Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 Understanding the Crisis in Greece 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Also by Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 WELFARE STATE AND DEMOCRACY IN CRISIS (co-edited) 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Understanding the Crisis in Greece Michael Mitsopoulos and Theodore Pelagidis 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 From Boom to Bust © Michael Mitsopoulos and Theodore Pelagidis 2011 All rights reserved No reproduction, copy or transmission of this publication may be made without written permission Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988 First published 2011 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, 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, 175 Fifth Avenue, New York, NY 10010 Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries ISBN 978–0–230–23777–3 hardback This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin 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 ISBN 978–0–230–23777–3 Financial crises—Greece—History—21st century Greece— Economic conditions—1974– 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 20 19 18 17 16 15 14 13 12 11 Printed and bound in Great Britain by CPI Antony Rowe, Chippenham and Eastbourne 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS To Georgia and to our daughter Veronica M M Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 To Elli T P 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 This page intentionally left blank Contents xi Part I Introduction Vikings in Greece: Rents, the Design of the Greek Political System and the Blockage of Reforms 2.1 Introduction 2.2 Description of the players of the game 2.3 Powerful interest groups as rent-seeking “Vikings” in Greece 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 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 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 List of Figures viii Contents 55 4.1 Introduction 55 4.2 Measures of the judiciary’s efficiency 57 4.3 4.4 4.5 Analysis of an indirect measure of the time required to dispose justice in Greece 59 Appeals court decisions – case facts as a direct proxy for the time needed to dispose justice in Greece 63 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 4.10 Simplifying procedures and strengthening accountability 77 84 4.11 Preserving the independence of the judiciary during reform 102 4.12 Conclusions 103 References 104 Part II 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 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 Efficiency and Quality of Justice in Greece Contents ix Appendix Road Transport in Greece and Government Intervention A1.1 An example of how the reform debate in Greece does not focus on issues that are crucially related to the low competitiveness of the country Appendix Shop Opening Hours in Greece 165 165 174 182 187 198 206 214 219 227 227 231 A2.1 An example of how consumer interests are not a consideration in reform debates when one has to deregulate, rather than regulate 231 Appendix Basic Examples of Details that Degrade the Greek Business Environment A3.1 Tax on raised capital A3.1.1 The situation in Greece A3.1.2 European trends A3.2 Publications in the Government Gazette A3.2.1 The situation in Greece A3.2.2 European trends A3.3 Multiple notifications of a new hiring A3.3.1 The situation in Greece A3.3.2 European trends A3.4 Taxing the transfer of private limited companies A3.4.1 The situation in Greece A3.4.2 European trends 236 236 236 236 236 236 237 237 237 238 238 238 238 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 5.5 Private sector salaried employment attributes, corporate taxation and corporate profitability 5.5.1 Private sector salaried employment, employer size and the relative attractiveness of public sector employment 5.5.2 Corporate income tax contribution in Greece 5.5.3 Profitability of Greek companies 5.6 The current crisis and the Greek financial system 5.7 Certain basic parameters of the Greek pension system 5.8 Main parameters of the Greek public finances 5.9 The examples of Finland and Ireland and how they can be an example for Greece 5.10 Conclusions Index Economist, The, 28, 50 Ecuador, efficiency of courts in, 58, 73 education, 13, 21–2, 79, 80–1, 132 effective tax rate, 183 EKAS, payment to, 200, 201, 202, 204 electricity, 215 employee, 55, 143, 163, 165, 170, 172, 182, 200, 205, 207, 223 cash handouts to employees, 237, 247 confused employees of ministry, 247 distribution of, 147, 161 employee per nominal GDP, 165 and employer size, 172 of government, 29, 47, 140, 147, 199 hire new employee, 237, 238 low wage, 143, 147 of parliament, 10–11 pension bill for public sector employee pensions, 207 pension fund of employees of public enterprises, 223, 225 private sector, 10, 47, 145, 146, 172, 204, 225 public sector, 163, 172, 200, 201, 210, 212, 214, 222, 224 real compensation