Greece 2017

Total score

61.53 change: 9.43

Score and comments

Political Freedom
Free and Fair Elections

Greece nurtures a long tradition of free and fair elections, which is a right granted by the constitution. After a very dynamic period, the political life somewhat stabilized. Still, the biggest political issues for the Government led by Prime Minister Alexis Tsipras have been the economy and the migrant crisis. Greece is a parliamentary democracy with the 300-seat unicameral parliament. Rather specific electoral system in the country, i.e. the so called “reinforced proportional representation”, which rewards the party with the plurality of votes at the elections with 50 extra seats in the parliament above its proportional share, remains a serious issue. That way, the system favors big parties, allowing even a party which won elections with a small margin of votes to form a

government, while marginalizing the role of small parties. Political parties are able to compete and operate in a free and unrestricted manner. Voting in Greece is mandatory.

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Absence of Unconstitutional Veto Players

Greece doesn’t have unconstitutional veto players who could undermine decision making process. This allows the government to rule effectively. Security forces are under civilian control. Although there is a specific situation with Greek judicial system - where only the Supreme Special Court, which is not a permanent body, could decide upon constitutionality of laws - there is a clear separation of powers between judicial, executive and legislative branch. However, corruption remains a problem, while the country has gone down by 11 places, and is now ranked as 69th, in the Transparency International`s 2016 Corruption Perception Index. Greek Orthodoxy is a state religion, recognized by the Constitution as a major faith, thus Greek-Orthodox Church has a significant influence in

shaping public discourse. However, it doesn’t have direct influence on political decisions.

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Freedom of Press

The country continues on its way of improving environment for journalists and for both the traditional and the online media outlets, with Freedom Barometer 2017 Press Freedom score increased. However, there is a lot on the way to make media landscape free in Greece. Journalists continue to be physically and verbally attacked because of their reporting. Economic pressure and criminalized defamation might influence journalists to practice self-censorship. Also, close relations between politicians and media owners could influence independent reporting. Issues regarding lack of transparency of media ownership remained unresolved. Government failed to license national televisions, following the Council of State ruling that the law, which was permitting Government to issue licenses

instead of the National Council for Radio and Television, was unconstitutional. Situation remained unresolved during the entire period under review.

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Rule of Law
Independence of the Judiciary

Justice system in Greece is free from direct control by the executive branch of power. By many reports, including FNF`s own field interviews, courts are, however, sometimes subject to outside indirect influence, by political or business circles. Corruption is also a serious problem, as well as is bias in politically sensitive cases. Portal GAN in December 2015 described Greek judiciary as “inefficient, slow and vulnerable to corruption and political influence”. Throughout summer 2017, a verbal skirmish was on between a number of government officials and the highest representatives of the judiciary. Senior judges accused Syriza-led government of trying to introduce Hungary- or Turkey-style political control over judiciary, so as to

be able to pursue authoritarian goals. On the other hand, government officials accused courts of being politically biased, by protecting the corrupt officials of the previous governments and by spreading fear among leftist groups by arresting their members on terrorism charges.

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Corruption

Business portal GAN describes corruption in various departments in Greece as “widespread” in public services, public procurement and police, very high in forest or construction inspectorates, “high” in judiciary, “serious” in tax administration and widely present in custom administration. Analyses by FNF and/or Greek scholars often conclude that oligopolies, professional licenses or otherwise closed markets, crony business activities, furnished public procurement, tax evasion or numerous other manifestations of inequality at the market are in the core of the Greek corruption problem. Some reforms of the enumerated have started after the Greek agreement with creditors in summer 2015, but the process is still slow, superficial

and divergent. Government is opening one after another chapter of corruption investigations (e.g. in March 2017, a probe was launched in health sector), foreign companies are often rightfully blamed, but there are too little systematic changes that would narrow the very ground for (and tackle the structural domestic causes of) corruption. In the Transparency International`s Corruption Perceptions Index 2016, Greece was ranked 69 (of 176 countries), with a score 44/100 (lower than the historic-best 46 in 2015).

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Protection of Human Rights

Academic freedom has been well preserved in the university classrooms in Greece, but in campuses occasional attacks by the far-left or ultra-conservative extremists against the liberals, or against vulnerable groups advocating equality, have reduced it. Yet, universities and adjacent think tank NGOs are still the true places of innovative scientific and social thinking. Freedom of religion and secular character of the state are officially guaranteed, but in reality Greek Orthodox Church is favored and ready to go political if their privileges decreased. A real breakthrough in religious tolerance was the permission, in August 2016, after long delay, to the Islamic Community to build a mosque in Athens. Along the management of the indeed

challenging refugee crisis (encompassing many tens of thousands of stranded migrants), Greek authorities showed both their bright and dark sides, from serious endeavor to provide shelter, education and healthcare for those who temporarily stayed in Greece to arbitrary detention and/or police brutality against some of them. A case of torture of three Roma by the police in Athens was reported in October 2016 by the Greek Helsinki Monitor, while in August 2016 the UN Committee on the Elimination of Racial Discrimination expressed concern over cases of discrimination of Roma in accessing education or housing, or in contacts with the police. In December 2016, the Parliament introduced new mechanisms of protection against police brutality. Despite persistent social conservatism on some other issues, the most recent opinion polls, such as Dianeosis` of April 2017, showed that homophobia was in retreat (50% approved same-sex marriages and 80% pledged for equal access of LGBTs to employment). The living conditions of LGBT citizens in Greece, however imperfect, are better than in any of the four neighbors. There is a strong legal protection against discrimination. Free and open pride rallies are held in two biggest cities, while civil unions are legalized. Gender equality is a challenge, especially taken the low participation of women in company boards and a neglect participation of men in paternity leave schemes.

