redress than lengthy court action.  At least one major Athens daily and a nationwide broadcaster, both defunct, fall into this category.

 Another long-standing demand by creditors that the IMF cited was the issue of opening up so-called “closed professions”, which affects everything from attorneys able to work anywhere in the country of 11 million residents, to civil engineers to even operators of loading equipment.

Other IMF recommendations, which have been repeated before and even prior to the economic crisis that hit Greece hardest, are reducing obstacles and allowing for a more competitive wholesale sector; liberalizing the food and beverage sectors and even tourism-related businesses.

The report does acknowledge the fact that Greece has, to a large extent, implemented several OECD recommendations to boost competitiveness in several sectors (transports, tourist lodgings, milk, bakery goods, pharmacies, oil products etc), and that Athens is proceeding with the "opening" of other occupations previously governed by fixed prices, fixed jurisdictions and a fixed number of practitioners, such as notaries and para-legal servers of summonses.