per, 168–9 salaried, 141, 147, 157, 161, 162, 170, 171, 201, 222 trip of employee to customs, 240 unit labour cost per employee, 164 wage bill per public sector employee, 212 white collar, 143 employers, 170–2, 204 company registered as employer, 237 German employers, 55 and insured employees, 171 obligation to distribute to employees, 143 social security contributions, 145, 165, 171, 225 employment, 22, 136, 137, 138, 139, 140, 160, 161, 162, 163, 165, 170, 179, 192, 193, 219, 220 average monthy remuneration, 170 in construction, 119 dependent, 145 employment options, 174 employment rate, 137, 139, 140, 223 employment terms, 171 employment-to-population ratio, 137–8, 138, 222 in European countries, 139 full-time, 150, 170, 172, 235 hours, 142, see also working hours increase in, 165, 231, 232, 233 part-time, 144, 160, 163, 170, 222, 231, 232, 233 public sector, 26, 165, 171–4 in retail, 231–3, 235 salaried, 151, 152, 160, 161, 165, 172, 174, 224 self-employment, 5, 140, 151–2, 157, 158, 160, 161, 163–5, 171, 174, 175–6, 201, 222 self-employed, 47, 141, 144, 154, 157, 158, 160–2, 184, 200, 222, 225–6 in telecommunications, 118 temporary, 141, 144, 158 and unemployment, 138 of women, 138 of young, 110, 138–9, 140 see also unemployment employment protection legislation (EPL), 141 EMU, see European Monetary Union (EMU) energy, 112, 185, 221 enforcement disputes before court, 101 enforcement fees advancement of, 99 enforcement fees of, 101 England, Corn Laws in, 21 entrepreneurship, barriers to, 134, 135 enterprises, 113, 115, 117, 165, 181–2, 192, see also corporations; company individual, 224 small, 226, 233–4 EPE, 238 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 254 EPL (employment protection legislation), 143 estates, taxes on, 214 ESYE, see Greek Statistical Service (ESYE) EU, see European Union (EU) EU-financed infrastructure investment, 119 Euro area (EA), 116, 122, 142, 166, 168, 188 see also eurozone Europe, real GDP growth in, 111 European capital markets, 190 European Central Bank (ECB), 69, 190, 191, 230 European Commission, 119, 126, 158, 175, 176, 179, 184, 185, 198, 221, 228, 229, 230, 236, 237, 238, 239 European Council, 238 European countries average to median income, 151 dividend taxation, 177 employment in, 139 labor productivity, 166–7 minimum wages, 150: proportion of full-time workers earning, 150 monthly gross salary, 173 non-financial companies, profitability of, 186 personal income tax brackets, 149 real compensation per employee, 168–9 S80/S20 income quintile share ratio, 152 wage earners to self-employed, 142 European Court of Human Rights, 6, 46, 68–71 European interbank money market, 190 European Monetary Union (EMU), 109, 114, 187 European Observatory for Small and Medium Enterprises, 233, 234 European trends exports, certificate of origin for, 240 Government Gazette, publications in, 237 new hiring, multiple notifications of, 238 private limited companies, taxes on, 238 raised capital, taxes on, 236 regulatory impact assessment, 239 European Union (EU) administrative burden, 125 administrative cost as GDP percentage, 129 funds, 113, 118, 174 funds influx, 112 labour productivity in, 167 real compensation of employees per head in, 169 regulation indices for lawyers, 79 taxation trends in, 158–60, 159, 176 eurozone, 3, 7, 19, 109, 111, 115, 116, 121, 122, 125, 158, 159, 174, 189, 193 banking sector, 194: expenditure of, 197; total operating income of, 197; total profits before tax of, 197 employment expectations in construction, 119 expenditure of, 197 inflation differential, 121–2 investment-to-GDP ratio, 118 total indebtness, 117 total operating income of, 197 total profits before tax of, 197 see also euro area excessive and immoral profitability, 185 excessive profit, 238 executive power, 44 expenditure of central government, 206 cuts in, 214 of general government, 211, 212 reduction, 212, 225 exports, certificate of origin for European trends, 240 situation in Greece, 239–40 farmers fund, 202, 203, 205 FDIs, see foreign direct investments (FDIs) 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 Index 255 Index Fehr, E., 19 Fernandez, R., 81 finance, 189–90, 234 domestic consumption, 113 of Greek government, 189–90 new private sector activities, 193–4 public, see public finances financial deregulation, 198 deregulation of sector, 109, 113, 198, 214 financial intermediation, 192, 193 financial markets global, 190 liberalization of, 111 Finland, 127, 214, 233 budgetary process, 216 deregulated markets, 228 increase of customer orientation, by government services, 216 economy, reshaping, 215 Electricity Market Act 1995, 215 electricity sector, 215 Energy Market Authority, 215 municipal autonomy, 216 Nordic electricity market, 215 public administration: efficiency of, 215; modernization of, 216 public sector reform priorities in, 216 public spending, efficiency of, 216 recession in, 214–17 reforms priorities in, 215–16 restrictions on market entry, 215 