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Economic Freedom
Security of Property Rights

Private property rights in Greece are not sufficiently respected. Weak institutions remain at the core of the problem of property rights. Judicial impartiality in court proceedings is sometimes under question. Corruptive practices within judiciary are still present. Enforcement of contracts is extremely difficult due to the very long court procedures, taking on average as much as 4 years, which is next to the worst in the world. This problem has recently been tackled by introducing tighter rules on adjournments and imposing deadlines for court procedures, but the impact of those reforms is yet to be evaluated. There are no specialized commercial courts, so commercial cases are heard before general courts. Obtaining real property in Greece is a complicated and expensive process,

since there are multiple layers of authority in issuance and approval of land use and zoning, coupled with a number of different fees and a high transfer tax. In certain areas, a prerequisite for obtaining real property is permission from the local council. Furthermore, there are restrictions on acquisition of land in border areas or on small islands, due to national security reasons. Comprehensive national land register has not still been finished.There are also restrictions on foreign equity ownership in numerous industries, more pronounced than in other OECD countries, most notably in public utilities and energy, areas which the Greek government considers of strategic importance.

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Size of Government: Expenditures, Taxes, and Enterprises

Although several waves of austerity measures have been implemented since the beginning of the debt crisis, general government expenditure is still blatant, reaching 49% of GDP in 2016. Political turmoil still poses a significant obstacle to business apart from the bad economic environment due to austerity. The economy recorded neither boom nor recession in 2016, but growth is expected to pick up next year, although the potential growth rate is estimated at just 1.5%. Public finances finally recorded a small surplus in 2016, but public debt remains enormous, at 184% of GDP. It is probably still unsustainable, so possible further actions should be taken to tackle this question. Public transfers remain at a very high level: even with the implemented downsizing, public sector in

Greece is oversized, with dubious efficiency, while pension system is not sustainable with annual transfer of 17% of GDP. State-owned enterprises (SOE) are still present in the country, especially in industries considered to be of strategic importance. Some of them enjoy privileged or quasi-monopoly status. The implementation of the privatization program that was designed in 2015 as a prerequisite for public finance bailout by international community has been slow due to political considerations, whereby the Greek government has tried to evade some of its obligations, most evidently in the area of the energy market and the national energy producer Public Power Corporation (PPC). But there are positive examples, such as the minority equity in the power grid company ADMIE and the railway company Trainose. The former Directorate General for Public Revenue that used to be a part of the Ministry of Finance was transformed to a more independent tax agency, with the aim to increase revenue collection (mostly through an expected decrease in the very high rate of tax evasion) and prescribe tax code reforms, as stipulated in the 2015 bailout agreement with the international creditors. High government consumption requires high tax rates: personal income tax is progressive, with rates of 22%, 32% and 45%, while corporate tax is set at 29%. High social security contributions lead to the overall high labour tax wedge, reaching 40% of the total labour costs. VAT is set at 6%, 13% and 23%.

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Regulation of Credit, Labour, and Business

Regulatory environment overall is not too business-friendly. Political and economic instability led to a freeze in new investments, standing as low as only 10% of GDP, and even pushed some investors out of the country. Starting a new business is easy and inexpensive, done within two weeks and with a symbolic minimum paid-in capital of just one euro. However, rules and regulations are complicated and sometime competing, creating surroundings prone to corruptive activities of public officials, while regulatory burden measured through licenses and restrictions remains heavy, even after reforms implemented under the austerity package. Tax procedure is also a weak point: although the number of annual payments is low, and they are filed online, actual compliance with regulation is

burdensome. High tax rates, complicated tax procedures and inefficient government bureaucracy are cited as major obstacles. Labour regulation has many built-in inflexible areas: fixed term contracts are restricted to just 36 months and are prohibited for permanent tasks, and severance payments increase with the years in tenure, protecting more seasoned workers, on the top of the strict redundancy rules. Minimum wage is still relatively high as compared to the median wage, but it has not been increased since 2012. Collective dismissals are considerably limited due to low threshold limit applied and restrictive pre-approval requirement. Centralized collective bargaining is dominant in the public sector, while in private sector it is present only in industries with a strong history of trade unions. The government is considering a return to sector agreements with extensions through collective bargaining, which would considerably limit the freedom of conducting business and would also increase labour market frictions and unemployment.

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Freedom to Trade Internationally

Freedom to trade in Greece is generally respected. Being an EU member state, Greece implements the common EU trade policy, with overall low trade tariffs for manufactured goods, while those on agriculture products might be substantially higher. Non-tariff regulatory trade barriers remain present mostly due to the complicated process of standardization. Customs service is inefficient, with expensive procedures, further hindering free trade. Working permits for non-EU nationals are generally difficult to obtain, while the new law regulating non-EU immigrant workers is generally considered to have alleviated some ambiguities and lowered the number of years necessary for illegal immigrants to obtain residence permit. A ‘’golden visa’’ program allows foreign nationals that

buy property above a 250 000 euro threshold to obtain a five year residency permit, and this program was widened to include buyers of Greek bonds. Capital controls on the capital outflow from the country are still present, although their scope was somewhat limited after August 2015 agreement with the European Stability Mechanism (ESM). High freight costs are partially attributed to the deteriorating public transport infrastructure, since there is a lack of resources for the maintenance and resolving of the bottlenecks in transport. The quality of railroad infrastructure is low, unlike roads and ports. Main Greek trade partners are other EU member countries, most notably Italy, Germany and Bulgaria, followed by non-EU countries such as Russia and Turkey.

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