shop trading hours in, 232 vertical supply chain, 215 first instance courts, 62, 68, 74, 75, 76 administrative, 74 cases termination at, 75–6 civil, 60–2, 74 fiscal consolidation, 214, 221, 224–5 of Ireland, 218 fiscal imbalances, 179, 198, 218 fiscal prospects, of Greece, 210 flat tax, 178 Flinter, D., 219 Force of Labour Supervisors (SEPE), 237, 238 foreign direct investments (FDIs), 109, 125, 125, 130 barriers to, 135 France, 17, 43, 47, 48, 49, 127, 128, 162 clearance rates in, 63 fair prices, 228 free markets, 228 laws, proposing and passing, 39 percentage of income tax paid by number of households, 156 personal income tax, 156 small transport companies in, 227–8 free market, 7, 15, 228 French constitution, 38–9 legal system, 89 procedural steps, 90–101 French political system, 38, 39, 41, 43 Friberg, R., 234 full-time employment, 150, 170, 172, 232, 235 Gaechter, S., 19 Galotskin versus Greece, 69–70 Gargasoulas versus Greece, 70 GDP, 109, 113, 116 debt-to-GDP ratio, 194, 210 and employment growth, 138 goods and services balance as a percentage of, 123, 124 growth, 111, 120, 207, 217 investment-to-GDP ratio, 118, 174 payment-to-GDP ratio, 207 per-capita GDP, 121, 131 Gemtos, P., 57, 83 general government, see government General Secretariat for Information Systems (GSIS), 179, 187, 201 German and Greek ten-year government bond, 188, 188 German Basic Law, 43 legal system, 89 procedural steps, 90–101 German system, 43, 50, 51 Germany, 17, 48, 127, 128, 162, 229, 240 income bracket, 156 percentage of income tax paid by percentage of population, 156 personal income tax, 156 shop trading hours in, 233 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 256 Gerring, J., 28 Giavazzi, F., 55 Gibson, H., 124 Ginsburg, T., 81, 82 global financial markets, 190 Golub, S., 133 goods and services balance, as GDP percentage, 123 Goos, M., 232 government and banking system, 192 bonds, 191 budget deficits, 163, 190, 194 central government, 146, 170, 222 budget: net revenue, 207; revenue, 208; to social security funds, 210 expenditure, 206, 207, 207, 214; for public sector pensioners, 200 expenses of, 206, 223, 224 revenue-to-GDP ratio, 208 spending, 223 debt and balance of payment, 188 debt-to-GDP ratio, 194 employment, 171 extraordinary measures taken by, 213 general government: debt-to-GDP ratio, 113; income of, 170; revenue of, 170 interest cover of, 209 interest payments on debt, 209 stability and growth program of, projections, 212–13 strength of, 32–4 wage bill, large cuts in, 225 Government Gazette, publications in European trends, 237 situation in Greece, 236–7 Gradus, R., 233 Greece percentage of population paying income tax, 156 shop trading hours, 233 Greek civil Supreme Court, see Areios Pagos Greek ICAP database, 184 Greek national law, 114–15 Greek National Statistical Service (formerly ESYE, now changed to ELSTAT), 56, 59, 70–1, 158, 184 Greek system, 44 Greek workforce, by insurance type, 154 growth of economy, see economic growth growth prospects of Greek economy, 220 growth rates, of Greece, growth rates and institutional weaknesses, 109 competitiveness, 121–36 corporate income tax contribution, in Greece, 174–82 current crisis and financial system, 187–98 economic growth, over past years, 111–20 labor market, 136–44 pension system, 198–206 private sector salaried employment, 171, 172, 174 profitability, of Greek companies, 182–7 public finances, main parameters of, 206–14 public sector employment, 165, 171, 172, 174 and the recession: in Finland, 214–17; in Ireland, 217–19 taxation and labor market paradoxes, 144–64: personal income taxation, facts of, 144–60 GSIS, see General Secretariat for Information Systems (GSIS) guarantees securing attached property, 92 Guichard, S., 214 Hajkova, D., 130, 179 Hamilton, A., 45 Hanssen, A., 78, 83, 84 Hardiman, N., 217 Hardouvelis, G., 191, 218, 219 Harlaftis, G., 126 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 Index 257 Index Harper, D., 234 Haugh, D., 187 Hayek, F A., 12, 13 higher education system, 132 higher-than-average operating income, 195 higher-than-average regulation, 222 high personal incomes, taxes on, 214 hiring of lawyer, 90 Hoetker, G., 81, 82 Høj, J., 215 Honkapohja, S., 215 horse-trading game, in Greek politics, 13 hostile legislative initiatives, 191 House of Representatives, 41, 44 Huber, J., 30 human rights, 46, 57 European Court of Human Rights, 68–71 violation of, ICT, see information and communication technology (ICT) IKA, 144–5, 154, 170, 187, 203, 205, 237 average full work years at retirement, 204 average retirement age for, 204 distribution of retirement age for, 203 ILO, see International Labor Organization (ILO) Income average to median, 151 of general government, 170 inequality, 10, 151–2, 161 maximization, 15 per bracket, 153 personal, 194 quintile share ratio, 152 ranking, of countries, 127–8 taxable, 153, 179, 189, 211 income bracket, 152 distribution of earnings of employees insured by IKA, 145–6 income declared by, 18, 155–6 income tax paid by, 18, 155 taxation of, 147 income tax, 17, 18, 219 corporate, 159, 174–82, 178 paid by employees of larger employers, 170 paid by income bracket, 154 personal, 144, 149, 153, 154, 156, 158, 159, 160–3, 178 progressivity of, 144 revenue, 179 indebtedness, 195 and eurozone average, 193 total, as percentage of GDP, 117 inflation, 109, 121, 124–5, 137, 185, 187, 220, 229 inflation differential, 121, 121–2 Greece and Ireland versus eurozone, 122 Greece versus eurozone, 121 information and communication technology (ICT), 118 infrastructure, spending on, 87–8 innovation, 132, 182,184, 220, 228, 233, 235 Institute for Economic and Industrial Research (IOBE), 175, 194, 228 insured employees, in private sector, 204 insured workforce, 199 interbank money market, 190 interbank rates, 114 interest expenses of Greek general government, 208, 209 interest groups, administration, 15–16 cooperation with, as rent-seeking Vikings, 8–9 interest payments to government debt, 209 international crisis, 190 International Labor Organization (ILO), 141 International Monetary Fund (IMF), 221, 230 international permits, 227 investments in Greek government bonds, 192 investment-to-GDP ratio, 118, 174 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 258 IOBE, see Institute for Economic and Industrial Research (IOBE) Ireland, 121, 123, 127, 217 budgetary institutions, weakness of, 217 corporate tax rates, 219 fiscal consolidation in 1980s, 218 foreign investment, 218 OECD data, 218 product market regulation, 218 public finances, deterioration of, 217–18 public sector, 217: in late 1980s, 217; restructuring, 217 recession in, 217–19 reform agenda, in late 1980s, 219 revenue from corporate income tax, 219 tax reform in, 218 tax system in late 1980s, 217 Ireland and Greece versus eurozone inflation differential, 122 Italy constitution, 44 shop trading hours, 233 Jacobsen, J., 232 Japan demand for litigation after deregulation in, 82 reactions to reform in legal professions, 81 reform in pre-trial cases, 88 John, A., 21 judges, 42, 63–4, 68, 73–4, 85, 89 business registration by, 86 education of, 80 incentives for, 78, 82 individual accountability of, 78, 81–2 management of workload, 87 order for physical enforcement, 99 pay structure of, 81 personal independence of, 103 productivity of, 78 publication of cases by, 63 rational, 31, 78 surveys among, 73, 87 judgment in court, 70, 74, 83 attachment of enforcement order, 99 enforcing, 99 notification of, 97: defendant, 98 registration of, 97 writing of, 97 justice, 22, 55 alternative specialized courts, establishing, 86 appeals court decisions, 63–8 appellate rate, increase in, 74–6 chronic judicial stagnation, 74, 87 cost of using official arbitration, 76–7 direct estimate of time, 56, 58, 63 European Court of Human Rights decisions regarding delays, 68–71 independence, need for, 102–3 indirect measure of time, analysis of, 59–63 insufficient staffing, 73 judges, workload of, 73 legal services, demand and supply for, 77–84 litigation rates, 83–4 measures, 57: direct method, 56, 58–9, 63; indirect method, 56–60, 70 procedural changes, 74 procedures simplification and accountability strengthening, 84–102 theoretical background, 83 time needed to serve, 56–8, 62–3, 65, 68, 71–4, 76, 84 Kajalo, S., 232 Kamilleri versus Greece, 69 Karokis versus Greece, 70 Kaufmann, D., 110, 126 Kazakos, P., 47 Keizer, K., 11, 157 Kelling, G L., 11, 158 Klein, B., 74, 75, 83, 84 Kooreman, P., 232 Kopsidis versus Greece, 68–9 Kornhauser, L., 81 Kosfeld, M., 233 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 Index 259 Index Koyama, T., 133 Kraay, A., 110, 126 Kunicova, J., 28 labor laws, 233 violation of, 228 labor market, 3, 5, 7, 110, 136–44 blue collar workers, 143 employment rate, 139 employment-to-population ratio, 137–9 enter first time, 140 failings of, 223 incentives, 141 paradoxes of, 163–5 performances, 140 and product market regulation, 143 rigidities, 110, 132, 142 salaried labor, 144–5, 121, 136, 139–40 and social coherence, 110 and taxation, 144–52 two-tier, 143 weak, 121–44 white collar employees, 143 labor cost, in Greece relative to EU, 164 labor productivity acceleration, in OECD countries, 164 in European countries, 166–7 Laffont, J.-J., 26 Lambsdorf, Graf J., 130 Lamoreux, N., 184 Landers, W M., 81 LaPorta, R., 102 Lassen, David Dreyer, 28 Latin American constitution of countries, 43 courts, 57 education of lawyers, 80 judiciary, 56 law, 15–16, 19, 29, 38–42, 44–8, 50, 65, 68, 81, 85, 89, 102, 114–15, 223, 229, 233, 239 breaking of, 11 of personal income taxation, 146–7 on tax, 147, 162, 178, 211, 219, 226 see also rule of law lawmakers, 7, 9, 19, 42 lawyers, 77, 80–2 regulation index for, 79 services, 80 layoffs, 212 Lederman, D., 26, 27, 31 leftist rhetoric, legal services, 76, 103 demand and supply for, 77–84 market malfunctioning, 76–7 legislative initiatives, 9, 33, 39, 41, 44, 191, 228 legislative power, 21, 32, 38, 40, 43, 44, 45 legislature, 15, 17, 19, 27, 33, 49–50, 102, 133, 220 Austrian, 43 bicameral, 43 Greek, 44–5, 47–8 French, 38–40, 47–8 US, 40–3 Leung, D., 165 Lex Mundi project, 56, 84–5 liberty, notion of, 12 Lijphart, A., 28, 29, 30, 32 Lintott, A., 27 liquidity from ECB, 190–1 litigants, incentives for, 88 loans by MFIs, 115, 192–3, 198 as percentage of GDP, 116 with government debt as percentage of GDP, 116 lobbyists, long-term growth rate of economy, 198, 220 Lopez-de-Silanes, F., 55, 73, 81 lower courts, decisions of, 63, 68, 74 Lower House, 43 lump sum payment, 201, 206 “luxury items,” 214 Maastricht, 194, 224 macroeconomic, 3, 109, 113–14, 150, 174, 215, 223 Madison, J., 27, 30, 31, 32, 33, 34, 35, 36, 40, 41, 48 Mageiras versus Greece, 70 Main Financial Institutions (MFIs), 115 debt and loans, 116 households and businesses, financing, 115 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 260 Makris, D., 59 Malley, J., 124 mandate holders, and corruption, 30–2 failure of, 16–20 mandate-issuing voters, Manos, S., 45 manufacturing in Greece profitability of, 184, 185 market economy, animosity towards, 20 Massicotte, L., 37 Matruglio, T., 72 McCullock, R., 20 media role of, 7, 14–15 media market competition level in, 14 media monopoly, 14 median income and average income, 151 medium-sized employers, salary of, 170 Melbourne, shop trading hours in, 232 Meleu, M., 26 memorandum of understanding (MOU), 220–1 merchant shipping industry, 123–6 Mexico pilot project in, 73 small transport companies in, 227–8 MFIs, see Main Financial Institutions (MFIs) microeconomic policies, 194 minimum wages, 143, 145, 146, 147, 150, 161, 162, 222 as a binding constraint, 145, 163 full-time workers earning, 150 proximity to median wage, 151 minorities, 25, 26, 32–7 minorities voice, in political process, 30 minority rights, 37 misinformation, role of, 7, 14 Mitsopoulos M., 6, 13, 20, 21, 29, 56, 59, 63, 74, 77, 111, 132, 233 mobile telecommunications, competitive market for, 115, 117, 118 Moe, T M., 44 monopoly, 15, 16, 234 media, 14 rents, elimination of, 228 monthly remuneration, 145, 170 monthly wage for public sector employees, 145, 224 Morgan Stanley, 191 Morrison, S A., 228 Morriss, A., 78 MOU, see memorandum of understanding (MOU) multiple pension, 201, 206 Mylonas, P., 131 National Assembly, 38–40 National Council, 43 National Greek Statistical Service, 56 national (trucking) permits, 227 Neisser, H., 43 nepotism, Netherlands, the legal services fees in, 82 shop trading hours, 232–3 small claims courts in, 75 trucking deregulation, 228 Neubauer, D W., 73 Neumark, D., 145, 160, 161 new hiring, multiple notifications of European trends, 238 situation in Greece, 237–8 New Zealand, 127 tenancy and dispute tribunals, 75 tenancy dispute, 72, 86 landlord-tenant disputes in, 86 legal services indicator, 80 OECD regulation index for professional services in, 130 Nicoletti, G., 112, 132, 142, 162, 184, 234, 235 Niskanen, W., 15, 16, 31 non-financial companies, 186 non-financial corporate sector, 110 non-financial corporations, 184–5, 193, 195, 220 balance sheets of, 195 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 Index 261 Index non-financial enterprises, 195 non-manufacturing sectors, 227 non-paying tenant, eviction of, 56 non-pecuniary incentives, 78 non-performing loans, 191 non-salaried labor, 157 non-wage take-home pay, cuts in, 225 Norris, P., 30 North, D., 15, 16 Norway shop trading hours in, 235 notaries public, 79, 81 OAED, see Organization for the Employment of the Labour Force (OAED) Observatory of European SMEs, 55 OECD, see Organization for Economic Cooperation and Development (OECD) OECD regulation index, for professional services, 130 OECD structural Indicators Database, 112, 132 official arbitration, cost of using, 76–7 official dispute resolution mechanisms, 86 official tax rate, 182, 183 OGA, pensioners of, 202 old age pensions, 203, 204 old age population, 138 oral hearing, 96–7 Organization for Economic Cooperation and Development (OECD), 110, 111, 112, 116, 118, 126, 130, 132, 133, 141, 144, 146, 161, 162, 195, 198, 215, 217, 218, 227, 228 Organization for the Employment of the Labour Force (OAED), 237, 238 Oswald, A., 20 Panagopoulos, E., 27 Panama clearance rates in, 63 Panhellenic Federation of Employees of Institutions of Social Policy, 201 pantopoleia, 233 Papaconstantinou, G., 131 paradoxes, of Greek labor market, 163–4 parliamentary democracy, 44, 48, 51 parliamentary systems, 10, 29, 41 part-time employment, 144, 160, 163, 170, 222, 235 by employer size, 172 increase in, 232 Paterson, I., 79, 79, 80, 81, 88, 126 pay cuts, argument for, 212 payment, 90, 101, 170, 172, 201–2, 212, 214 payment-to-GDP ratio, 207 Pechlivanidis and others versus Greece, 69 Pelagidis, T., 6, 13, 21, 29, 56, 59, 63, 74, 77, 111, 124, 132 pensioners, 200–2, 205–6, 214 average monthly expenditure on, 200 number of, 199 pensions/pension system, 5, 110, 146, 157, 172, 173, 198–206 Annual Social Budget, 199 basic attributes, 110 benchmark numbers, 199 budget on pensions, 199 construction workers, 204 disability pensions, 203, 205, 206 distribution of pensions, 204–5 EKAS, payment to, 200, 201, 202 expense, adding, 200, 200 farmers fund, 202, 205 IKA fund, 203, 205 insured employees, in private sector, 204 insured workforce, 199 lump sum payment, 201, 206 multiple pension, 201, 206 OGA, pensioners of, 202 old age pensions, 204 per-capita annual expenditure, for 2007, 201 public sector pensioners, 200 Public Sector Political Employee Fund, 200 retirement age, 203, 203, 204, 205 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 262 Spraos report, 198, 205 supplementary pensions, 202, 202, 203 tourism industry workers, 204 uninsured employees, in private sector, 204 work years upon retirement, 204 yearly expenditure on, 200 per-capita annual expenditure, for 2007, 201 per-capita GDP, 131, 136, 137 periptera, 233 personal incomes, 178, 182, 194, 214 personal income tax, 19, 153, 178, 178, 182, 214, 219, 226 facts of, 144–63 per income bracket, 155 progressivity, 144 Persson, T., 26, 27, 28, 31, 35, 37, 45 Peru, clearance rates in, 63 Pikoulas and others versus Greece, 70 Pilat, D., 233, 234, 235 pilot courts, 88–9 plaintiff’s enforcement fees, reimbursement of, 101 pleadings, filing of, 94 pockets of rent, existence of, political macrostructure, 31 political system, in Greece, 3, 4, 6, 7, 9, 13, 14, 16, 19, 22, 24, 25, 28, 32, 33, 35, 37, 38, 52, 190, 220, 230 horse-trading game in, 13 rents design of, politicians, 4–5, 14, 17, 231, 235 pork-barreling, proliferation of, Portugal shop trading hours, 233 Posner, R A., 31, 55, 78, 81 Postal Services Directive, 229 pre-judgment attachment, 92 hearing on, 93 report on, 93 preliminary exemptions, judge’s resolution on, 93 presidential democracy, 39, 51 presidential system, 29 Price, R., 132 price control, 133 price index, 114 pricing, 187, 189, 234 Priest, G L., 75, 83, 84 private limited companies, 237–8 taxes on: European trends, 238; situation in Greece, 238 private sector, 5, 146, 187, 193, 194, 195, 204, 212, 214, 220, 223, 225 credit, 113, 120 insured employees in, 204 jobs, 118 social security fund, 237 uninsured employees in, 204 wage, 222 private sector salaried employment, 165, 170–4 procedural changes, 74, 87 product market, 7, 110, 126, 132, 134, 164, 195, 210, 212, 215, 218, 221 and labor market regulation, 143 regulation, in OECD countries, 164 regulation of, 112 profit and loss statement, 237, 238 profits, 5, 165, 175, 178–9, 182–7, 194, 197, 211, 224, 234, 238 average, 195 of banking sector in OECD countries, 196 below-average, 195 corporate, 178–9, 182 corporate income tax, 182, see also tax: on corporate income corporate profits, 165, 176, 178, 179, 182, 184 effective tax rate, 183 excessive, 238 extraordinary tax on, 214 Greek banks, 195 Greek companies, of, 182 Greek ICAP database, 184 limited or nonexistent, 226 in manufacturing, 185 margin of large stores, 234 non-financial companies, 118, 186, 195 non-financial corporate sector, 110 official tax rate, 183 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 Index 263 Index profits – continued profiteering, 20 replaced by state intervention and administrative costs, 220 seeking, 19 self-employed income, 184 shops stay open when, 233 small companies: innovations, 182, 184 and tax, to legal form of enterprises, 181 taxable, 194 progressive tax system, 17 property rights, theory of, 15, 16 proportional electoral systems and corruption, 27 publication fees, 236 public auction call for, 101 sale through, 101 public debt, 3, 113, 189, 190, 193, 208, 216 cost of servicing, 194 increase in, 136 public employees, 147, 210, 223 average wage bill, 212 gross income for, 172 payments, 173 public finances, 22, 206, 212, 223–4 budget for 2010, 208–10 central government: expenses of, 206; revenue of, 206, 208 centralized payment system, 212 debt-to-GDP ratio, 210 deteriorating, 190 economy, of Greece, 211 expenditure cuts, 214 fiscal prospects, 210 GDP growth, 207 layoffs, argument for, 212 pay cuts, argument for, 212 payment-to-GDP ratio, 207 product reform program, 212 public sector, 212: pension, 214; wage, 214 public sector pay, issue of, 214 revenue-to-GDP ratio, 208 social security funds, central government budget to, 210 social security system, reform of, 214 taxable incomes and profits, increase in, 211 taxes, 214 wage bill, 212, 214 public health, 22, 132 public limited company, 179, 237 public money, management of, publicly owned companies, see company public policies, implementation of, 15, 16 public sector, 115, 140, 146, 150, 187, 195, 204, 212 economic activity, influencing, 84 efficiency of, 217 employees, 163, 207, 214, 224: average income of, 172; monthly wage for, 224; remuneration of, 172 employment, 16, 171, 172, 174: attractiveness of, 165; in Greece, 171 Finland, reform priorities in, 216 in Ireland, 217 payment, issue of, 214 pension, 214 pensioners, 200, 201, 214 wage, 214 wage bill of, 221 Public Sector Political Employee Fund, 200 Rabesona, J., 176 railway transport, 133 raised capital, taxes on European trends, 236 situation in Greece, 236 real compensation per employee, in European countries, 168–9 real GDP growth in Greece and Europe, 111 real unit labor cost, 164, 165 redirected capital, 193 redistribution and corruption, 19 of funds, 192, 208 re-election, 17 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 264 refinance, of Greek government bonds, 191 reforms debates, 227–30: consumer interests, 231 implementation of, market-oriented, 19 rents blockage of, timing of, 112 voters afraid of, 10–14 regional trucking permits, 227 Register of Exporters, registration with, 239 regulation and corruption, 131 Regulatory Impact Assessment (RIA), 133 European trends, 239 situation in Greece, 238–9 rents, 4, 7–10, 19, 132, 157, 220, 228 acquisition of, and judiciary, 77–84 pool (or pocket) of, 8–10, 15 rent-seeking, 4, 13, 21 groups, 7, 16, 102 request to defendant, to comply voluntarily with judgment, 100 research, and innovation, 132 resolute reform, 12 resources allocation of, 236 expansion of, 20 material, 87 resources allocated for court personnel, 73 retail , 221 prices, 234 sector, 217, 232–3, 235 service, 135 trade, 133, 231 retirement age, 173, 203–6 distribution of, 203 schemes, 225 revenue, 19, 126, 152, 158, 163, 174, 178, 217, 218 of central government, 208 of general government, 170, 211, 212 increase in, 225, 226 of Irish government, 219 from personal income tax, 224 tax, 47, 158, 194 on undeclared remunerations, 15 revenue-to-GDP ratio, 208 RIA, see Regulatory Impact Assessment (RIA) road transport, 215 and government intervention, 227–30 and railway transport, 133 Rodrik, D., 81, 110, 219 Roman Republic, 27 Romania, dispute resolution in, 88 Rose-Ackerman, S., 20, 28 Rowley, C., 13, 16 rule of law, 4, 7, 9, 11–12, 30, 44–5, 55–6, 102 breaking of, 11 in Greece, 104 institutional framework, part of, 55–6 strengthening of, 12 see also justice Said, S., 55, 88 Sakellariou, M., 27 salaried labor, 157 salary, monthly for public and private control, 173 Sartori, G., 30 Scarpetta, S., 132, 142, 162, 184, 234 Schonhardt-Bailey, C., 12, 21 self-employed, see under employment self-employed income, 184 self-employment, 5, 151–3, 157–8, 161, 163–5, 171, 174, 176, 201, 222, 232 semi-closed markets, in Greece, Senate, 38, 39, 40, 41, 42, 48, 49, 50 separation of powers, 26, 27, 32–4, 36, 44, 49, 52 and accountability, 27 strong government creation with, 37–48 weakening of, 47 SEPE, see Force of Labour Supervisors (SEPE) shadow economy, 11, 212 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 Index 265 Index Shavell, S., 66, 68 shop trading hours, 231–5 Singapore clearance rates in, 63 court fees, 88 Skuterud, M., 232 Slovakia business registration in, 86 judicial uncertainty in, 55 pilot project in courts, 87 small companies, 182, 224, 226 innovations, of, 182, 184 small trucking companies, 228–9 smaller proprietor companies, tax rate of, 182 Smith, A., 55 social coherence, 10, 16, 52, 110, 165, 216, 220, 223 social security budget, 200 contributions, 145, 157, 160, 163, 170, 171, 172, 202, 226 funds, 207, 214, 223: central government budget to, 210 payments, 146, 158, 160, 170: evasion, 222 system, 205, 210, 212, 214, 225 Sokoloff, K., 184 solvency risk, 187 South Wales, New, 82, 232 sovereign debt ratings, 189, 189 sovereign risk, 187 Spain employment rate, 139 shop trading hours, 233 Sparta, 27 spatial planning, 22 special interest groups, 7, 162, 201 Special Registry for Exporters, 239 Spraos Report, 198, 205 Stability and Growth Program, 210, 211, 212 state control, 132, 133, 136 in business operation, 136 command and control regulation use, 133 state-controlled companies, 140 “Statistics of Justice” publication, by ESYE, 59 status quo, 4, 6, 7, 8, 11, 81 maintenance of, 10 Stephan, P., 57, 75 Stournaras, G., 194 substituted service instead of physical delivery, 91–2 summons and complaint filing of, 90 physical delivery, arrangements for, 91 supplementary pensions, 200, 201, 202, 203, 210 supply chain management, 229 Sutherland, D., 132 Svensson, J., 31 Sweden monarchy, 43 OECD regulation index for professional services in, 130 shop trading hours in, 233 Symvoulio Epikrateias, 46, 50, 59, 63, 229, 230 Tabellini, G., 27, 28, 31, 35, 37 Taha, A., 78 “take home” remuneration, 146, 225 tax, 146–7, 159 burden, 5, 117, 152, 153–4 on corporate income, 159, 176, 176, 177, 178, 180–1, 183, 219 credit, 147 direct, 159, 176 direct tax paid by corporations, 158, 159 on dividends, 177 evasion, 12, 17, 158, 160, 163, 218, 219, 221, 222, 226 income, 17, 145, 156 legislation, 162, 219 personal income, 18–19, 148–9, 154, 156, 158, 159, 163, 170, 178, 219 on profitable corporations, 214 and profits, 181 progressivity of income tax, 142 reform, 218 revenue, 47, 152, 158, 175, 179, 182, 190, 194, 212, 225 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 266 structure, 17 trends in EU, 159 taxable income, 153, 179, 201 generating, 189 and personal income tax, 153 and profits, increase in, 211 taxable profits, 194 tax advances, 182, 191 taxation and labor market paradoxes, 144–64 personal income taxation, facts of, 144–60 taxation trends, in EU, 159, 176 tax authorities’ integrated information system (TAXIS), 89, 208 tax burden, 117, 119, 145, 152, 154, 162 of corporate sector, 176 distribution of, 153 in Greek society, sharing of, 18 tax-free income, 147, 156, 157, 162 TAXIS, see tax authorities’ integrated information system (TAXIS) tax rate, 146, 152, 158, 161, 162, 178, 179, 218, 219, 226 official and effective: per fiscal year, 183 of smaller proprietor companies, 182 tax system, 7, 130, 217 inequalities of, 162 tax wedge, 144, 150, 161–2 and employment rate, 151 dividends: double taxation of, 176–8; taxation of, 178–9 telecommunication deregulation, see deregulation: of telecommunications improvement of, 112, 115–18 price sub-index index, 116–17, 117 services, 116 ten-year German government bond yield as percentage of Greek, 188 Terrovitis, T., 118 Thacker, S., 28 tied-up capital, 174, 175 Tinios, P., 173, 198, 204, 205 Toay, T., 124 tourism, 123, 125–6 related services, 124 workers in, 204 trade balance deficit, 121, 123 traffic violations, 12 transaction costs, reduction of, 15, 16 transparency, 7, 8, 9, 10, 15, 16, 17, 21 Transparency International, 19, 47, 126 transport 112, 221 rail, 133–4, 227–8 road, 133–4, 215, 227–9 services, 125 unconstitutional restrictions in Greek road transport, 229–30 transportation industry, 185 Treisman, D., 28 Trinidad and Tobago, dispute resolution in, 58, 63 Tsasnik and Kaounis versus Greece, 70 Tullock, G., 9, 14 Turcotte, J W., 73 “tyranny of the majority,” 32, 33 UK Ministry of Justice, 77 Ulen, T., 73 uncompetitive Greek economy, 190, 191 unemployment, 137, 138, 139, 140, 150, 218 see also employment uninsured employees, in private sector, 204–5 United Kingdom, 198 UK Governments Actuary Department projections for Greek pension system, 198 UK Ministry of Justice, study on court fees, 77 United Nations (UN), 127–8 United States, 28, 34, 39, 40, 41, 42 constitution, 28, 33, 34, 40, 42–3, 45, 51: solution adopted in, 40 courts: clearance rates in, 63 legislature, 40, 41, 42 minimum wages, 150 regulated market, 228 shop trading hours in, 232 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 Index 267 Index Upper House, 43 US system, 42, 43, 84 of governance, 51 valuation/appraisal of attached movable goods, 100 VAT receipts, 224 Verified-tax-to-corporate income, 182 Vikings, in Greece, administration, as prize for interest groups, 15–16 interest groups, as rent-seeking Vikings, 8–9 mandate holders, failure of, 16–20 media, role of, 14–15 players, description of, voters, voice expressions of, 10–14 Virginia, circuit courts in, 75 Voiklis, E., 57 voters, 6, 16, 18, 35, 220, 232 accountability, of elected officials, 26 dissatisfaction of, general views of, 27 government intervention, in markets, 20 ignorant and misinformed, 10–14 mandate-issuing, market economy, suspicious of, 20 misinformation to, 14, 17 opinion of, 14 rationality of, 13 voice expressions of, 10–14 wage bill, 184, 221, 223, 225 management of, 212 reduction of, 214 size and historic growth rates of, 214 wage earners to self-employed, 142 wage earnings, 137 wage share, 139, 140, 165, 221 in EU-15, 141 wages, distribution of, 145 Wagner, A., 30, 32 Waldfogel, J., 83 Wascher, W., 145, 160, 161 “weak governance,” 4, 5, 110 “weak institutions,” 4, 5, 6, 17, 21, 104, 109, 110, 126, 130, 136, 220 weaknesses, of Greek economy, 187, 192 Weil, P., 232 welfare maximization, 13–14, 16 white collar employees, 143 Wilentz, S., 40 Winston, C., 228 Wise, M., 215 workers, 140, 147, 205 blue collar, 143 construction, in, 146, 205 earning minimum wage, 147 insured with IKA, 170 productive, 140, 222 salaried high-income, 161 self-employed, 47 tourism, in, 204 workforce by insurance type, 154 working hours, 140–1, 157, 161, 233, see also employment: hours working parents and women, 231, 235 World Bank, 110, 121, 238 judicial reform, project on, 56 World Bank Doing Business reports, 55, 56, 58, 73, 74, 126, 221, 236, 240 and governance indicators, 121 World Economic Forum Competitiveness Index, 121, 126, 128 written judgment copy, plaintiff’s receipt of, 97 yearly expenditure, on pensions, 200 Zizzo, J D., 20 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright material from www.palgraveconnect.com - licensed to ETH Zuerich - PalgraveConnect - 2011-05-06 268 ... 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Understanding the Crisis in Greece Michael Mitsopoulos and Theodore Pelagidis 10.1057/9780230294752 - Understanding. .. 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. .. 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis 10.1057/9780230294752 - Understanding the Crisis in Greece, Michael Mitsopoulos and Theodore Pelagidis Copyright